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8/12/2019 Local Content-Willy Olsen

1/20

Localcontent

Oslo18th February

ByWilly

H

Olsen,

senior

adviser

INTSOK

[email protected]

[email protected]

www.intsok.com

www.intsok.com

Thenewglobal

economicpowerhouse


2/20

www.intsok.com

Lukoil/Statoil

BP/CNPC

Exxon/Shell

ENI

Shell/Petronas

www.intsok.com

Marcellusisoneoftheshalegasplays,transformingUSgasproduction.

StatoilhasbeenattheheartoftheplaysinceNovember2008

Acquireda32.5%interestintheAppalachianacreagefromChesapeake

Anambitiousdrillingprogramwith13,50017,000horizontalwells

We'rethenewkidsontheblock,"StephenBull,

Statoil


3/20

Thelargestglobaloffshoremarkets

Billion

USD

Expectedexpenditure201013

Source: INTSOKs annual m arket report

Brazil

Nigeria

Kazakhstan

Russia

T&T

Angola

Libya Iran

Saudi

Canada

Australia

Venezuela Malaysia

Norway

Azerbaijan

Algeria

Oldtimers Newcomers

TanzaniaTimorLesteEcuador

Bolivia

Ghana Indonesia

PNG

UK

Mexico

Aglobaldriveforlocalcontent

Iraq

Source:WillyHOlsen


4/20

Localcontent NOCsmoreassertive

Localcontentimportant

Efficiencydrive

Industrystructurechange

No

local

content

Oilpricewillinfluencelocalcontentstrategies

ValueCreation

ValueAdded

Knowledgeretention

Economicmultiplier

effect

EconomicallySound

Localcontentshouldaddvalue

EqualorBetter

Quality

Cost

Delivery

Safety&Environment

NurturenotSubsidize

What is the extra mile that you need to take?

Keydefinitionfeatures Basicpremises


5/20

ThequantumofcompositevalueaddedorcreatedintheGhanaianeconomythroughtheutilizationofGhanaianhumanandmaterialresourcesfortheprovisionofgoodsandservicestothepetroleumindustry withinacceptablequality,health,safetyandenvironmentalstandardsstostimulatethedevelopmentofindigenouscapabilities

%ofGhanaianmanagementinservice

companies

%ofGhanaianownership

%ofGhanaianEmployees

%valueofservicesprovidedbyGhanaians;

%valueofGhanaianrawmaterials

%valueofGhanaianFinishedGoods

Infrastructuralinvestments

TechnologyTransfer/Capacity

Development Newemploymentopportunities

Ghanaianparticipationintheprocurement

ofimportedgoods

Localcontentdefinitionandcriteria butnotcreatealargebureaucracy

Source:GNPClocalcontentgroup

Neverforgetour

ownexperiences


6/20

Operators

Legislationfrom1972to1995

Useofcarrotsandstick

Stimulatingcompetitionand

cooperation

Activegovernmentinvolvement

Technologytransfer

agreements

TaxincentivesforR&D

BackingjointR&Dinitiatives

Threepro

active

oil

companies

Statoil,Hydro,Saga

Solidindustrybaseandcompetence

Apartnershipapproach

Hydroasoperatorusedsomeoftheworldsmostadvancedtechnology

companiesin

the

Troll

Oil

project

Theprojectwasnotfornewcomerswithlackofexperience

Theinternationalheavyweightsweremobilized

BakerHughes

Halliburton

Schlumberger

Theoutcomewasamajortechnologicalsuccessstoryandtransfer of

technologytoHydroandseveralsmallerNorwegiansubcontractors.

Trolloil atestbedfornewsolutions

Source:EconreportforHydro


7/20

Kristin Tyrihans Tordis IOR

High pressureHigh temperature

Advanced wel ls

Record long

pipeline heating

Subsea rawseawater

injection

Subsea separation

boosting andinjection system

FieldsthatliftedNorwaystechnologybasis

B

illionNOK

Thelocalcontentimpactonthecluster

Source:OED/Menonreport,WHOanalysis


8/20

Whocandeliver?

Lackofalignmentofinterests

Governmentpriorities

Localcapabilitydevelopment

Fairshareofrevenues

Job

andskill

creation

Diversifiedanddeveloped

nation

Sustainable

future

Improvedinfrastructure

Reserveandproductiongrowth

Competitiveprofitability

Costeffectivelocalcontent

compliance

Supplierchain

cost

efficiency

Shareholder

value

Licensetooperate

Oilcompanypriorities


9/20

Morethan100NOCsaroundtheworld

Theycontrolmostofthereserves

Theyareverydifferent

Manyhavebecomecommercialized

Manyareindireneedofreforms

MostNOCswerecreatedwithamandateto

implementgovernmentenergypolicies

Theoverallmissionwastoincreasestaterevenues

andact

as

an

economic

engine

Theywillbethelocalcontentdriver

Petronas,PetrobrasandStatoil successstories

SaudiAramco,Sonangol,NNPC,KMGdrivingtheagenda

17

NOCsarethenationscustodians

1970&

1980s Geologyand

geophysics

Prospect

generation

Exploration

Drilling

Engineering

Development

Operationand

maintenance

Specialist

maintenance

Wellservices

Geologyand

geophysics

Prospect

generation

Exploration

Drilling

Engineering

Development

Operationand

maintenance

Specialist

maintenance

Wellservices

Now

Theoilindustrystructurehaschanged

ContractorsOilcompanies Both

Oilcompaniescoulddolocalcontent

Oilcompaniesneedhelptodolocalcontent

Source:WillyHOlsen


10/20

ThecaseofBrazil

www.intsok.com

Largepotential

for

ouradvanced

technological

solutions


11/20

EverythingwhichcanbedoneinBrazilshouldbedone

inBrazil

www.intsok.com

Heistheleadingthe

worldsmostaggressive

oilcompany


12/20

Qualification Industrialpolicy Industryperformance

Industry

capacity

Technology

qualification

Professional

qualification

RegulationFinancing

Taxpolicy Fostermicro

andSMEs

CompetitiveSustainable

HSE

Strategicissues

Challenge

Maximizelocal

content

Thestrategicapproach

Supplier

development

Funding

initiatives

Initiativeson

competitiveness

Source:BasedonPetrobrasinformation

R&DManagement

R&DGas&EnergyR&DRefiningR&DExploration R&DProduction

Basic

Engineering

Technology

Management

CENPES anislandofknowledge

CenpeswasthesourceoftheinnovativesolutionsthatmadePetrobras

therecognizedworldleaderindeepwaterandultradeepwater

Cenpeshas227laboratoriesasaresultofrecentexpansion

Near2,000workfortheinstitutiondirectly

Cenpesisthemostvisiblefeatureinagiantnetworkofinvestmentsthat

Petrobrashasmadeintheareaoftechnology

InvestedclosetoUS$700millioninR&D2008


13/20

imports

imports

Current Demand Future Demand

1.Increaseproductivitycapacityofhighlycompetitivesectors

2.Developcompetition amongmediumcompetitivesectors

3.Incentivefornewnationalentrants

4.Incentiveforassociationbetweennationalandinternationalcompanies

5.IncentiveforsettlingdowninternationalcompaniesinBrazil

Increasein

NationalSupply

CapacityofG&S

Needsubstantialgrowthinlocalcapacity

www.intsok.com

Aker

Acergy

Siemens

AGR FMC

Marintek

Seadrill

Sevan

Petrobras

It is not necessary for a Norwegian company that has ambition

to gain a contract to be present in Brazil, but it is an advantage.

All the Norwegian companies I do business with are

represented in Rio

Jose Formigli

Petrobras, Vice President, Presalt Development


14/20

ThecaseofAngola

Wehave

to

create

conditions

to

enable

more

Angolan

citizenstoplayapartintheeconomy.

TherewillnotbeaconsolidatedsocietyinAngolaiftheminoritycanttakepartinit.

UntilnowbeenleaningtowardsforeigndominationItsnecessarythatlittlebylittlethistrendbereversed.

ManuelVincente,CEOofSonangol,2009


15/20

Thedeepwaterprojectsinthelastdecadehasbeen

basedoncomplextechnicalsolution

Sonangoldrivinglocalcontentagenda

Effortstobuildanindustrialbasebeganinthe1980s

SubsidiarieswithTechnip,Saipem,PrideandAcergy

Equityinterestsinspecialistandlogisticservices

Equityinterestsinyardsandsupplybases

Jointventureswithforeignfirmshaveresultedin

constructionyards

Localcontentcanmeanlongerprojectschedule and

higherrisks andlessrevenuestoAngola

MorepressuretouseAngolanstaff

Thelocalcontentchallenge

GreaterPlutonio

45Wells

Rosa

23Wells

Jumper+

Manifold

Fabrication

JumperFabrication

InvestmentinBase

Jumper+

ManifoldFabrication

XmasTreeAssembly

investmentinbase

Pazflor

firstsubsea

separation

LargestFMC contractever

Furtherexpansion

oflocalproduction

andsupport

Girassol/Jasmin

45Wells

Nemba

7wells

FMCsfabricationexpansioninAngola

Graduallocalexpansionsincefirstcontractin1997

22Angolansemployedin2000 now250

80%ofworkforceareAngolans aimtohave97%by2013


16/20

www.intsok.com

ThecaseofRussia

Inlinewithyourorders,anewbusinesstobuildseaplatformshasbeenestablishedatthecityofAstrakhanAllAstrakhansshipyardsaswellastwoshipyardsin

KaliningradandotherfacilitiescanhandletheworkfortheCaspianprojects

VagitAlekperov,LukoilsCEO,inmeetingwithPrimeMinisterPutin

21September2009.


17/20

ExxonMobilandShellhavelocalcontent

requirementsinSakhalin

Manhoursandweight

AkerSolutionsGBSatSakhalin2enabled

Shelltomeetalllocalcontenttargets

Structure biggesteverbuiltinRussia

92%manhours

97%materialsbyweight

700

Russian

firms

involved AkerSolutionisnowengagedinthe

ExxonMobilprojectatSakhalin1

Firstproductionexpected2015

Norwegianconcretesolvinglocalcontent

TheRussianoilservicemarketis

stillrelativelyundeveloped

Oilcompanies 80%internalin

2003beforeoutsourcing

Independentdomesticservice

companiesemerged

in

recent

years

Oftenspunofffromoilcompanies

likeLukoil,TNKBPandRosneft

TNKBPsaletoChinablocked

Schlumbergerhasmadeseveral

largeacquisitionsandhas14,000

employeesinRussia

Oilcompanies

Marketshare

Oilcompanieshavelargeinternalorganisation


18/20

Lessonslearned

Needahighlevelchampion

Thinkstrategically,Actpractically

Identifycapabilitiesandgaps

Buildcapabilitiesandcapacities

Strengtheninstitutions

Pickpartners

that

support

your

strategy

Beselectivebasedonstrategicvalue

Engageearlyinthelifecycle

Disaggregatecontracts

DoitinCountry first

Doitwithlocals willcomenext

Lessonslearnedfromsuccessfulcountries


19/20

Legislationandregulations,concessionandPSCs

Project,procurement&contractstrategies

Localcapacitybuilding,trainingandR&Difnecessary

throughtaxincentives

Technologytransferrequirements

SupportforSMEsandentrepreneurs

Registryofcompetentandqualifiedlocalvendors

Adviceonpotentialsforjointventuresandother

mechanismsofcooperationwithforeigncompanies

Clusterprograms

Mentorprograms

Infrastructureinitiatives

Supplybasedevelopments

Enterprisecenters

Whathasbeensuccessfultools?

Opportunity

appraisal/

Feasibility

ConceptSelection SystemDefinitionConceptDefinition ProjectExecution

AbilitytoInfluenceCostAbilitytoAbilityto

InfluenceCostInfluenceCostProject

Expenditures

ProjectProjectExpendituresExpenditures

Project

Sanction

ProjectProject

SanctionSanction

Youwillhavetoactearly!


20/20

Governmentsshouldnotpickwinners andsubsidizeforever

Cannotrefrainfromengaginginsomekindofindustrialpolicy

Havetocarefullybalancestructuralnecessitiesandthedangers of

publiclyinduceddistortions

Badlyenforcedlocalcontentpolicymayimpedeeconomicgrowth

Consumingwealthratherthancreatingvalue

Riskofpermanentprotection

Corruptionandredtape

Localcontentisnotalwayscostless

Source: Rodrik, 2004, Hausman & Rodrik, 2006, Per Heum, 2003 & 2008

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