This document discusses security challenges for oil and gas infrastructure and how developing local content strategies can help address them. It notes that oil and gas facilities are capital intensive and vulnerable to attacks from groups seeking to undermine stability or gain control over oil wealth. Developing the local economy through workforce training, supplier development and technology transfer can reduce unrest, as local populations will feel they are benefiting from the industry. If revenues are reinvested to create jobs and opportunities outside the oil sector, countries will be less dependent on oil and less prone to instability when prices fluctuate or attacks occur. Overall, local content is most effective for enhancing security when it leads to diversification and inclusive economic development.

1. Jessica Kyeyune

2. Overview of the Challenge
 Capital intensive facilities and installations
 Susceptible and vulnerable to criminal actions.
 Requires security to promote investor confidence.
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3. What Causes attacks on Infrastructure?
 Competition for Oil Wealth
 Marginalisation of natives of the oil & gas producing regions
 Militarization of the region by local militia groups.
 Environmental degradation by Oil activities
 Social Unrest by Youths who are mainly unemployed.
 Displaced people who need to reclaim their livelihood!!!

4. Possible Security threats
 Cyber attacks
 Bunkering Oil from pipelines/wells
 Deliberate sabotage to pipelines and other assets.
 Laxity in Safety & Security Standards
 Local militants on pretext of securing more oil wealth
for their communities

5. Who are the perpetrators?
Different motivations, objectives, tactics and capabilities.
These include
 Terrorists, Insurgents,
 Pirates, Criminal syndicates,
 Environmental activists,
 Anti-oil activists /protesters,
 Hostile Nation-States,
 Unknown groups & individuals.

6. Examples of attacks by category
1. Piracy
 Tanzania – 3/10/11 attack on Poseidon drill ship.
2. Terrorism
 Iraq - 4/04 Al Basrah Oil Terminal -suicide boats
3. Insurgency
 Nigeria- 29/6/09 Bombing Forcados loading terminal
MEND insurgency group

7. Examples of attacks by category…….
4. Organised crime
 Cameroon - 17/9/10 Offshore Moudi oil terminal-AMC
5. Civil protest & Vandalism
 Greenland -31/8/10 Stena Don offshore drilling rig
6. Inter-state hostilities
 Iran -03/83 Iraqi planes -Nowruz oil field platform

8. Examples of attacks by category……
7. Internal sabotage
 Malicious actions of current/former employees
 Disclosure of sensitive information to third parties
 Collusion with external adversaries that attack

9. Niger Delta People's Volunteer
Force (NDPVF)
Armed force "bunkering" oil lines
Movement for the Emancipation of
the Niger Delta (MEND)
Violent force employed against oil
barons, government officials
Goals: undermine authority and stop
Nigeria's oil exports

10. Multiplier effect of a Single attack
Niger Delta
 Apx.50,000 barrels of oil stolen per day
 10,000 barrels spill from pipelines damaged by
thieves
 Most of oil haul is taken by local gangs to rudimentary
refineries,
 where the crude they cannot process is simply
discarded.

11. National Content is defined as added value brought to
a host nation through:
Workforce development:
Employment and training local workforce
Supplier development:
Procuring supplies and services locally and
Developing local supplier capacity
Can Local Content Help to enhance Security?

12. Oil & Gas Specialist Goods and Services
Non-Specialist Goods and Services
$ Local Content Opportunities
Understanding Oil & Gas Cycle & Local Content

13. POLICY
OBJECTIVES
THE NATIONAL OIL
AND GAS POLICY (2008)
1
Efficient
Licensing
2
Establishment &
Management of
Resource
3
Efficient
Production
4
Valuable
Utilization of
Resource
5
Promotion of
Transport &
Storage
6
Collection of
right revenue
7
National
Participation
8
Development
of National
Expertise
9
Environment
Conservation
10
Stakeholder
Relationships
Policies required to enhance local participation

14. To enact:
State Participation in Petroleum
activities
Provision of goods and services by
local entrepreneurs
Training and employment of locals
Technology transfer
2
Legal requirements for local content

15. Purpose:
Increase national wealth thru
Economic growth and more employment of locals
“Value creation in the country”
Norway, UK, Brazil &Nigerian policy
 Other countries look at Ownership
 Expenditure in the local economy
 Employment of local workforce
 Local content is a means – not a goal
Developing Local Content Strategies

16.  High Government commitment
 International oil companies to be supportive
 Policies and contracts that allow service companies
to invest in the country
 High focus on developing human capacity
What will it take to reach a satisfactory level?

17. Source: SBC analysis
Note: Industries within quadrants are not evaluated relatively to each other
Feasibility
 Cement
manufacturing
 Bulky
construction
materials
 Construction
steel
manufacturing
 Site safety
and security
 Facility
Management
 Civil construction
services
 Generic waste
management
 Hazardous waste
management
 Transportation &
Logistics (Goods)
 Fuel
wholesale
 Manpower
agency
 Technical
consultancy
 Food
supply
 Catering
 Light equipment
manufacturing
 Domestic Airline
Services
 Road
construction
 Transportation
(People)
 Work safety
products
High
Low
Complex Easy
 Production
operation services
 Furniture
manufacturing
 Vendor and
representation
services
 Mechanical
construction
services
 GMS Light iron/steel
products Oil/Water
pipe
installation
 Pipe
steel
 Petrochemical
(refinery)
 Fertilizer
 Machinery and
heavy equipment
manufacturing
 Drilling
services
 Drilling
supplies
 Oilfield
Services
 Oilfield equipment
manufacturing
 Drilling
Equipment
 Oilfield
chemicals
 Cement
additives
 O&G specific
emergency
services
 Engineering
consultancy
Benefits
Blue area
industries
will be
addressed
through
steps on
education
Identify Industries with high local content potential

18. What it takes to boost local participation
 Understand the strengths and weaknesses of local
enterprises to ensure policy responsiveness
 Promote programs to upgrade and train local companies to
meet the stringent QHSE requirements
 Create institutions that focus on R&D and Set up long-term
plans to support and finance R&D.
 Provide tangible benefits for oil and gas companies to hire
and train young graduates - eg. tax rebates, royalty changes
 Access to low cost finance
18

19. There is no “Ideal model” to export to other countries
The most successful countries have 40% – 80%
 Brazil, Malaysia, United Kingdom, Norway
 Many are struggling to reach 25%-30%
 Nigeria, Angola, Trinidad and Tobago, Saudi Arabia, Libya
2
What level to aim for?

20.  Shell placed 70% of all contracts with Nigerian owned
firms until 2002-2003
 Value creation in the country was only some 5 - 15%
 Sourced work outside Nigeria, acted as middlemen
for profit
 Over ambitious Local Content Strategies may hurt
economies.
• Ghana 90% in 10 years, IOCs divesting-Nigeria, Brazil Revisiting
Local ownership is no guarantee for value addition

21. Has Legislation increased local participation?
Brazil – Petrobras:
 Active involvement in the industry from its formation
 Acquired technology in deep water drilling thru international
expertise.
Malaysia :
 Formed partnerships with international oil companies;
 Local industry gained best practice & management skills
 Cutting edge technologies used by oil companies.
Norway :
 Openness towards international companies
 A strong focus on national value creation.
 Technology agreements to fund R&D
 Existing capabilities & competitive strengths were leveraged.
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22. Universities and
Technical
Institutions
Petroleum Industry
E&P
Refining
Transportation
Distribution
Governmental
Agencies
Supply Chain of
Goods and
Services
Financial
Institutions
Environmental Protection
Health and safety assurance
Social and economic
development
Technological innovation
Key objective: Promote Sustainable Development
Proactive Linkages: IOCs, Gov, Law Enforcement Agencies
Boarder Control, Passport Control,
INTERPOL, etc
Local & International Law
enforcement Agencies

23. Working Effectively with other Departments
Procurement& Contracts:
Ensure business opportunities
to local firms
Land Acquisition:
Fair & Equitable Process
QHSE:
Ensure environmental
integrity, Safety & Security
Local Content:
Ensure utilisation of local
goods/services, training &
technology transfer
Corporate Social Responsibility:
Implement community projects &
improve livelihood
Human Resources:
Employment
opportunities &
Compliance with Labour
Laws
Community Liaisons:
Restoration of Livelihood
and grievance handling

24. High expectations can lead to several negative
consequences:
 A disappointed, and therefore a disengaged public
 An indebted government that has borrowed
against possible incoming revenues
 Increase of rent seeking; and
 General mistrust within the society.
These consequences need to be managed accordingly.
Managing Expectations

25. Economic and Political Instability
When people are out of work they are more
susceptible to violence
Supports Insurgents
Steal & Sell; Extortion; Political Alliances
Increases Separatism
Massive revenues, little disbursement of wealth
Under-represented locals bear brunt of costs

26. Addressing the Political Effects
 Build institutions for managing resources
 Direct benefits of oil revenues to citizens
 Involve principal stakeholders in developing plans
 Strong civil society to monitor development
 Transparency – EITI, PWYP
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27. Direct
Effect
• Value of oil and
gas production
(IOCs & GoU)
Indirect
Effect
• Purchase of
materials, services
and supplies
locally Private
Sector
Induced
Effect
• Spending by
employees of both
oil Companies and
suppliers
• Private Sector &
GoU
Oil and
Gas Sector
Government
gets revenue
from oil and
taxes from Oil
Companies,
Suppliers
And
Employees
And reinvests
the proceeds
to develop the
Country’s
Economy
Security will come from reinvesting Oil & Gas Revenues

28. Local Content Strategy for Security
 Stop focusing on specific threats; focus on vulnerabilities
 Be prepared that enemies will use our technologies
against us.
 Enemies find the holes, the weaknesses in our
society…
 and they exploit them to harm us.

29. 29
Successful local content strategies can enhance
Security when:
•Focus is put on diversification rather than
resource windfall
•Ensure the revenue generated, is reinvested
wisely and holistically
• Stimulate other sectors in the Economy to reduce
unemployment
Conclusion