Oslo18th February
Localcontent
ByWillyHOlsen,senioradviserINTSOK [email protected] [email protected]
www.intsok.com
Thenewglobal economicpowerhouse
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BP/CNPC Exxon/Shell Lukoil/Statoil Shell/Petronas ENI
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We'rethe newkidson theblock,"
StephenBull, Statoil
Marcellusisoneoftheshalegasplays,transformingUSgasproduction. StatoilhasbeenattheheartoftheplaysinceNovember2008 Acquireda32.5%interestintheAppalachianacreagefromChesapeake Anambitiousdrillingprogramwith13,50017,000horizontalwells
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Thelargestglobaloffshoremarkets
Expectedexpenditure201013
BillionUSD
Source: INTSOKs annual market report
Aglobaldriveforlocalcontent
Oldtimers Newcomers
Norway UK Algeria Libya Mexico Ecuador T&T Venezuela Ghana Nigeria Angola
Russia
Canada
Kazakhstan Azerbaijan Iraq Iran Saudi Tanzania Indonesia Malaysia TimorLeste PNG Australia
Bolivia Brazil
Source:WillyHOlsen
Oilpricewillinfluencelocalcontentstrategies
Localcontent
NOCsmoreassertive Localcontentimportant
Efficiencydrive Industrystructurechange Nolocalcontent
Localcontentshouldaddvalue
Keydefinitionfeatures Basicpremises
ValueCreation ValueAdded Knowledgeretention Economicmultiplier effect EconomicallySound
EqualorBetter Quality Cost Delivery Safety&Environment NurturenotSubsidize
What is the extra mile that you need to take?
Local content definition and criteria but notcreate alarge bureaucracy
Thequantumofcomposite valueaddedorcreatedin theGhanaianeconomy throughtheutilizationof Ghanaianhumanand materialresourcesforthe provisionofgoodsand servicestothepetroleum industrywithinacceptable quality,health,safetyand environmentalstandardss tostimulatethe developmentofindigenous capabilities
Source:GNPClocalcontentgroup
%ofGhanaianmanagementinservice companies %ofGhanaianownership %ofGhanaianEmployees %valueofservicesprovidedbyGhanaians; %valueofGhanaianrawmaterials %valueofGhanaianFinishedGoods Infrastructuralinvestments TechnologyTransfer/Capacity Development Newemploymentopportunities Ghanaianparticipationintheprocurement ofimportedgoods
Neverforgetour ownexperiences
Apartnershipapproach
Legislationfrom1972to1995 Useofcarrotsandstick Stimulatingcompetitionand cooperation Activegovernmentinvolvement Technologytransfer agreements TaxincentivesforR&D BackingjointR&Dinitiatives Threeproactiveoilcompanies Statoil,Hydro,Saga Solidindustrybaseandcompetence
Operators
Trolloil atestbedfornewsolutions
Hydroasoperatorusedsomeoftheworldsmostadvancedtechnology companiesintheTrollOilproject Theprojectwasnotfornewcomerswithlackofexperience Theinternationalheavyweightsweremobilized
BakerHughes Halliburton Schlumberger
Theoutcomewasamajortechnologicalsuccessstoryandtransfer of technologytoHydroandseveralsmallerNorwegiansubcontractors.
Source:EconreportforHydro
FieldsthatliftedNorwaystechnologybasis
Kristin Tyrihans Tordis IOR
High pressure High temperature Advanced wells
Record long pipeline heating Subsea raw seawater injection
Subsea separation boosting and injection system
Thelocalcontentimpactonthecluster
BillionNOK
Source:OED/Menonreport,WHOanalysis
Whocandeliver?
Lackofalignmentofinterests
Governmentpriorities Fairshareofrevenues Localcapabilitydevelopment Jobandskillcreation Improvedinfrastructure Diversifiedanddeveloped nation Sustainable future Oilcompanypriorities Reserveandproductiongrowth Competitiveprofitability Supplierchaincostefficiency Costeffectivelocalcontent compliance Licensetooperate Shareholder value
NOCsarethenationscustodians
Morethan100NOCsaroundtheworld Theycontrolmostofthereserves Theyareverydifferent Manyhavebecomecommercialized Manyareindireneedofreforms MostNOCswerecreatedwithamandateto implementgovernmentenergypolicies Theoverallmissionwastoincreasestaterevenues andactasaneconomicengine Theywillbethelocalcontentdriver
Petronas,PetrobrasandStatoil successstories SaudiAramco,Sonangol,NNPC,KMGdrivingtheagenda
17
Theoilindustrystructurehaschanged
Operationand maintenance
Development
Geologyand geophysics
Prospect generation
1970& 1980s
Oilcompaniescoulddolocalcontent
Engineering
Exploration
Operationand maintenance
Development
Geologyand geophysics
Oilcompaniesneedhelptodolocalcontent
Oilcompanies
Source:WillyHOlsen
Contractors
Drilling
Now
Both
Wellservices
Specialist maintenance
Prospect generation
Engineering
Exploration
Wellservices
Specialist maintenance
Drilling
ThecaseofBrazil
Largepotentialfor ouradvanced technological solutions
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Everything whichcanbe doneinBrazil shouldbedone inBrazil
Heistheleadingthe worldsmostaggressive oilcompany
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Thestrategicapproach
Challenge Maximizelocal content Strategicissues
Qualification
Technology qualification Professional qualification Supplier development Industry capacity
Industrialpolicy
Financing Taxpolicy Regulation Fostermicro andSMEs
Industryperformance
Sustainable Competitive HSE Initiativeson competitiveness
Funding initiatives
Source:BasedonPetrobrasinformation
CENPES anislandofknowledge
R&DManagement
R&DExploration
R&DProduction Basic Engineering
R&DRefining Technology Management
R&DGas&Energy
CenpeswasthesourceoftheinnovativesolutionsthatmadePetrobras therecognizedworldleaderindeepwaterandultradeepwater Cenpeshas227laboratoriesasaresultofrecentexpansion Near2,000workfortheinstitutiondirectly Cenpesisthemostvisiblefeatureinagiantnetworkofinvestmentsthat Petrobrashasmadeintheareaoftechnology InvestedclosetoUS$700millioninR&D2008
Needsubstantialgrowthinlocalcapacity
imports
5.Incentiveforsettlingdown internationalcompaniesin Brazil 4.Incentiveforassociation betweennationaland internationalcompanies 3.Incentivefornewnational entrants 2.Developcompetitionamong mediumcompetitivesectors 1.Increaseproductivitycapacityof highlycompetitivesectors
Increasein NationalSupply CapacityofG&S imports
Current Demand
Future Demand
Aker
Sevan
Acergy Petrobras
Seadrill
Siemens
Marintek AGR
FMC
It is not necessary for a Norwegian company that has ambition to gain a contract to be present in Brazil, but it is an advantage. All the Norwegian companies I do business with are represented in Rio
Jose Formigli Petrobras, Vice President, Presalt Development
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ThecaseofAngola
WehavetocreateconditionstoenablemoreAngolan citizenstoplayapartintheeconomy. TherewillnotbeaconsolidatedsocietyinAngolaifthe minoritycanttakepartinit. Untilnowbeenleaningtowardsforeigndomination Itsnecessarythatlittlebylittlethistrendbereversed.
ManuelVincente,CEOofSonangol,2009
Thelocalcontentchallenge
Thedeepwaterprojectsinthelastdecadehasbeen basedoncomplextechnicalsolution Sonangoldrivinglocalcontentagenda Effortstobuildanindustrialbasebeganinthe1980s SubsidiarieswithTechnip,Saipem,PrideandAcergy Equityinterestsinspecialistandlogisticservices Equityinterestsinyardsandsupplybases Jointventureswithforeignfirmshaveresultedin constructionyards Localcontentcanmeanlongerprojectscheduleand higherrisks andlessrevenuestoAngola MorepressuretouseAngolanstaff
FMCsfabricationexpansioninAngola
Pazflor firstsubsea separation
GreaterPlutonio 45Wells
Girassol/Jasmin 45Wells Nemba 7wells LargestFMCcontractever Furtherexpansion oflocalproduction andsupport Rosa 23Wells
JumperFabrication InvestmentinBase
Jumper+ Manifold Fabrication
Jumper+ ManifoldFabrication XmasTreeAssembly investmentinbase
Graduallocalexpansionsincefirstcontractin1997 22Angolansemployedin2000 now250 80%ofworkforceareAngolans aimtohave97%by2013
ThecaseofRussia
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Inlinewithyourorders,anewbusinesstobuildsea platformshasbeenestablishedatthecityofAstrakhan AllAstrakhansshipyardsaswellastwoshipyardsin Kaliningradandotherfacilitiescanhandletheworkforthe Caspianprojects
VagitAlekperov,LukoilsCEO,inmeetingwithPrimeMinisterPutin 21September2009.
Norwegianconcretesolvinglocalcontent
ExxonMobilandShellhavelocalcontent requirementsinSakhalin
Manhoursandweight
AkerSolutionsGBSatSakhalin2enabled Shelltomeetalllocalcontenttargets Structure biggesteverbuiltinRussia
92%manhours 97%materialsbyweight 700Russianfirmsinvolved
AkerSolutionisnowengagedinthe ExxonMobilprojectatSakhalin1 Firstproductionexpected2015
Oilcompanieshavelargeinternalorganisation
TheRussianoilservicemarketis stillrelativelyundeveloped Oilcompanies 80%internalin 2003beforeoutsourcing Independentdomesticservice companiesemergedinrecentyears Oftenspunofffromoilcompanies likeLukoil,TNKBPandRosneft TNKBPsaletoChinablocked Schlumbergerhasmadeseveral largeacquisitionsandhas14,000 employeesinRussia
Marketshare
Oilcompanies
Lessonslearned
Lessonslearnedfromsuccessfulcountries
Needahighlevelchampion Thinkstrategically,Actpractically Identifycapabilitiesandgaps Buildcapabilitiesandcapacities Strengtheninstitutions Pickpartnersthatsupportyourstrategy Beselectivebasedonstrategicvalue Engageearlyinthelifecycle Disaggregatecontracts DoitinCountry first Doitwithlocals willcomenext
Whathasbeensuccessfultools?
Legislationandregulations,concessionandPSCs Project,procurement&contractstrategies Localcapacitybuilding,trainingandR&Difnecessary throughtaxincentives Technologytransferrequirements SupportforSMEsandentrepreneurs Registryofcompetentandqualifiedlocalvendors Adviceonpotentialsforjointventuresandother mechanismsofcooperationwithforeigncompanies Clusterprograms Mentorprograms Infrastructureinitiatives Supplybasedevelopments Enterprisecenters
Youwillhavetoactearly!
Ability Abilityto to Influence InfluenceCost Cost
Project Project Sanction Sanction
Project Project Expenditures Expenditures
Opportunity appraisal/ Feasibility
ConceptSelection
ConceptDefinition
SystemDefinition
ProjectExecution
Localcontentisnotalwayscostless
Governmentsshouldnotpickwinners andsubsidizeforever Cannotrefrainfromengaginginsomekindofindustrialpolicy Havetocarefullybalancestructuralnecessitiesandthedangers of publiclyinduceddistortions Badlyenforcedlocalcontentpolicymayimpedeeconomicgrowth Consumingwealthratherthancreatingvalue Riskofpermanentprotection Corruptionandredtape
Source: Rodrik, 2004, Hausman & Rodrik, 2006, Per Heum, 2003 & 2008
