Local Content Development – Facing New Challenges with Defining its Boundaries and its Measurement Indicators

Abstract

Abstract With Host Countries stepping up their demands and expectations in terms of local content, defining its perimeter and boundaries has created some confusion among the industry. It becomes a challenge for IOCs/NOCs to agree on its definition, perimeter, and hence on its indicators to measure it. This proposed paper will present a possible perimeter for local content development initiatives and suggest key performance indicators. Local content –aimed at enhancing skills, developing suppliers and infrastructures of Host Countries in connection with field development and production projects –now occupies a predominant place in the oil & gas producing countries. Usually measured as a percentage of investment, of man hours, of weight of equipment manufactured, or of jobs created and industrial bases used, local content concerns industrial capacities as much as human resources. IOC/NOC operators therefore act simultaneously on multiple levers to obtain progress on this front: training the country's technicians and managers, hiring local staff, stimulating the networks of SME and pre-qualifying local companies. This proposed paper is based on a definition of local content applied by TOTAL for its oil & gas development projects. It is also based on a methodology applied by TOTAL to measure local content for its oil & gas development projects. The main application of the information provided in the proposed paper is to provide the industry with one way of defining and measuring local content, which is not always formalised. Case studies will not be presented in this paper, only the methodology. Indeed, when it comes to benchmark local content of different oil & gas development project, it is rarely possible to do it, due to different definition / perimeters, and absence of local content indicators.