Jessica Kyeyune

Overview of the Challenge

Capital intensive facilities and installations

Susceptible and vulnerable to criminal actions.

Requires security to promote investor confidence.

2

What Causes attacks on Infrastructure?

Competition for Oil Wealth

Marginalisation of natives of the oil & gas producing regions

Militarization of the region by local militia groups.

Environmental degradation by Oil activities

Social Unrest by Youths who are mainly unemployed.

Displaced people who need to reclaim their livelihood!!!

Possible Security threats

Cyber attacks

Bunkering Oil from pipelines/wells

Deliberate sabotage to pipelines and other assets.

Laxity in Safety & Security Standards

Local militants on pretext of securing more oil wealth for their communities

Who are the perpetrators?

Different motivations, objectives, tactics and capabilities.

These include

Terrorists, Insurgents,

Pirates, Criminal syndicates,

Environmental activists,

Anti-oil activists /protesters,

Hostile Nation-States,

Unknown groups & individuals.

Examples of attacks by category

1. Piracy

Tanzania – 3/10/11 attack on Poseidon drill ship.

2. Terrorism

Iraq - 4/04 Al Basrah Oil Terminal -suicide boats

3. Insurgency

Nigeria- 29/6/09 Bombing Forcados loading terminal

MEND insurgency group

Examples of attacks by category…….

4. Organised crime

Cameroon - 17/9/10 Offshore Moudi oil terminal-AMC

5. Civil protest & Vandalism

Greenland -31/8/10 Stena Don offshore drilling rig

6. Inter-state hostilities

Iran -03/83 Iraqi planes -Nowruz oil field platform

Examples of attacks by category……

7. Internal sabotage

Malicious actions of current/former employees

Disclosure of sensitive information to third parties

Collusion with external adversaries that attack

Niger Delta People's Volunteer Force (NDPVF)

Armed force "bunkering" oil lines

Movement for the Emancipation of the Niger Delta (MEND)

Violent force employed against oil barons, government officials

Goals: undermine authority and stop Nigeria's oil exports

Multiplier effect of a Single attack Niger Delta

Apx.50,000 barrels of oil stolen per day

10,000 barrels spill from pipelines damaged by

thieves

Most of oil haul is taken by local gangs to rudimentary

refineries,

where the crude they cannot process is simply

discarded.

National Content is defined as added value brought to

a host nation through:

Workforce development:

Employment and training local workforce

Supplier development:

Procuring supplies and services locally and

Developing local supplier capacity

Can Local Content Help to enhance Security?

Oil & Gas Specialist Goods and Services

Non-Specialist Goods and Services

$ Local Content Opportunities

Understanding Oil & Gas Cycle & Local Content

POLICY

OBJECTIVES

THE NATIONAL OIL

AND GAS POLICY (2008)

1 Efficient

Licensing

2

Establishment &

Management of

Resource

3

Efficient

Production

4

Valuable

Utilization of

Resource

5

Promotion of

Transport &

Storage

6

Collection of

right revenue

7

National

Participation

8

Development

of National

Expertise

9

Environment

Conservation

10

Stakeholder

Relationships

Policies required to enhance local participation

To enact:

State Participation in Petroleum activities

Provision of goods and services by local entrepreneurs

Training and employment of locals

Technology transfer

2

Legal requirements for local content

Purpose:

Increase national wealth thru

Economic growth and more employment of locals

“Value creation in the country” Norway, UK, Brazil &Nigerian policy

Other countries look at Ownership

Expenditure in the local economy

Employment of local workforce

Local content is a means – not a goal

Developing Local Content Strategies

High Government commitment

International oil companies to be supportive

Policies and contracts that allow service companies to invest in the country

High focus on developing human capacity

What will it take to reach a satisfactory level?

Source: SBC analysisNote: Industries within quadrants are not evaluated relatively to each other

Feasibility

Cement

manufacturing

Bulky

construction

materials

Construction

steel

manufacturing

Site safety

and security

Facility

Management

Civil construction

services

Generic waste

management

Hazardous waste

management

Transportation &

Logistics (Goods)

Fuel

wholesale

Manpower

agency

Technical

consultancy

Food

supply

Catering

Light equipment

manufacturing

Domestic Airline

Services

Road

construction

Transportation

(People)

Work safety

products

High

Low

Complex Easy

Production

operation services

Furniture

manufacturing

Vendor and

representation

services

Mechanical

construction

services

GMS Light iron/steel

products Oil/Water

pipe

installation

Pipe

steel

Petrochemical

(refinery)

Fertilizer

Machinery and

heavy equipment

manufacturing

Drilling

services

Drilling

supplies

Oilfield

Services

Oilfield equipment

manufacturing

Drilling

Equipment

Oilfield

chemicals

Cement

additives

O&G specific

emergency

services

Engineering

consultancy

Benefits

Blue area

industries

will be

addressed

through

steps on

education

Identify Industries with high local content potential

What it takes to boost local participation

Understand the strengths and weaknesses of local

enterprises to ensure policy responsiveness

Promote programs to upgrade and train local companies to

meet the stringent QHSE requirements

Create institutions that focus on R&D and Set up long-term

plans to support and finance R&D.

Provide tangible benefits for oil and gas companies to hire

and train young graduates - eg. tax rebates, royalty changes

Access to low cost finance

18

There is no “Ideal model” to export to other countries

The most successful countries have 40% – 80% Brazil, Malaysia, United Kingdom, Norway

Many are struggling to reach 25%-30% Nigeria, Angola, Trinidad and Tobago, Saudi Arabia, Libya

2

What level to aim for?

Shell placed 70% of all contracts with Nigerian owned

firms until 2002-2003

Value creation in the country was only some 5 - 15%

Sourced work outside Nigeria, acted as middlemen

for profit

Over ambitious Local Content Strategies may hurt

economies.

• Ghana 90% in 10 years, IOCs divesting-Nigeria, Brazil Revisiting

Local ownership is no guarantee for value addition

Has Legislation increased local participation?

Brazil – Petrobras:

Active involvement in the industry from its formation

Acquired technology in deep water drilling thru international expertise.

Malaysia :

Formed partnerships with international oil companies;

Local industry gained best practice & management skills

Cutting edge technologies used by oil companies.

Norway :

Openness towards international companies

A strong focus on national value creation.

Technology agreements to fund R&D

Existing capabilities & competitive strengths were leveraged.

21

Universities and

Technical

Institutions Petroleum Industry

E&P

Refining

Transportation

Distribution

Governmental

Agencies

Supply Chain of

Goods and

Services

Financial

Institutions

Environmental Protection

Health and safety assurance

Social and economic

development

Technological innovation

Key objective: Promote Sustainable Development

Proactive Linkages: IOCs, Gov, Law Enforcement Agencies

Boarder Control, Passport Control,

INTERPOL, etc

Local & International Law

enforcement Agencies

Working Effectively with other Departments

Procurement& Contracts: Ensure business opportunities

to local firms

Land Acquisition:

Fair & Equitable Process

QHSE:

Ensure environmental integrity, Safety & Security

Local Content:

Ensure utilisation of local goods/services, training &

technology transfer

Corporate Social Responsibility: Implement community projects &

improve livelihood

Human Resources: Employment

opportunities & Compliance with Labour

Laws

Community Liaisons: Restoration of Livelihood and grievance handling

High expectations can lead to several negative

consequences:

A disappointed, and therefore a disengaged public

An indebted government that has borrowed

against possible incoming revenues

Increase of rent seeking; and

General mistrust within the society.

These consequences need to be managed accordingly.

Managing Expectations

Economic and Political Instability When people are out of work they are more susceptible to violence

Supports Insurgents Steal & Sell; Extortion; Political Alliances

Increases Separatism Massive revenues, little disbursement of wealth Under-represented locals bear brunt of costs

Addressing the Political Effects

Build institutions for managing resources

Direct benefits of oil revenues to citizens

Involve principal stakeholders in developing plans

Strong civil society to monitor development

Transparency – EITI, PWYP

26

Direct Effect

• Value of oil and gas production (IOCs & GoU)

Indirect Effect

• Purchase of materials, services and supplies locally Private Sector

Induced Effect

• Spending by employees of both oil Companies and

suppliers

• Private Sector & GoU

Oil and

Gas Sector

Government

gets revenue

from oil and

taxes from Oil

Companies,

Suppliers

And

Employees

And reinvests

the proceeds

to develop the

Country’s

Economy

Security will come from reinvesting Oil & Gas Revenues

Local Content Strategy for Security

Stop focusing on specific threats; focus on vulnerabilities

Be prepared that enemies will use our technologies

against us.

Enemies find the holes, the weaknesses in our

society…

and they exploit them to harm us.

29

Successful local content strategies can enhance Security when:

•Focus is put on diversification rather than resource windfall

•Ensure the revenue generated, is reinvested wisely and holistically

• Stimulate other sectors in the Economy to reduce unemployment

Conclusion