Sub-Saharan Africa is of course no stranger to oil and gas exploration and production. Nigeria, Angola, and Gabon represent the region’s most mature markets. The past five years have seen significant new developments in oil and gas exploration in new frontier regions. Enhanced seismic imaging and other technological advancements have enabled exploration of deeper deposits, particularly in offshore areas. These developments are bringing international oil companies into areas either completely new to the industry or previously cast aside as unpromising.

1. Petroleum Africa
The Push for Local Content in
Africa’s Oil and Gas Frontiers
June 26, 2013

2. Petroleum Africa: The Push for Local Content in Africa’s Oil and Gas Frontiers
1
Sub-Saharan Africa is of course no stranger to oil and gas exploration and production. Nigeria, Angola, and Gabon
represent the region’s most mature markets. The past five years have seen significant new developments in oil and
gas exploration in new frontier regions. Enhanced seismic imaging and other technological advancements have
enabled exploration of deeper deposits, particularly in offshore areas. These developments are bringing international
oil companies into areas either completely new to the industry or previously cast aside as unpromising.
In August 2012, World Oil identified the three most propitious development frontiers: The Gulf of Guinea, West
African Pre-Salt formations, and East Africa’s coast.
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Gulf of Guinea
The discovery of commercially viable reserves in the Jubilee Field offshore of Ghana, which achieved first production in
2010, has fueled exploration westward into Cote d’Ivoire, Liberia, and Sierra Leone. Though these currently represent
the areas of greatest promise for additional discoveries, preliminary exploration is also underway in Togo, Benin, and
Mauritania.
Coast of Western Africa Pre-Salt
Brazil’s discovery of vast petroleum reserves in its pre-salt offshore formations in 2006 has led to keen interest in
exploration of similar formations off the coast of western Africa. Gabon, Angola, and Namibia have each initiated pre-
salt exploration. Successful finds in Namibia will open a new frontier for oil and gas in Africa.
East Africa
Early discoveries of gas in coastal regions of Mozambique and Tanzania led to a determination that petroleum
deposits offshore would be gas-prone. Initially, the lack of domestic and regional markets for natural gas and
technological limitations for liquefaction and transportation led the industry to turn its sights elsewhere. By the end of
2010 only 600 exploratory wells had ever been drilled in East Africa. Contrast this with the 14,000 that have been
drilled in West Africa since exploration activities began in Africa. Aggressive advances in liquefaction capabilities and
rising demand for natural gas in Asian economies has intensified exploration off the coasts of Mozambique, Tanzania,
and Kenya. These new efforts will bring the gas to market within the next few years.
Beware, the Resource Curse
Nigeria, Angola, and Gabon were some of the first countries on the continent to develop their oil deposits and, in so
doing, have struggled to realize social development gains in conjunction with resource extraction. This all too common
reality is known in international development circles as the “resource curse.” Resource rich developing countries often
lag behind others in development indicators including life expectancy, infant mortality, and poverty. Furthermore,
companies active in these markets have in some cases exacerbated the resource curse by relying almost entirely on
imported labor and technology to deliver on their contracts.
Having seen other African countries suffer from the curse, frontier country governments are keen to ensure their
private sector partners aid them in avoiding the same fate. Some have even introduced regulations that require
international oil companies (IOCs) operating in their markets to achieve an aggressive percentage of local content
usage. In countries where regulators have not yet formally adopted quotas, companies are preparing for regulation by
proactively identifying means to include host country enterprises in their operations’ supply chains.
In many cases operators are motivated by more than just legislation to include local content in their procurement and
contracting plans. As CDC Development Solutions CEO, Deirdre White points out, the tide is changing quickly.
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Each
new frontier optimistically awaits new discoveries, and no IOC wishes to prejudice its chances of winning follow-on
concessions. National oil companies and official Ministries in the African frontier markets expect all IOC concession
holders to implement plans to enhance local economic development.
1
http://www.worldoil.com/August-2012-Regional-Report-Offshore-Africa.html
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Local Content, National Content, and the Changing Attitudes of an Industry

3. Petroleum Africa: The Push for Local Content in Africa’s Oil and Gas Frontiers
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Such vigilance extends beyond officialdom, down to the community level. Local people, with access to the internet
and other communications channels, are learning from the experiences of communities similar to their own that have
already engaged with oil companies. Indeed, support from the people is often the primary prerequisite for social
license to operate.
Social License to Operate
Key stakeholders in communities affected by the oil and gas industry are no longer willing to sit by passively while
billion dollar capital investments are made in their backyards with limited local economic benefit. Petroleum ministries
are able to revoke a license or concession in order to induce operators to invest in local capacity building or ameliorate
environmental concerns. Rural communities that cannot express dissatisfaction with the lack of economic
opportunities generated by the industry may instead resort to protest, as seen with some regularity in the Niger Delta.
One way in which oil and gas companies have gained favor and fostered positive relationships with local communities
has been to increase the amount of goods and services they purchase locally.
Paul Klein, founder of Canadian social purpose consultancy, Impakt, recently commented in Forbes on the imperative
for companies, most especially within the extractive industries, to maintain this social license.
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Klein points to the
pressing need for companies to focus more time and resources on building positive relationships well beyond official
bodies. With cross-spectrum support, operators are able to operate across vast distances and in close proximity to
marginalized communities that would not otherwise be within reach.
Frontier Markets . . . Can they leverage broader economic impact from oil and gas?
Universally, ministries and local communities alike are determined to ensure that IOCs make every effort to ensure
local companies are part of their supply chains. Yet, the most effective means by which to encourage greater local
content investment is still uncertain. Ghana’s Parliament is considering legislation requiring 90% Ghanaian content by
2020. The Jubilee Field will have been producing oil for 10 years in 2020. Is it realistic for Ghana to require 90% local
content in this compressed time period, while Nigeria, in its 40
th
year of major production, averages 30% annually?
Ghana’s plan seems particularly unrealistic given that the majority of Ghana’s reserves lie in deepwater offshore
deposits that require exceptional engineering expertise to bring to market.
While aggressive quotas may not always deliver the best results, early attention to promoting local content on the
part of frontier country regulators bodes well. Each new frontier market represents a fresh start, informed by the
experiences of governments in mature markets. IOCs are increasingly willing to secure not only official licenses but
also the social license to operate from local communities and stakeholders.
Mozambique
An example of how things have evolved can be seen in the plans unfolding to bring the Mozambican offshore natural
gas discoveries to market. Anadarko is the lead developer of a planned LNG park positioned along the Northern coast
of the country.
Anadarko is applying a lesson learned by the industry over the past few years – that it is essential to leverage local
content efforts in early project phases for the benefit of later ones. The company commenced its work in-country with
comprehensive assessments of the capabilities of local companies to participate in construction-phase procurement
and contracting. The company has retained the services of leading international consultants and development NGOs,
including my own organization, CDC Development Solutions, to assist in these efforts. It is also working closely with
the contractors performing front-end engineering and design (FEED) efforts for the LNG plant to leverage their on-the-
ground assessments to yield local procurement and contracting benefits in the construction phase. In turn, many of
the FEED contractors have operated elsewhere on the continent, and bring those important lessons learned to their
work on the LNG park.
3
http://www.forbes.com/sites/csr/2012/12/28/three-ways-to-secure-your-social-license-to-operate-in-2013/ ;
http://impaktcorp.com/

4. Petroleum Africa: The Push for Local Content in Africa’s Oil and Gas Frontiers
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Small and medium local enterprises that are unfamiliar with the procurement and contracting requirements of major
petroleum companies struggle to develop the capabilities to meet IOC contracting requirements within the five-year
project development window. To overcome this hurdle, projects must commence assessment and support activities
well in advance of FID to carry them forward through FEED to enable local enterprises to participate in the
construction phase of the project. Furthermore, companies that participate in construction are better positioned to
provide services to the facility over the course of its operational life.
Impact Beyond the Supply Chain
Some IOCs in frontier markets have also begun to finance enterprise development programs that are not necessarily
directly related to the oil and gas supply chain. This move to support economic development beyond the supply chain
arises out of the need to secure a social license to operate. The arrival of IOCs to frontier marketplaces brings with it
opportunities well beyond operational procurement and contracting requirements. Workers in the industry will bring
demand for food, handicrafts, and a variety of services that may fit nicely with existing capabilities in local
communities.
CDC Development Solutions currently supports work of this nature on a livelihoods project in Takoradi, Ghana. There,
we are working to improve the business skills of fishermen and fishmongers in over 20 coastal communities affected
by the offshore oil industry. Improvements in the marketability of their produce may eventually supply fish to the
burgeoning oil and gas industry. For now, the program focuses on enhancing the traditional livelihoods of those
directly impacted by the presence of rigs in their fishing grounds.
Harry Pastuszek
Director, Local Content Development
CDC Development Solutions
Phone: +1 202.530.7678
Email: hpastuszek@cdc.org
Web: www.cdcdevelopmentsolutions.org
Harry brings diverse sustainable economic development experience to his role at CDC Development Solutions courtesy
of management and operational roles first at the World Bank’s International Finance Corporation (IFC) and most
recently with Bechtel Corporation. At Bechtel, Harry served as Sustainable Development Manager in the Washington,
DC office, servicing the company’s oil and gas and mining clients on mega-construction projects in Angola, Canada,
and the US. In 2009 he relocated to Brisbane, Australia to assume the role of Global Manager of Sustainable
Development for Bechtel’s Mining and Metals Business Unit. Prior to joining Bechtel in 2006, Harry spent seven years
working in a variety of roles in the Environment and Social Development Department at the IFC.