Abstract
A novel concept, local content, in oil industry is gradually emerging. Local content should be defined in terms of value addition in local country (by local staff, local materials, local services and facilities) rather than in terms of ownership of the company performing the value added activities. Many oil exporting countries have taken a positive approach toward local content development to maximize the benefits from oil and gas extraction. The purpose of this study is to develop a conceptual model for local content development in petroleum industry. Local content can generally be defined in terms of the ownership and/ or location of the enterprises involved in production and/ or the value-added in the production process. Local content promotion will have to vary significantly between countries, depending on the current status of their economic, political and social development. This model is useful for state governments to consider all aspects and factors affecting local content development generally. Local content development outcomes are economic growth, industrial growth and spillover effects. The paper begins with examining the factors accommodated in literature believed to influence the local content promotion. Based on our review, the conceptual model derived includes key factors of local content that evaluate local content development, and examine interrelations between local policies, local infrastructure, local environment, and local capability.
Highlights
During the past 40 years, there have been significant structural changes in the oil industry
The purpose of this study is to develop a conceptual model for local content development in petroleum industry
H5: There is a positive relationship between Local infrastructure and Local content development
Summary
During the past 40 years, there have been significant structural changes in the oil industry. These developed countries have been active in both the upstream and downstream oil industries Based on these successful experiences, other oil exporting enterprises have taken positive approaches towards local content development to increase the benefits from oil and gas extraction (Klueh et al, 2007). The primary objective of local policies has evolved from creating backward linkages, which is, supplying input to the local economy through transferring technology, creating local employment opportunities, and increasing local ownership and control They create forward linkages, which is, processing the sector’s output prior to export through, for instance, the establishment of refineries, petrochemical industry, and the production of fertilizers (Tordo et al, 2011)
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