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New petroleum producers urged to heed ‘local context’ in policy making

24 May 2018

Emerging petroleum producing countries have been urged to carefully consider country context when forming local content policies – or risk long-term drawbacks to the development of the sector.

That was one of the conclusions from a local content workshop held in Beirut over 21-23rd May which included representatives from Namibia, Guyana, Ghana and Uganda. The workshop was organised by the New Petroleum Producers Discussion Group - an initiative by Chatham House, the Natural Resources Governance Institute (NRGI) and the Commonwealth Secretariat - which supports countries that are relatively new to the oil and gas industry in the sustainable development of the sector.

“Countries that are exploring for oil and gas want to ensure that the local economy benefits as much as it can, especially in the event of discovery. The challenge is that there are so many unknowns – are there actually any resources? Is it oil or gas? How much is there? What type of development facilities will be required?” explained Naadira Ogeer, an economic adviser from the Secretariat. “You won’t know the answer to these until you drill and furthermore, you really may not fully understand how much resources there are many years after the first discovery.”

She said the trick is therefore to understand what the industry future needs may be, and write policies which enable a country to truly capitalise on what they have and where they need to develop, so they can participate in a meaningful way now, as well as years down the line.

The ultimate aim, said Ms Ogeer, is to make sure citizens benefit as much as possible from a country’s finite natural resources.

“It is important to understand that no-one-size-fits-all. So what might work in Nigeria, say, may not necessarily work in Uganda. A well-designed policy is grounded in a clear understanding of the local market and provides clarity to both investors and citizens on what’s expected by the government as the sector develops.”

During the workshop, delegates discussed key issues surrounding the design and implementation of local content policy with particular emphasis on better understanding the experiences of developing countries.

“The common denominator among the workshop participants was that a country should have a baseline study on goods, service and skills available locally in order to facilitate the development of well-informed local content policy,” commented Tupa Iyambo, from the Ministry of Mines and Energy in Namibia.

Others welcomed the insights gained from countries like Uganda and Ghana, whose delegates shared how they set up their local content frameworks and overcame challenges.