Localisation strategies are a cornerstone for mutual growth, value creation, and effective transformation for both Ghanaian Society and upstream Oil and Gas companies. However, by not taking a holistic view, the potential benefits of robust localisation strategies are not captured.
In 2007, Dallas-based Upstream Oil and Gas Company Kosmos Energy made one of the largest oil discoveries in Ghana for decades. The Jubilee Field which is located 60 km offshore between the Deepwater Tano and West Cape Three Points blocks off the coast of Ghana’s Western region currently has a production rate of 84,700 Bopd (Barrels of Oil Per Day). The discovery of oil acted as a beacon to the world that signaled Ghana’s hydrocarbon potential. To capitalise on this potential, from 2007 to 2020, Ghana has taken major leaps to develop the industry; from setting up industry-specific entities such as the Petroleum Commission, to passing regulations such as the LI2204. All these actions have been undertaken to make sure that the discovery of oil, and the resulting exploitation of natural resources, leads to the creation of economic value. Which will be diffused throughout the entire country instead of being concentrated in the hands of a few. One central area for creating mutual economic benefit, across multiple stakeholders, is workforce localisation strategy. The lifecycle of a localisation strategy has many nuances. Given our deep industry experience within the Oil and Gas sector in Ghana, we set out to explore and demystify the following within this article:
Why The Need For A Holistic Workforce Localisation Strategy?
Local Content Regulations refer to policies that are imposed by governments that often require firms to use some level of domestically supplied services or domestically manufactured goods in order to operate within an economy. These regulations are put in place as a means for the government to achieve its respective policy aims in regards to industrialization, economic development, and employment. When faced with existing local content regulations in a particular economy of interest, companies must employ workforce localisation strategies. Developing and implementing a workforce localisation strategy can take a variety of different forms depending on the economy of interest. Given our deep experience within Ghana’s Oil and Gas sector, we have identified gaps in the implementation of workforce localisation strategies as it relates to workforce planning. These gaps prevent and seriously hamper the perceived mutual value creation that is supposed to underpin these strategies. We believe that there is a need for holistic localisation strategies; which are integrated strategies from a business objective perspective where the company believes in the benefits of localisation, and creates structures of accountability between themselves and the host country.
Ghana’s local content regulations were created in a piece of legislation known as the LI2204. The central pillars of these regulations are highlighted below:
A holistic localisation strategy requires that a company explicitly states its intention of having a majority of its company’s operations run by domestic nationals within the economy of interest, and working in tandem with the host country to achieve this. Transparency on both sides is necessary for a successful engagement. Without this transparency or accountability, localisation strategies tend to fall short and lead to hidden costs that are incurred by both the host country and the oil and gas company.
Hidden Costs Of A Badly Implemented Localisation Strategy
There is a cascade of hidden costs when it comes to a poorly implemented localisation strategy. Most international oil companies, within the upstream oil and gas sector, that have the ability and capital to go into new economies are publicly traded companies. This requires a sharp focus on maximizing shareholder value and being efficient allocators of capital. These companies must use both short-term and long-term planning to ensure the viability and attractiveness of their business for prospective and existing investors and customers. Therefore cost discipline is absolutely necessary. So it is extremely surprising to see some of these companies incurring a greater cost than necessary due to not employing holistic localisation strategies. We believe that the companies that will ultimately succeed are the ones that view holistic localisation strategies as a competitive profit-maximizing long-term investment, instead of a cost-centre associated with compliance. We will use our experiences operating within the Ghanaian Oil and Gas sector to highlight how some of these hidden costs are incurred.
Our Recommendations For Creating A Holistic Workforce Localisation Strategy
The companies that take a long-term view of the economies that they operate in are the ones that are most poised for success. At CarvinClay, we take the stance that investing in developing strong workforce localisation initiatives and programmes acts as a competitive advantage that companies can use to pursue growth, productivity gains, and ultimately create more value. However, this is easier said than done. So we laid out some concrete and proven ways of developing, measuring, and implementing strong localisation strategies below:
Implications for Oil and Gas Companies in Ghana
If you are an oil and gas company currently operating in Ghana, then we suggest that you start viewing your localization strategy as a way of creating a competitive advantage. An advantage that not only benefits your company but also benefits the communities that you operate in. This creates a virtuous flywheel that will help your organization ultimately create and capture more value in the long-run.