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Jessica Kyeyune
Overview of the Challenge
Capital intensive facilities and installations
Susceptible and vulnerable to criminal actions.
Requires security to promote investor confidence.
2
What Causes attacks on Infrastructure?
Competition for Oil Wealth
Marginalisation of natives of the oil & gas producing regions
Militarization of the region by local militia groups.
Environmental degradation by Oil activities
Social Unrest by Youths who are mainly unemployed.
Displaced people who need to reclaim their livelihood!!!
Possible Security threats
Cyber attacks
Bunkering Oil from pipelines/wells
Deliberate sabotage to pipelines and other assets.
Laxity in Safety & Security Standards
Local militants on pretext of securing more oil wealth for their communities
Who are the perpetrators?
Different motivations, objectives, tactics and capabilities.
These include
Terrorists, Insurgents,
Pirates, Criminal syndicates,
Environmental activists,
Anti-oil activists /protesters,
Hostile Nation-States,
Unknown groups & individuals.
Examples of attacks by category
1. Piracy
Tanzania – 3/10/11 attack on Poseidon drill ship.
2. Terrorism
Iraq - 4/04 Al Basrah Oil Terminal -suicide boats
3. Insurgency
Nigeria- 29/6/09 Bombing Forcados loading terminal
MEND insurgency group
Examples of attacks by category…….
4. Organised crime
Cameroon - 17/9/10 Offshore Moudi oil terminal-AMC
5. Civil protest & Vandalism
Greenland -31/8/10 Stena Don offshore drilling rig
6. Inter-state hostilities
Iran -03/83 Iraqi planes -Nowruz oil field platform
Examples of attacks by category……
7. Internal sabotage
Malicious actions of current/former employees
Disclosure of sensitive information to third parties
Collusion with external adversaries that attack
Niger Delta People's Volunteer Force (NDPVF)
Armed force "bunkering" oil lines
Movement for the Emancipation of the Niger Delta (MEND)
Violent force employed against oil barons, government officials
Goals: undermine authority and stop Nigeria's oil exports
Multiplier effect of a Single attack Niger Delta
Apx.50,000 barrels of oil stolen per day
10,000 barrels spill from pipelines damaged by
thieves
Most of oil haul is taken by local gangs to rudimentary
refineries,
where the crude they cannot process is simply
discarded.
National Content is defined as added value brought to
a host nation through:
Workforce development:
Employment and training local workforce
Supplier development:
Procuring supplies and services locally and
Developing local supplier capacity
Can Local Content Help to enhance Security?
Oil & Gas Specialist Goods and Services
Non-Specialist Goods and Services
$ Local Content Opportunities
Understanding Oil & Gas Cycle & Local Content
POLICY
OBJECTIVES
THE NATIONAL OIL
AND GAS POLICY (2008)
1 Efficient
Licensing
2
Establishment &
Management of
Resource
3
Efficient
Production
4
Valuable
Utilization of
Resource
5
Promotion of
Transport &
Storage
6
Collection of
right revenue
7
National
Participation
8
Development
of National
Expertise
9
Environment
Conservation
10
Stakeholder
Relationships
Policies required to enhance local participation
To enact:
State Participation in Petroleum activities
Provision of goods and services by local entrepreneurs
Training and employment of locals
Technology transfer
2
Legal requirements for local content
Purpose:
Increase national wealth thru
Economic growth and more employment of locals
“Value creation in the country” Norway, UK, Brazil &Nigerian policy
Other countries look at Ownership
Expenditure in the local economy
Employment of local workforce
Local content is a means – not a goal
Developing Local Content Strategies
High Government commitment
International oil companies to be supportive
Policies and contracts that allow service companies to invest in the country
High focus on developing human capacity
What will it take to reach a satisfactory level?
Source: SBC analysisNote: Industries within quadrants are not evaluated relatively to each other
Feasibility
Cement
manufacturing
Bulky
construction
materials
Construction
steel
manufacturing
Site safety
and security
Facility
Management
Civil construction
services
Generic waste
management
Hazardous waste
management
Transportation &
Logistics (Goods)
Fuel
wholesale
Manpower
agency
Technical
consultancy
Food
supply
Catering
Light equipment
manufacturing
Domestic Airline
Services
Road
construction
Transportation
(People)
Work safety
products
High
Low
Complex Easy
Production
operation services
Furniture
manufacturing
Vendor and
representation
services
Mechanical
construction
services
GMS Light iron/steel
products Oil/Water
pipe
installation
Pipe
steel
Petrochemical
(refinery)
Fertilizer
Machinery and
heavy equipment
manufacturing
Drilling
services
Drilling
supplies
Oilfield
Services
Oilfield equipment
manufacturing
Drilling
Equipment
Oilfield
chemicals
Cement
additives
O&G specific
emergency
services
Engineering
consultancy
Benefits
Blue area
industries
will be
addressed
through
steps on
education
Identify Industries with high local content potential
What it takes to boost local participation
Understand the strengths and weaknesses of local
enterprises to ensure policy responsiveness
Promote programs to upgrade and train local companies to
meet the stringent QHSE requirements
Create institutions that focus on R&D and Set up long-term
plans to support and finance R&D.
Provide tangible benefits for oil and gas companies to hire
and train young graduates - eg. tax rebates, royalty changes
Access to low cost finance
18
There is no “Ideal model” to export to other countries
The most successful countries have 40% – 80% Brazil, Malaysia, United Kingdom, Norway
Many are struggling to reach 25%-30% Nigeria, Angola, Trinidad and Tobago, Saudi Arabia, Libya
2
What level to aim for?
Shell placed 70% of all contracts with Nigerian owned
firms until 2002-2003
Value creation in the country was only some 5 - 15%
Sourced work outside Nigeria, acted as middlemen
for profit
Over ambitious Local Content Strategies may hurt
economies.
• Ghana 90% in 10 years, IOCs divesting-Nigeria, Brazil Revisiting
Local ownership is no guarantee for value addition
Has Legislation increased local participation?
Brazil – Petrobras:
Active involvement in the industry from its formation
Acquired technology in deep water drilling thru international expertise.
Malaysia :
Formed partnerships with international oil companies;
Local industry gained best practice & management skills
Cutting edge technologies used by oil companies.
Norway :
Openness towards international companies
A strong focus on national value creation.
Technology agreements to fund R&D
Existing capabilities & competitive strengths were leveraged.
21
Universities and
Technical
Institutions Petroleum Industry
E&P
Refining
Transportation
Distribution
Governmental
Agencies
Supply Chain of
Goods and
Services
Financial
Institutions
Environmental Protection
Health and safety assurance
Social and economic
development
Technological innovation
Key objective: Promote Sustainable Development
Proactive Linkages: IOCs, Gov, Law Enforcement Agencies
Boarder Control, Passport Control,
INTERPOL, etc
Local & International Law
enforcement Agencies
Working Effectively with other Departments
Procurement& Contracts: Ensure business opportunities
to local firms
Land Acquisition:
Fair & Equitable Process
QHSE:
Ensure environmental integrity, Safety & Security
Local Content:
Ensure utilisation of local goods/services, training &
technology transfer
Corporate Social Responsibility: Implement community projects &
improve livelihood
Human Resources: Employment
opportunities & Compliance with Labour
Laws
Community Liaisons: Restoration of Livelihood and grievance handling
High expectations can lead to several negative
consequences:
A disappointed, and therefore a disengaged public
An indebted government that has borrowed
against possible incoming revenues
Increase of rent seeking; and
General mistrust within the society.
These consequences need to be managed accordingly.
Managing Expectations
Economic and Political Instability When people are out of work they are more susceptible to violence
Supports Insurgents Steal & Sell; Extortion; Political Alliances
Increases Separatism Massive revenues, little disbursement of wealth Under-represented locals bear brunt of costs
Addressing the Political Effects
Build institutions for managing resources
Direct benefits of oil revenues to citizens
Involve principal stakeholders in developing plans
Strong civil society to monitor development
Transparency – EITI, PWYP
26
Direct Effect
• Value of oil and gas production (IOCs & GoU)
Indirect Effect
• Purchase of materials, services and supplies locally Private Sector
Induced Effect
• Spending by employees of both oil Companies and
suppliers
• Private Sector & GoU
Oil and
Gas Sector
Government
gets revenue
from oil and
taxes from Oil
Companies,
Suppliers
And
Employees
And reinvests
the proceeds
to develop the
Country’s
Economy
Security will come from reinvesting Oil & Gas Revenues
Local Content Strategy for Security
Stop focusing on specific threats; focus on vulnerabilities
Be prepared that enemies will use our technologies
against us.
Enemies find the holes, the weaknesses in our
society…
and they exploit them to harm us.
29
Successful local content strategies can enhance Security when:
•Focus is put on diversification rather than resource windfall
•Ensure the revenue generated, is reinvested wisely and holistically
• Stimulate other sectors in the Economy to reduce unemployment
Conclusion
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