September 10, 2014
Local content programs: How can energy companies ensure success?
By: James Arnott

Across emerging market economies, national oil companies (NOCs)—or national utilities and mines companies—are making big investments in resource development in collaboration with international or independent oil companies (IOCs). The NOCs and government agencies are not only banking on investment from their international collaborators but also on the flow of knowledge and knowhow in a range of areas—developing local talent, integrating backward the supply chain, improving processes, enhancing benefits and executing an active knowledge transfer program. For IOCs, the most challenging aspect of exploration and development is often how to fast-track the work within the limits of available local content and utilizing them on a competitive and sustainable basis.

While such partnerships can bring a host of benefits to local economies, there could be a significant mismatch of expectations as well. NOCs, the actual resource holders, may have inflated ideas of the capacity and capability of the local workforce, or of the investment potential or even of the market place. This misalignment leads to the partnership failing to meet the local content target, or triggering a cost or time overrun for the project, or causing a rift in relationships with government stakeholders.

Energy companies are trying to address these challenges through a three-step framework combining strategy, tactics and operations. But the rapid growth in emerging market economies and increasing regulation are forcing them to think beyond compliance and focus more on long-term workforce and supplier development through sustainable local content programs. From Accenture’s extensive experience in capital projects in multiple geographies, we have unearthed six critical success factors for local content programs. First, lay down a vision and strategy that is set in the context of the local demand-supply situation and is relevant to the market place. Second, ensure appropriate organization and governance. Next is putting in place a set of well-defined processes around the actual execution and management of the local content. Fourth, those processes must ensure accurate, timely and insightful measurement and reporting to safeguard the investments made. Fifth, enforce a set of enabling programs with shared responsibilities and outcomes. Finally, we need supporting tools and technologies to allow optimum development of local content programs. Listen to this podcast to know how these six levers help energy companies strengthen local content over time to drive future growth, innovation and competitive advantage.

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