April 24, 2011
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№ 3 (March 2011)

Africa Oil and Gas Tech Needs Offer New Markets for Russian Exports

   Despite the clamors and merits foreseen in the pursuit of local content which is becoming a vital arm of oil and gas contract policies in producing nations of Africa, it has become clear that oil-rich nations of Africa do for sure need immense assistance in the areas of technology to jump-start its burgeoning industry.

By Sunny Oputa

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   It is not only the importance of having reasonable and availability of quality technology that is the prime quest for ensuring accomplishments of the intents of local content administration in the African market. African producers and local operators are capital starved and has imperative quest for an enhanced human capital bank. However, the lack of technology and its availability is also encapsulated in the same mold with poor capitalization and labor force that requires “steroid” to jolt performance for optimal gains.

   For Nigeria, the most populous African country and prime producer in Africa, local content which is christened as “Nigerian Content”  to propagate the vision of the people, according to Nigerian National Petroleum Corporation (NNPC), is defined as “the quantum of composite value added or created in the Nigerian economy through the utilization of Nigerian human and material resources for the provision of goods and services to the petroleum industry with acceptable quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities.” In the same vein, Angola the second highest producer of crude oil in the African market through the concept of Angolinization entails the hiring of local people in positions for which they are qualified in the nation’s oil industry. The core essence of local content hinges on the eradication of the so called Dutch disease and development of robust local economy through massive participation of indigenes.

   While the right implementation of local content remains one of the feasible panaceas for stimulating economies of impoverished resourced rich-nations of Africa, it is also a known fact that the utilization of locals without the availability of proper technology is an effort in futility. Simply put, African producing nations lack technological base on its own to shoulder the complex requirement of oil and gas operation. Therefore, the dire need for foreign supply of technology, transfer of sort or the essence  of developing local industries that would give birth to technologies are germane if Africans can sustain and propel the industry at its own accord.

   Many marginal fields which were abandoned by mega IOC’s for commercial reasons and allocated to local operators have remained undeveloped because of lack of capital and zero technological presence. As things stand for now, it is still a far cry and wild dream that the local operators can develop these fields independently without seeking for foreign technical and financial partnership.  None of the producing nations have shown enough potentials or visible strategies to enforce emergence of locally developed technologies suitable for the industry. At this pace, for many decades to come, these nations will still be dependent on foreign supply of technology and integration of expatriates to keep the industry afloat and maintain a viable economy, as most of these nations are almost 90 percent dependent on the revenue accrued from oil industry for economic sustenance.

   It is clear as the day light to local operators and governments that they cannot make meaningful progress without acquisition of technologies which are not locally available. Dependence on foreign supply is still the platform or modus operandi. The African technology supply chain, amid the evolution of local content will only avail through partnership between foreign suppliers and credible vendors, leasing and direct purchase.

   Results have shown that companies that invest on technology always generate growth and benefit from economics of scale. After all, technology entails speed, ease, quality, increased productivity and variations in cost.  Companies such as AFREN and OandO that were able to source for fund and invested heavily on technology have become the two top leading local operators in Africa.  Gradually funding is becoming available to local operators and vendors through the efforts of local banks who have recently become capitalized with new stream of CEOs, regional financial institutions and the collaboration of World Bank, IFC and other foreign financial bodies.

   Many foreign manufacturers and suppliers are still wary to do business or invest in some African nations as result of the volatility of the market, encumbered by substantiated and sometimes over-exaggerated geopolitical issues, and visible taints of corrupt practices.  These factors have strangulated market growth and expected surge in local economies. As these traces have stymied growth and reputation in the global market, most African producing nations and economies are working round the clock to turn into a new leaf by pushing for political and market stability and reforms, and also enforcing anti-corruption practices.

   While the market can not be duly be crowned with a halo of innocence, it is proper to say that the enlarged African market for technology suppliers is still a profitable business terrain worth venturing into by foreign companies that understands the market  or has reputable and resourceful chaperons to lead them through the labyrinth.  

   A foreign supplier that wants to get into the emerging and robust African market needs to understand the various cultures and learn the contract policies and regulatory frameworks that are prevalent in these nations. Above all, for mega suppliers that want to make Africa home, a development of corporate social responsibility policy would leverage them as preferred neighbors.

Author’ Bio
Sunny Oputa, is the CEO of Energy & Corporate Africa and a consultant in the African Oil & Gas Market. Energy & Corporate Africa is dedicated to human capital development, performance enhancement and capacity building in the African market. Based in Houston, the organization consults, conducts researches and studies; identify opportunities, trains, and run conferences focused on the African market, including the annual Sub-Saharan Oil&Gas Event in Houston April 28-29 (www.energycorporateafrica.com).

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