Local Content and the Petroleum Industry
Equatorial Guinea has laid the legal foundations for local content. In our latest African Knowledge Series feature, we explore the impact of the regulations on the oil and gas business.
By Estela M. Nse Mansogo, Associate Lawyer
Local content regulations have been in place for a long time and have made a positive impact on the people of Equatorial Guinea.
My experience testifies to this success. I work for Centurion Law Group, which sent me out of the country to learn English and improve my knowledge of the oil and gas industry, which positively affected my career. Local content regulations have given other Equatoguineans the same opportunities and allowed them to compete better with their international counterparts.
In the past it was solely foreign workers that held skilled positions in oil and gas. Today the government is implementing legislation to ensure that locals are provided with training and play a more significant role in the sector. This is a general trend in Africa, and especially in large petroleum producing markets like Nigeria and Angola.
The Ministry of Mines, Industry and Energy, in compliance with the Hydrocarbons Law, amended the National Content Regulation in September last year (Ministerial Order 1/2014).
The main purpose of the regulation is to further boost the economy and ensure an acceptable participation from national, regional and African companies in the oil and gas industry of Equatorial Guinea. The law now obliges companies to hire locally whenever possible. It also pushes for contracting of local businesses and their inclusion in the overall industry supply chain. If a skillset is not available in the national labor pool, then the job is open for non-national applicants, with other African citizens given preference.
The government sees local content development as critical to economic growth. The National Content Regulation provides benefits such as the development of the capacity of Equatoguinean citizens, leading to greater national employment in the oil and gas sector as well as greater participation of national companies in the oil and gas sector through joint ventures with foreign companies.
Nationals benefit from the skills and employment opportunities provided by the oil and gas industry but, additionally, those workers’ salaries are paid and spent in the country. Energy firms also benefit, as they do not have to provide the high salaries, accommodation costs and travel expenses associated with foreign workers.
As a result of continuous breaches of the local content requirements of the Hydrocarbons Law, the government wanted this National Content Regulation to demonstrate the great importance of the mandate and demand exact compliance with the many rules and regulations established for this purpose.
The 2014 regulation reinforces the national content aspect of Equatorial Guinea’s 2006 Hydrocarbons Law, as previous legislation consisted of only a few paragraphs in an article. The prosperity of the energy sector will have no long-lasting benefit to the country if companies do not fulfill their local employment quotas. Up to now, there was no specific law that required companies to follow strict parameters. The government now has a solid set of guidelines that it can implement.
The major task and concern of the government should be the enforcement of regulation. Companies can be fined for violations, their contracts can be rescinded and the government can stipulate that the costs will not be recoverable.
Room for improvement
As this is a newly created regulation, it is too early to discuss its effectiveness. There is always room for improvement, but I believe that before improving deficiencies, we must demand the full enforcement of foreign companies that are active in Equatorial Guinea before we make further analysis.
The government understands that not all the skills and expertise that are needed in the sector are currently available in the country. This is why the authorities insist on companies providing training for local employees and local businesses. The government also understands that it will take several years for locals to attain the level of expertise where they can take over from their expatriate counterparts.
Most local companies are not at the level of their international competition but they have improved greatly. Their experience and general skill levels have increased. By partnering with local firms, employing and training Equatoguineans and instructing local suppliers on international best practices, international companies have brought a wealth of knowledge to Equatorial Guinea.
Local content rules have made a big impact on Equatorial Guinea’s joint venture companies, with benefits for both the national and international parties. Local companies gain investment, growth opportunities and expertise and eventually, are in a position to lead projects and run operations independently.
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