A New Approach to Enterprise and Community Development in Africa’s Oil and Gas Sector
About a month ago, I received a phone call from the lead consultant on a team hired to advise the Ministry of Energy for a small African nation on issues regarding “local content”. “Local content” is a term at risk of falling into the abyss of development jargon. Put simply, it means the extent to which local people and companies are able to participate in the workforce and supply chains of a given industry. It is most often a focus area in sectors that require technical sophistication to exploit natural resources—namely extractive industries such as mining, oil, and gas.
The phone call from this lead consultant was one of four such contacts I received in that week alone. As the Vice President of Enterprise and Community Development at CDC Development Solutions, I have seen a growing interest in advisory services designed to aid local companies in entering the oil and gas supply chain in sub-Saharan Africa. This shift highlights the fact that a new day is dawning in the oil and gas industry in this part of the world. The claims in a recent Economist feature that the death knell is sounding for the integrated international oil and gas company (IOC) may be overcooked; however, there is no question that the rising relevance of national oil companies (NOC) in new markets is driving profound attention to issues of small and medium enterprise (SME) development among regulators, NOCs, and IOCs.
The Changing Role of the IOC
While it is true that IOCs such as ExxonMobil, Chevron, and Shell remain among the world’s most valuable companies, there is still no doubt that the IOC’s role in the global oil industry is changing. Oil demand in developed countries has been falling since the mid-2000s, a result of more efficient vehicles and overall demographic changes in car ownership. Simultaneously, we are seeing a greater demand for oil from the developing world—a demand that is only expected to increase as living standards improve in developing countries.