African oil and gas producers now provide plenty of examples of local content legislation done the right way. Cameroon can learn some valuable lessons from its neighbours, Nigeria and Equatorial Guinea.
By William Fonkeng, Associate Attorney at Centurion Law Group’s Douala office
Local content has rightfully taken its place as one of the most discussed trends in African oil and gas in recent years and the provisions for providing greater benefit to local people and businesses are present in legislation around the continent.
Cameroon has a mature but comparatively small petroleum sector. Local content regulations are in place, but as with many much newer oil and gas explorers and producers, the country is reaching out to more experienced neighbours, seeking help in developing, implementing and enforcing effective local content policies.
Local Content Provisions in Cameroon
In Cameroon the Petroleum Code (Law no. 99/013 of December 22, 1999) sets out local content provisions for the petroleum sector in sections 76 and 77. Section 76 states that contractors must give preference to Cameroonian construction companies and suppliers of goods and services, providing they are able to match the quality of service, payment terms and after-sales services of competitors. Section 77 deals with personnel: The holder of a petroleum contract (such as a PSC) should be prepared to finance and enact training and development programs for Cameroonians and qualified locals should be given hiring priority.
The Gas Code (Law no. 2012/006 of April 19, 2012) sets out local content provision in sections 62 to 68. Section 62 states that the development of natural gas resources must be accompanied by a local content component that specifies the benefits of the gas project for Cameroon’s economic, social, industrial and technological development. Section 64 states gas companies shall be required to contribute to a special account for local capacity building. Under section 65, gas companies shall give priority to Cameroonians with the required level of competence when recruiting. As per section 66, gas companies and their subcontractors shall be required to give preference to companies under Cameroonian law. Under the same, the minister in charge of the downstream gas sector (Minister of Commerce) or any other authorized public establishment shall ensure the monitoring and implementation. Finally, per section 67, gas companies are required to submit to the state and execute according to their priorities, a technology and knowledge transfer program related to their activities in a bid to encourage, facilitate and enable the gradual replacement of expatriate personnel at gas companies with local personnel.
Impact on Development
In the past, the large numbers of expatriate employees working at international oil companies could be understood. The IOCs had the necessary financial and technical capabilities to champion oil and gas projects, and were therefore in an advantageous position. It is also likely that a lack of government will was a factor.
The aforementioned provisions show the government’s determination for oil companies to involve more locals in the sector. However, the political expectations do not match the reality. In the case of ancillary services, many more Cameroonians could be employed than are presently.
The principle that the resources are owned by the people of Cameroon, and therefore they ought to extract as much value as possible, underpins the local content effort. But the value added by the oil and gas business is in many ways not felt in the local economy and results in ‘capital flight’, because local sub-contractors are not used. Apart from the instances where services simply may not be available locally, this is caused in large part by the lack of a strong enforcing body.
Lessons to be learned
Traditionally in African societies, younger siblings learn from older ones, and with respect to the oil and gas industry, our neighbours Nigeria and Equatorial Guinea are very much our seniors. Nigeria in particular, as Africa’s largest oil producer, has a lot to teach Cameroon with regard to local content.
The Nigerian Oil and Gas Industry Content Development Act of 2010 established the Nigerian Content Development and Monitoring Board (NCDMB), now headed by Executive Secretary Denzil Kentebe. The board’s stated aims are to increase indigenous participation in the oil and gas industry; build local capacity and competencies; create linkages to other sectors of the national economy; and to boost industry contributions to national GDP. Barely two years after the enactment of the local content act, the NCDMB reported over 30,000 jobs had been created.
Equatorial Guinea has also taken great steps to implement local content provisions. On 26 September 2014, the Ministry of Mines, Industry and Energy enacted Ministerial Order no. 1/2014. The new law, among other measures, requires oil companies to include Equatoguinean firms as partners and in the procurement of goods, services, capital, and human resources whenever possible. In addition, the law demands the inclusion of capacity building. This includes the training of local staff, as well as social work. The Directorate of National Content at the MMIE is responsible for the implementation of this new set of rules, and is headed by National Content Director Oscar Garcia Berniko.
In the Cameroonian context, the inclusion of local content provisions in legislation is a step in the right direction, but it is not enough. The agencies to follow up on implementation are lacking, and this is where we can learn the most from Nigeria and Equatorial Guinea. A board like the NCDMB in Cameroon could create more jobs and restrict capital flight through the award of contracts locally and the promotion of a sector that is better served by Cameroonian firms.
Congo-Brazzaville and Kenya have both reached out to the NCDMB to help design and put in place national content policies for the oil and gas sector. Cameroon too could reach out to its neighbour for assistance in establishing stringent local content regulations to avoid constant breaches.
Countries such as Nigeria and Equatorial Guinea have taken serious steps to ensure that oil and gas companies make a significant contribution to economic growth and the acceleration of development. Another example of this is Angola, where Francisco Simao was recently appointed Vice President Legal Affairs for BP Angola. That puts him in charge of the only completely nationalized legal department among big oil companies in Africa.
It is fundamental that Cameroon emulates the actions taken by its neighbours to build specific structures such as NCDMB to reinforce the legal and regulatory framework of the sector. In doing so, the Cameroonian government will be able to create progressive and comprehensive strategies to ensure the successful integration of Cameroonians into all aspects of the oil and gas industry.