Local content in Tanzania in the advent of gas discoveries

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“’Local Content' means the local component of goods, services and human resources employed in the conduct of Petroleum Operations under this contract” – Model Production Sharing Contract (2003)

One of the key aspects being touted by experts as crucial for enabling Tanzania to make the most of recent gas discoveries is the enhancement of local content policies (LCPs). Jobs creation as a result of domestic enterprise development and strong forward and backward linkages with other sectors, we are told, can enormously impact and transform the country in its quest to attain some of the objectives listed in its Development Vision 2025.

The debate on local content in Tanzania has been growing progressively with media reports citing business leaders and politicians appealing to government to put in place policies that will enable local enterprise to benefit from this opportunity.

In the interest of contributing to the debate, the Uongozi Institute, the Tanzania Private Sector Foundation, the Revenue Watch Institute/Natural Resource Charter and the World Bank are organising a series of roundtable discussions for Tanzanian local content practitioners to learn of LCP approaches in other countries and bridge the difference in understanding in terms of the opportunities, challenges and best practices. The practitioners from civil society, government and private sector, it is hoped, will therefore be better placed to contribute to the local content policy making process in Tanzania.

Policy Forum attended the first roundtable discussion held in March 2014 which featured the experience of Trinidad and Tobago shared by the keynote speaker, Anthony E. Paul, an oil and gas strategy consultant and Managing Director of Association of Caribbean Energy Specialists Ltd. Paul took the audience through the history of oil and gas development in Trinidad and Tobago, its post-independence approach to local content and participation and the lessons learnt including some successes and failures.

The audience heard that one of the key milestones for local content development in Trinidad and Tobago was issuance of the Petroleum Regulations in 1971 which bound licensees to minimise the employment of foreign personnel, ensure that employees are engaged only in positions for which the operator cannot find available nationals of the country having the necessary qualifications and ensure that all employees in the same category enjoy equal conditions irrespective of nationality.

The regulations also stated that licensees should prepare programmes for industrial and technical education and training, including the grant of scholarships, with a view of locals eventually replacing foreign personnel as soon as practicable and affording nationals possible opportunity to fill senior positions in the operations of the licensee.

Paul went on to illustrate the importance of a resource rich country having the right vision. He shared a powerful quote from the first Trinidadian Prime Minister, Dr. E. E. Williams, when officiating the ceremony marking the beginning of the construction of the Iron and Steel Company in Trinidad in 1976:

“Blessed as we are with hydrocarbon resources we have a choice to make. There have been attempts to persuade us that the simplest thing to do would be to sit back, export our oil, export our gas, do nothing else and just receive the revenues derived from such exports and, as it were, lead a life of luxury–at least for a limited period. …This, the government has completely rejected, for it amounts to putting the entire nation on the dole. … Instead, we have taken what may be the more difficult road and that is–accepting the challenge of entering the world of steel, aluminium, methanol, fertilizer and petrochemicals, in spite of our smallness and in spite of our level of technology.”

In essence, what was being articulated here is a broader vision of development that maximises the level of local content and local participation for the benefit of present and future generations and includes the entire value chain.

Paul also described the Trinidadian framework for “local value-added” (value captured and retained in the country) which has three main building blocks: Human Capability which refers to the employment, training, development and internationalisation (making globally competitive) of nationals; Enterprise Capability which is the improvement of the value-add, know-how and innovation capability of local businesses and institutions;  and Capital Markets which denotes encouraging the growth and use of the local capital market.

In winding up, Paul stressed the importance of clarity and consensus on the vision and commitment of agencies that are crucial to its implementation. For the Trinidadian case, he mentioned the success factors among many as being the need for a strong political will and leadership, empowered and effective oversight institutions, and maximum participation of civil society.

The other crucial element for the audience to take away was the importance for implementing agencies to ask the right question:

"The question to be asked is not 'what can we do with existing local capability?' but rather 'what can we build with existing and projected demand, so as to enhance local capability and allow us to capture more value in the future?' See Capacity Development as an investment and not a cost," he stressed, adding that "local content also has to be regulated as "it doesn't work if its an option to the IOCs (International Oil Companies) and International Service Companies. Although make sure you do not over-regulate."

Related article: Local Content: enhancing the subnational benefits of oil and gas sector

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