Image: Offshore Technology
The Ivory Coast’s government recently adopted a Bill further strengthening local content provisions, which include reforms on the preferential selection of local companies for supply and services contracts and employment of nationals, as well as the use of local financial and insurance services. Moreover, the new bill will implement a classification of petroleum-related activities into three distinct categories.
- Category A activities will be reserved for Ivorian companies;
- Category B activities will be reserved for Ivorian companies and for Ivorian companies in partnership agreements with foreign companies;
- Category C activities will be reserved to all companies.
The government has stated that it will bring clarifications on these new categories as well as on the implementation modalities of this new Bill.
Ivory Coast is one of West Africa’s most dynamic and promising economies. The country not only managed to sustain a yearly growth rate averaging 8% for nearly a decade, but was also among the few sub-Saharan African nations to maintain growth amid the unprecedented economic shock resulting from the Covid-19 pandemic. Key factors for this success include large-scale structural fiscal reforms, infrastructure development, the implementation of strategies to increase value-added from cocoa and other foodstuffs destined for exports, all of which have contributed to an amelioration of the business climate. Indeed, the World Bank’s annual Ease of Doing Business index ranked Ivory Coast 110th (out of 190 countries) – a large improvement from its 167th position in 2011.
Bringing forth new strategies to attract Foreign Direct Investment (FDI) meant revising local content provisions too. A practice widespread across the continent, local content policies aim to boost employment rates and to ensure human capital development and technology transfer in petroleum-producing countries. Although Ivory Coast has a comparatively smaller oil and gas industry than most African oil-producing countries – oil production averaged 36,000 bpD in 2019 – local content policies have remained at the center of governmental debates. In 2012, Ivory Coast’s government amended the country’s Petroleum Code, first enacted into law in 1996, to obligate Petroleum contract holders (i.e, concession contracts, production sharing contracts, and/or service contracts) and their sub-contractors to hire Ivorian nationals. In addition, both contractors and sub-contractors are required to set up and finance training programs for Ivorian employees as well as petroleum administration officials. Up until then, local content regulations were limited to Article 52, which stipulated that IOCs should contract local companies for construction, supply and services under the condition that these are equivalent in quality, price, quantities, delivery time, and terms of payment.
The country has integrated local content requirements to a number of other regulatory frameworks, including the 2014 Mining Code and the 2018 Investment Code, ensuring that multiple sectors of its economy benefit from technology transfer and capacity building. However, local content regulations specific to the Petroleum Code are expected to become particularly vital, as major offshore oil and gas discoveries have been made this year. Indeed, following deepwater exploration on block CI-101, Italian oil company, Eni, discovered an estimated 1.5 to 2 billion barrels of oil and about 1.8 to 2.4 trillion cubic feet of gas. Following this discovery, Eni announced that it had launched studies for a ‘fast-track development’ of the discovery. If successfully developed, Ivory Coast has the potential to rival a number of African oil-producing countries and become a much more important player to contend with.