Country Perspectives – Key

Local Content learnings for Kazakhstan from across the globe

Looking to other Local Content examples across the globe, Kazakhstan is keen to understand from international perspectives and best

practices, how to commit to and build capabilities locally, addressing industry changes, foreign investment demands and in-country

development needs. Here are some case studies on who they’ll be taking direction from:

OmanOman describes its development of ‘In-Country Value’ (ICV), as a

national priority. And with direct manpower targets at 90% in production and operation, Oman is serious about its commitment to utilising the O&G industry to add in-country value. The Ministry of Oil

and Gas formed an ICV Committee, to provide guidance and governance to value-adding in-country development. Two sub-

committees were also launched to support the ICV: Contract and Procurement managers sub-committee and the Human Resources

managers sub-committee.

The ICV Committee has launched a number of successful initiatives including expatriate succession plans to develop the local workforce, and the implementation of a Joint Supplier Registration System (JSRS)

as a ‘single window’ system for Omani registered suppliers in a common pool of oil and gas supplier base.

The ICV programme was launched in 2013, and O&G firms bidding for contracts are required to submit a plan outlining what measures they intend to implement to boost local content, through procurement of

goods and materials, support services, construction etc. Generally speaking, the higher the local input level, the more favourably a

competitive tender bid will be viewed.

Studies have indicated that there are more than 50 supply chain opportunities for Omani businesses to support O&G.

The blueprint strategy also states the 63% of the direct workforce in O&G companies are Omanis. The Local Workforce Development

Programme also suggests training and educating more than 36,000 Omanis.

NorwayA worldwide example for many, Norway is the leader in Local Content

policies, with the country’s national oil company Statoil partnering with the government research institutes and universities. The country’s

success with Local Content can be attributed to its use of legislation and relationship building skills between foreign operators and local

companies, as well as stringent government standards. The Ministry of Petroleum and Energy made the transfer of technology critical in choosing license awardees, with contracts awarded to Norwegian

bidders who were providing competitive prices and services.

The Government encouraged building partnerships between foreign and Norwegian companies, and this has helped transform the country into a “leading-edge thinker”. Such partnerships were so successful at

enabling technological developments that a number of international oil and gas companies now have research and development facilities in

Norway.

In 2014 GE Oil & Gas launched a new $5 million technology centre; The Technology Solutions Centre, in Stavanger to demonstrate GE’s

products for the oil and gas industry.

Decades of oil and gas experience have made Norway an expert in managing the petroleum sector. For countries just discovering their

resources, facing challenges in the management and administration of a new sector, Norway launched The Norwegian Oil Development

initiative in 2005.

Assisting with the development of petroleum rich countries that need guidance on how to manage those resources for economic growth as

well as to promote the welfare of populations sustainably and encourage transparency, anti-corruption, infrastructure development

and SME development; the initiative works with Angola, Iraq, Mozambique, Nigeria, South Africa, Uganda, and many more nations

around the world.

Norway’s Local Content stance is held up by many as a shining beacon, but it isn’t always applicable to all. Therefore it is a great example to

learn from, contextually speaking.

CanadaWith petroleum companies required to submit documentation stating the benefits provinces will gain from their presence before any work or

activity is approved, Local Content from the offset is at the heart of Canada’s oil and gas industry.

Each province has its own interpretations of an Accord Agreement, but they are very similar. The Canada Nova Scotia Offshore Petroleum

Resources Accord Implementation Acts states that a benefits plan to the area under interest must be submitted and approved before any work is carried out. Legislation requires commitments to Nova Scotia

residents and businesses, with operators detailing how residents could be employed, and how they will be trained and educated locally. An

office in the province must additionally be established. Procurement of local goods through manufacturers and service companies must be fair

and give businesses the opportunity to participate competitively.

Statoil’s work in oil rich Labrador and Newfoundland is an example of how first considerations to local companies to supply goods and

services that are competitive in terms of price and quality are beneficial both to international oil companies and to the local area.

Companies are expected to exceed environmental and social performance standards to do business in Canada, so one could see further environmental and technological advancements because of stringent Local Content standards. Aligning business interests with

those of the Canadian economy and society is how foreign entities will continue to be welcomed by Canada. It is crucial to demonstrate non-

monetary and monetary objectives, and how those match up with provincial Local Content requirements.

MalaysiaWith a strong national petroleum company, Malaysia uses regulatory as well as incentive based and capability building programs to achieve its

Local Content objectives.

Predominately foreign entities in the early days of production, the Petroleum Development Act and the founding of national oil company

Petronas brought Local Content capabilities into the limelight. As Malaysia’s natural resources have depleted, the country’s presence in the international market has grown, alongside its partnerships with a

number of international players.

The enactment of the PDA enabled international oil companies to partner with Petronas under production sharing agreements.

Contractors are required to minimise the employment of a foreign workforce and train Malaysian personnel, as well as provide a minimum

monetary amount to train Petronas workers. Securing equipment, facilities, goods, materials and services locally are also part of the

agreement.

Petronas has established four educational and training institutions as well as an e-learning platform; supporting the education of the future

Malaysian workforce in the oil and gas industry. The company also sponsors students in higher education both at home and abroad.

The Economic Transformation Program of 2010 is transforming Local Content additionally. The aim of the program is to turn Malaysia into a

high-income country by 2020. As one of the key economic areas of Malaysia, the oil and gas industry is of immense focus in the program,

and the government aims to increase the competitiveness of its domestic oil field services and equipment industry to become a

regional hub.

BrazilBrazil has a calculated methodology, a mix of deregulation and

protection with Local Content. While the winner during a bidding round for blocks is chosen based on a number of factors, the growth and potential returns for the country plays a big part in that decision.

Kiraitu Murungi, Senator for Meru County and Director of Humphreys Ltd, and energy, O&G consulting firm, writes in The Standard Digital

that: “Brazil has the most successful local content program in the emerging oil producing

economies.”

Contextually, the oil and gas industry was highly protected as the semi-public Brazilian energy corporation (then state-owned) Petrobras was the sole developer until the 1990s, when licensing agreements with internationals opened up Brazil, and started to develop technology

capabilities without the worry of overseas competition.

Since then Brazil has relaxed its policies to allow further trade and has privatised in part some of Petrobras. One key factor in driving

efficiencies is that contractors only have to buy goods and services locally if they are competitive in terms of cost and quality in

comparison to foreign suppliers.

From a top down approach there is the National Program for the Mobilisation and Development of Oil and Gas Industry, with contract

and company specific levels for each to meet regarding Local Content.

Brazil’s National Agency for Oil, Gas and Bio-fuels (ANP) has also established a local content certification system. Therefore the policies are contained within concession contracts and agreements. The ANP

enacted the Local Content Certification Rules in 2007, whereby accredited independent companies had to certify percentages of local content in goods and services acquired in the country. This certifying

entity encourages transparency in the industry.

Gradually increasing the amount of Local Content desired in each bidding round for blocks has been so far successful. Petrobras has an

operating share with a minimum of 30% in Brazil, with the exploration phase requiring Local Content levels of 37% and at development stage

55% until 2021, rising to 59% thereafter.

The Kazakhstan Local Content Summit will showcase international experiences and best practices that are of particular interest to

Kazakhstan. Taking place 16-17 June in Astana, Kazakhstan, the Kazakhstan Local

Content Summit will be hosted in partnership with NADLoC. For more information contact Pete Bamford:

Telephone: +44 20 7978 0349 Email: klcenq@glccouncil.org

- Kazakhstan

Resources:

1.http://www.incountryvalueoman.net/INCONV13/system/files/ICV%20Development%20Blueprint%20Strategy-.pdf

2.https://www.zawya.com/story/Oman_gears_up_to_secure_incountry_value_wealth-ZAWYA20140529042220/

3.http://www.bain.com/publications/articles/how-national-oil-companies-can-fuel-economic-development.aspx

4.http://processengineering.theengineer.co.uk/oil-and-gas/ge-launches-oil-and-gas-technology-centre/1019115.article

5.http://www.norad.no/en/tools-and-publications/publications/publication?key=109578

6.http://www.cnsopb.ns.ca/

7.http://www.cnsopb.ns.ca/

8.http://www.statoil.com/annualreport2010/en/sustainability/casestudyourcanadianoilsands/localcontent/pages/localcontent.aspx

9.http://www.ey.com/Publication/vwLUAssets/Canada-Oil-Gas-Market-entry-strategy/$FILE/Oil-Gas-Market-entry-strategy.pdf

10.http://www.agc.gov.my/Akta/Vol.%203/Act%20144.pdf

11.http://issuu.com/world.bank.publications/docs/local_content_policies_in_the_oil_and_gas_sector

12.http://issuu.com/world.bank.publications/docs/local_content_policies_in_the_oil_and_gas_sector

13.http://www.standardmedia.co.ke/?articleID=2000108086&story_title=maximise-local-content-in-oil-and-gas-sector&pageNo=2

14.http://unctad.org/meetings/en/Contribution/DITC_TED_13062013_Study_WTI.pdf

15.http://unctad.org/meetings/en/Contribution/DITC_TED_13062013_Study_WTI.pdf

16.http://www.mondaq.com/x/240372/Oil+Gas+Electricity/Local+Content+In+Brazil

17.http://www.petrobras.com/en/magazine/post/libra-auction-result.htm Compiled by Larissa Hirst, Online Content Manager, GLCC. *Disclosure: We have sourced our statistics from the references as shown in the citation list. While we have sourced these statistics from reliable sources, The CWC Group cannot guarantee all accuracy and credibility. First Image of by Nutexzles Image of hydraulic fracturing by Aleksey Klints