Energy Capital & Power

Equatorial Guinea: Local Content to Drive Market Recovery

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Since the onset of COVID-19 and temporary repatriation of oil and gas workers, local content has become a strategic opportunity for Equatorial Guinea to indigenize its oil and gas operations and redefine the way it sources goods, capital and labor.

Moreover, volatile – albeit rising – global oil prices have placed a renewed emphasis on implementing cost-cutting measures. By establishing local infrastructure and supply chains, companies can reduce their costs in the long run by easing procurement, optimizing production and reducing transport and logistics costs. For mature producers like Equatorial Guinea that boast existing infrastructure, opportunities to pool resources with neighboring markets, establish regional value chains and create economies of scale are abound. That said, local content has long-been a complex balancing act between generating and retaining local value through prescriptive policy, while maintaining a somewhat flexible and foreign investor-friendly environment. On the back of a new ministerial decree, enhanced training initiatives and a spirited commitment by its government to national industry, Equatorial Guinea is leveraging progressive local content policy and capacity-building programs to strike the balance.

Policy at Play

The legal and regulatory regime governing the extractive sector is a critical tool for driving indigenous participation in the oil and gas industry. In simple terms, local content in Equatorial Guinea is primarily enforced through the country’s National Content Regulation and Hydrocarbons Law – in addition to a series of ministerial decrees, individual production sharing contracts and local labor code – and establishes stipulations related to the procurement of goods and services, hiring of a qualified workforce, skills and technology transfer, and social infrastructure development. The most recent addition to the framework came last April with the announcement of Ministerial Order 1/2020, which establishes the period by which companies can employ foreign labor in the oil and gas sector as three years. Enforced by the General Director of National Content, the decree serves to incentivize hiring of the local workforce and ensure that companies are seeking long-term local replacements for the foreign workers who they employ.

While Equatorial Guinea has been relatively flexible in negotiating compliance mechanisms with foreign companies, its Ministry of Mines and Hydrocarbons (MMH) has not been hesitant to cancel contracts with service providers that fail to comply with regulations, as it did in 2018. To enforce local content policy, the MMH regularly conducts compliance audits to assess efforts taken by operators, suppliers, contractors and sub-contractors toward domestic capacity building and the implementation of corporate social responsibility plans and national training programs. While the MMH has sought to strengthen enforcement of compliance with regulations, a sophisticated legal, regulatory and institutional framework to support the policies is still needed, along with monitoring and evaluation mechanisms that have the authority and autonomy to implement the policies in place. The framework should also include quantifiable metrics to measure the performance of the international companies in executing knowledge and skills transfer.

Bridging the Skills Gap

Skills development and training is at the forefront of Equatorial Guinea’s local content agenda, with COVID-19 accelerating the need for highly skilled labor in the market. Rapidly advancing technologies and remote work setups initiated by the pandemic have disrupted traditional job markets and the skillsets needed to compete in them, requiring employees to both re-skill and up-skill employees. In Equatorial Guinea, training initiatives have been led by the Instituto Technologico Nacional de Hidrocarbus de Guinea Ecuatorial (ITNHGE), which provides education courses in petroleum and electrical engineering, mining engineering and mechanical engineering, and is open to applicants from member countries of the Economic Community of Central African States. The ITNHGE provides training of indigenous personnel and equips them with the necessary skills to be able to perform highly skilled labor.

Skills and technology transfer has also been carried out through strategic partnerships between training facilities and private sector companies via sector skills councils, enterprise centers and so forth. The National Association of Hydrocarbon Service Companies (NAHSCO), for example, promotes and attracts foreign partners to Equatorial Guinea to become local shareholders in national companies. By facilitating partnership among government, industry and civil society, NAHSCO enables SMEs to gain access to skill development, mentoring and business management support. Through the National Content Development Fund, the Government has also created training and capacity-building programs for nationals and provided scholarship funds and schemes for higher education studies abroad.

ECP, in partnership with the Ministry of Mines and Hydrocarbons, will launch the Africa Energy Series: Equatorial Guinea 2021 campaign – comprising a report and documentary – that will serve as a critical tool to navigate the energy investment landscape of one of Africa’s more mature petroleum-producing markets. To participate in the upcoming Africa Energy Series documentaries, please contact [email protected] and to advertise or sponsor, please contact [email protected].

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Grace Goodrich

Grace Goodrich

Grace Goodrich is a Publications Editor at Energy Capital & Power, where she writes about the intersection of energy, policy and global finance in sub-Saharan Africa's fastest-growing economies. Grace produces our Africa Energy Series investment reports in Angola and Equatorial Guinea (2019), as well as co-authored African Energy Chamber: Road to Recovery (2021).