Angola Deepen Local Content Agenda

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By Ndubuisi Micheal Obineme

As the COVID-19 pandemic has caused unprecedented impacts on Africa’s oil and gas industry, Angola isn’t left behind. The country is unfortunately hit by the crisis at a time when the continent’s second-biggest oil producer was hoping for bigger oil revenues to fund economic diversification efforts. Angola is undergoing a profound change to Deepen its Local Content Agenda, which has been going on in the country for a longtime.

However, Angola still stands as one of the largest oil producers in Africa with an output of approximately 1.3 million barrels of oil per day (BPD) and an estimated 17,904.5 million cubic feet of natural gas production.

According to a report, crude oil reserves in Angola amounted to 7.8 billion barrels in 2021 and 301 billion cubic metrics of proven natural gas reserves. The President of Angola, João Lourenço, has been undertaking an overhaul of the regulatory framework in the oil and gas industry. Petroleum production tax was cut from 20% to 10%, while petroleum income tax was reduced from 50% to 25%, among others.

Going forward, industry experts have said that Africa should see the pandemic as an opportunity to develop its local capacities, as it represents a new approach for the nationalization of Africa’s oil and gas resources to indigenous companies and promoting in-country capacity development.

In their words, “Supporting local content development looks to be the new solution for African countries to generate more revenue from their oil and gas activities.

“The COVID-19 pandemic has been a local content enabler, for the time being. This crisis is an opportunity to continue efforts and to have more people engage with the industry to perform key tasks such as operation maintenance in the upstream sector, among others”.

In Angola, local content development isn’t a new agenda, it has been in place over the years.

Though Angola is moving step by step on developing its local content value chain in the oil and gas industry. This article provides a detailed analysis on the ongoing development in terms of local content development in Angola oil and gas industry, with a spotlight on the new Presidential Decree no. 271/20 which has set a new pathway to deepen and regulate matters relating to the transfer of skills and technology, the recruitment and training of Angolan human capital, and the acquisition of goods and services produced locally by indigenous companies.

On October 20, 2020, the Angolan Government under the administration of President João Lourenço, launched a new Presidential Decree no. 271/20, approving a new Legal Regime of Local Content in Angola. It clarified some major issues around fostering Angolan business and promoting in-country capacities across the entire value chain of the oil and gas industry.

The Presidential Decree no. 271/20 is part of the Angolan Government’s objectives to Deepen its Local Content Agenda in the oil and gas industry. This new Local Content Regime provides a common understanding of the Government’s objectives to support and ensure the Angolan entrepreneurs have a stake in the oil and gas business activities as well as promote the “Angolanization” of the oil and gas sector.

Based on our findings, the new Local Content Decree introduces the following changes among others:

Local content rules are now applicable to all companies providing goods and services to the oil sector and not only to oil companies acting in the country as associates of the National Concessionaire (E&Ps).

The restrictive concept of a national company is limited to companies fully owned by Angolan citizens or Angolan companies as opposed to the previous framework that deemed as Angolan company entities held in at least 51% by a local citizen or company.

Inclusion of the definition of other companies incorporated in Angola (but not fully owned by local shareholders) as companies incorporated under Angolan law.

This new law maintains three regimes for the acquisition of goods and services in the oil sector (exclusivity, preference, and competition), however does not specify which services and goods fall in each regime, leaving such definition for the National Concessionaire after consultation with the Competition Authority.

Activities subject to the exclusivity regime shall be performed and provided by Angolan companies as defined above (100% held by Angolan citizens or companies).

Activities that fall in the preference regime may be performed by companies incorporated under Angolan law, however, preference is given to Angolan companies.

Goods and services not included in the exclusivity and preference lists may be provided by foreign entities.

Companies aiming to provide goods or services to the oil sector shall be registered and certified by the National Concessionaire before being hired for a particular contract (this includes Angolan companies, companies incorporated under Angolan law, and foreign companies).

All contracts shall now include a local content clause.
All technical assistance and foreign management agreements shall include a detailed programme on training, transfer of knowledge and technology, and evidence of improvement of local staff skills.

The contracting process involves now more than a simple commercial agreement between client and supplier/ provider.

Companies in the oil sector value chain shall deliver to the National Concessionaire and/or the relevant ministry documents evidencing the commitment with the promotion of local entrepreneurship, diversification of the economy, and training of local staff, as follows:

An annual local content plan
Annual human resources plan
Framework Agreement expressing the contractor’s obligations regarding human resources development
Investment plan
List of expected acquisitions for each quarter (for operators only).

Penalties
The new local content legal framework provided an extensive list of violations. Under the terms, the non-inclusion of local content in the contracts is an administrative offense punishable with fines ranging between $50,000 – $300,000 and may lead to the suspension or prohibition to enter into new contracts.

In summary, Angola’s new local content regime is categorized into two major segments which cover the local content requirements applicable for the procurement of goods and services for petroleum operations, and the Angolanization such as recruitment, employment, and skill acquisition.

In terms of procurement of goods and services, this particular segment applies to Angolan Companies and Angolan Law Companies who are supplying goods and providing services to the petroleum industry in the country.

According to the policy, an Angola Company is known as a company that must be legally incorporated with a registered office in Angola, and the share capital will be held by Angolan citizens. While the Angolan Law Companies is any company incorporated and organized in accordance with Angolan laws.

More so, the Presidential Decree comprises of Exclusivity Regime; Preference Regime; Competition Regime.

The Exclusivity and Preference Regime are similar laws, mainly for 100% Angolan Companies and Citizens. This regime outlines the goods and services oil companies must consider to patronize Angolan companies.

While the Competition Regime is mainly for all companies operating in Angola. It doesn’t matter whether it’s an Angolan Company or a Foreign Company. The requirements are based on the share capital of the company.

Speaking about the implementation of the new local content regime, H.E Eng. Jose Barroso, Secretary of State for Angola Oil & Gas, revealed that the Government is working closely with the National Oil, Gas, and Biofuels Agency (ANGP), operators, and service companies to continuously improve and ensure the implementation of the new local content regime.
The Secretary of State noted that the Presidential Decree clearly states the different types of contracts that can be performed by Angolan companies, adding that there is a Data (statistics) that contains the lists of Angolan Companies who are certified and able to perform certain scope of works in the oil and gas sector.

He said that ANPG has publicized the opportunities for those that are interested to invest in the Angola oil and gas sector.

“We are looking for partners who can assist us to speed up the process of our local
content regime.

“We will continue discussions with AECIPA to improve the process of the new local content regime.

“Regarding financial sustainability, we will engage with local banks and financial institutions to support local companies.

“We are also discussing with operators in terms of making their payment terms more favorable to Angola companies.

“When we started the Angolanization process, we were focused on recruiting, training, and empowering Angolans.

“We also understand that we aren’t going to have 100% of Angolans in our oil and gas sector.

“We need to have the right balance to attract investment on technology transfer for
Angolans”.

Frankly speaking, there have been numerous discussions from experts and stakeholders commentaries about Angola’s new local content regime, evaluating the challenges and opportunities, while recommending some key strategies for a sustainable local content practice in the Angola oil and gas industry.

In recognition of these challenges and opportunities, as well as the critical role local content is contributing in the development of Oil and Gas Resources in the Angola economy, the Angolan Oil Industry Contracted Companies Association, AECIPA, in partnership with Global Event Partners, GEP, organized the second edition of Angola Oil and Gas Service and Technology Conference 2021 – also known as Angola Energy Series to explore the Opportunities, Challenges and Future Prospects in the Angolan Local Content and its Supply Chain.

The Angola Energy Series 2021 programme featured a series of webinars focused mainly on building a diverse and inclusive oil and gas industry for Women in Energy, Empowering the Next Generation of young people in overcoming barriers to aspire for greatness, Angolan Local Content, and its Supply Chain: Progress, Challenges, and Future.

Looking at the entire value chain of the Angola oil and gas industry, a new report shows that Angola has not been the hardest hit by the crisis. as the government and the private sector players have managed to delay projects rather than cancel them. Over the years, Angola made some important fiscal reforms of which we saw positive outcomes in the year 2021. The National Bank of Angola liberalized foreign exchange, which increased financial flows in the oil sector in particular. Most projects in Angola haven’t been canceled, and this is a welcome development for the Angolan government to further promote its local content agenda going forward.

In another development, Mr. Bráulio de Brito, President, AECIPA and Chairman of the Angola Energy Series, stated that AECIPA has developed a strategic plan to empower the Angolan Youth through various empowerment investment programmes which is essential and pivotal to Angola’s long term growth and success.

“Equality, empowerment, and local content are all core themes of our event. The Angola Energy Series has been devised to provide a platform for some of the finest minds of the industry to convene, connect and put forward solutions towards the betterment of the sector.

At the forefront of this is engagement and collaboration, and we see this not just in terms of making business connections but about taking a holistic view of the sector and how we can ensure it develops and flourishes.

“AECIPA established the Angola Energy Series as a platform for the sharing of
knowledge, information, ideas, solutions, and most importantly, purposeful business interactions”.

AOTC is hosted under the high patronage of the Ministry of Mineral Resources and Petroleum, Angola – which offers in-depth content from over 50 speakers, engaging with an audience of more than 1,250 from 43 countries across the globe. In addition, over 300 video meetings were held between delegates, and more than 5,000 messages were exchanged via the event platform.

“The inaugural Angola Energy Month is a resounding success, setting the benchmark for future collaborations and business development throughout the service industry. Following this level of engagement, we have extended the programme to create the Angola Energy Series – again bringing together the international oil and gas industry in an insightful and highly informative programme of virtual and physical events,” Bráulio said.

The Youth Empowerment Investment Programme is structured to include The HALO Trust – a humanitarian organization that has been saving lives and helping war-torn communities across the globe recover for over thirty years including Angola.

Programme Manager of HALO Angola, Rob Syfret, explains; “Since 2017, The HALO Trust has run this unique project in Angola to train and employ all-female demining teams, combining women’s empowerment whilst clearing landmines and making land safe. Over 100 women have already been recruited and many are now in leadership roles while dozens have completed additional training as paramedics and drivers. HALO needs help from the rest of the community to complete the job in the remaining contaminated provinces of Angola.”

Miguel Baptista, Managing Director, Schlumberger Angola, Central Africa, and East Africa commented, “Focusing on the development of Angolans will set the path for the sustainability of the local content, and allowing us to continuously deliver our products and services and train the future Angolan entrepreneurs.

“At Schlumberger, we are very pleased with the whole process. The Angolan new local content law is aligned with Schlumberger’s business values.

“It will also create the baseline of knowledge transfer and competitive business environment”.

He noted that the new Angola local content regime has created an environment for the Angolan oil and gas industry to move forward.

Challenges
Highlighting the Challenges on Angola Local Content, Berta Rodrigues Issa, Managing Director of Inga Rose, said, “The main obstacle is that the Angola oil and gas industry hasn’t been able to develop a strategic roadmap on local content for the next 5 – 10 years.

“Angola aims to retain at least 10 percent of the value of goods and services in-country.

“What we have been seeing over the past decades, for instance, we have been filling 10 buckets of water (servicing goods) every year worth over $6 billion projects. And, 9.5 out of these 10 buckets go to abroad which is affecting the Angola economy.
“We have never set a target to retain two buckets of water in-country.

“Some countries believe that local content should be around 60 – 80 percent. That’s a different case for Angola, as the oil and gas industry is an international market. We do most of the services globally.

“Collaboration and Transparency are key. Once, we are able to set a target regarding the local content percentage that should be retained in-country, this will enable us to collaborate with the Government, IOCs, Indigenous companies, and stakeholders to reach the target.

“Adopting a Strategic Roadmap and Financial Framework is key for a sustainable local content implementation in Angola.

“We need to create a business model for the project opportunities. This isn’t the responsibility of local banks but the IOCs in terms of the payment terms in the contracts.

“It is through Funding that we can have sustainable local content implemented in Angola. With Funding, we will have access to technology and skills transfer”.

Speaking further, Luís Lago de Carvalho, Managing Director of Octomar explained that the development of Human Resources more especially Angola local personnel isn’t a major challenge because most companies operating in Angola have some large numbers of Angola employees.

“I think the problem still lies on the senior management level. There are issues around it.

“I see the biggest problems from the new companies coming into the service sector. With the increase of onshore campaigns, there will be more and more opportunities for Angolan companies because of the size of investment and capacities that will be needed.

“The Angola onshore campaign will boost local content for service providers that operate in the production side.

“We shouldn’t discriminate companies that are here for a long time. We need to treat them well as they have made huge investments in local content in infrastructure and personnel. There should be a Protectionist Framework to monitor the compliance of local content in Angola.

“We cannot go on and say we support local content when we haven’t quantified what we want to achieve. We need to have a local cotent target and see what stays in-country.

He added, “There should be a Roadmap in balancing the new local content regime rather than moving millions of investment abroad.

Stakeholders Commentaries
Speaking on capacity building, Dra. Chindalena Lourenço, Partner at Fátima Freitas & Associados, advised Angola to collaborate with other African countries who have been practicing local content for many years to share knowledge and experience.

She said, “It is possible to achieve local content on some certain criteria and we believe that if there is continuous training of Angolan people through sharing knowledge, it can be achieved”.

On his part, Ranti Omole, PETAN’s Vice Chairman, and Chairman of Radial Circle Group pointed out that it is usually difficult to have a formal agreement on Technology Transfer.

Using Nigeria as a case study, He said, “We ensure that in the oil and gas industry, all the OEMs one way or the other have competent local partners.

“This is the easiest way for a small service provider to grow capacity from valves, compressors, and various technical components. This is where they can grow and manage bigger projects in the industry. This was the first thing that was done in Nigeria in early 2000.

“This ensures that every equipment imported into the country has a local partner while the local partner will be responsible for the maintenance of the equipment”.

While speaking on the business model in the Nigerian Local Content Value Chain, Ranti disclosed that the Nigerian Content Development & Monitoring Board (NCDMB) was established in 2010 under the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.

He said NCDMB is vested with the mandate to make procedures that will guide, monitor, coordinate, and implement the provisions of the NOGICD Act signed into law on April 22, 2010.

“NCDMB is more of private-sector populated Board, while the Minister stands as the Chairman of the Board.

“On the Board of Directors, you have Petroleum Technology Association of Nigeria (PETAN), member of Nigerian Society of Engineers, Member of the Shipping Council among others”.

He stated that NCDMB works closely with indigenous companies to set a local content target on specific projects based on the company’s capacity.

NCDMB monitor and ensure compliance with those agreed targets. These targets are set annually.

“On local content fund, one percent of every contract awarded into the industry is deducted and remitted to the Nigerian Content Fund. The fund is over a billion dollars.

“The Fund is used to sustain operations in the Nigerian oil and gas industry.

“Currently, about 400 million dollars are being disbursed to service providers in three different tranches.

“The Fund is also used to support various capacity development initiatives to stimulate some segments of the industry such as investment in pipe coating mills, marginal refineries, small scale petrochemical activities, etc…
“The Fund is totally outside the Nigerian Government control.

“The private sector and NCDMB work closely to disburse the funds accordingly,” he concluded.

In addition, Luiz Bispo, Superintendent of Local Content of the National Agency of Petroleum and Biofuels in Brazil (ANP) also provided some key recommendations for local content development in the oil and gas industry.

He said, “There should be a Roadmap that will balance the local content policy for E&P investment, human capacity development to meet the demand of goods and services.

“There is also the need to set a goal for the local content. After establishing the goals, it is crucial to monitor and measure the results if it’s progressing and in line with the local content goal.

“Also, it is also important to recognize the local content limitations based on the set goals. Local content can be used to find out the gaps in research and development, workforce capabilities, tax reduction among others.

“Another important aspect of local content is flexibility in terms of allowing different types of investment strategies by oil field operators to meet their requirements,” he added.

Speaking on the Local Content Strategies in Brazil’s oil and gas industry, he revealed that Brazil has also made some mistakes in its local content journey, while recording some success stories.

According to him, Brazil’s local content strategies encourage the development and training of specialized labor, technological solutions, research, and development.

He said Brazil’s local content policy is the proportion between the expenditure with national goods and services for exploration and production, developmental operations of E&P contracts, and the total expenditure for this purpose.

He stressed that the main goals of Brazil’s local content policy are developed under the appropriation of long-term oil income and reduction of dependence on foreign products with the objectives to increase participation of local suppliers on a competitive basis, indirectly stimulating technological development for the workforce.

“Suppliers should see the local content policies as an opportunity to become a competitive and stay independence as an indigenous operator.”

Opportunities
The opportunities in Angola Local Content and its Supply Chain are centralized on driving growth and economic development.

Speaking further, Dr. Valter Escorcio, Angola Country Director at Baker Hughes, said that the company is willing to push the local content agenda forward, adding that the growth of local content in Angola will come from the Angolan indigenous oil and gas operators.

“For example, I look at our neighbors in the region such as Nigeria.

“Nigeria has very strong indigenous oil and gas operators. They are the biggest drivers of local content in Nigeria.

“Today, Baker Hughes is still working on projects in Angola despite the challenges such as COVID-19 and others…

“Baker Hughes isn’t an Angolan company, but, we have a big investment in terms of capacity building, developing infrastructures to support the Angolan local businesses. We are seen as a bonafide local content player because of our investment in Angola.

“Sustainability is the central and the core area for successful local content practice in Angola,” Dr. Valter said.

According to Dr. Valter, “The Angolan Onshore Campaigns will drive the growth of local content. We are looking forward to seeing how it evolves with the new onshore operators. For the indigenous companies, the onshore campaigns remove a lot of risks and limitations that may have kept them away from the opportunities in the offshore drilling campaigns.

“The onshore campaigns will be where we can drive a larger impact of local content practice in Angola.

“But, we must always keep the focus on the Sustainability of the local content.”

Furthermore, The Ministry of Mineral Resources, Oil and Gas, and ANPG held a workshop recently, under the motto: “Local content, for the strengthening of Angolan entrepreneurs”, which aims to deepen knowledge about the new local content regime. The workshop is part of the Government’s efforts to showcase the Local Content opportunities to Angolan entrepreneurs.

The Angolan Ministry of Mineral Resources, Oil and Gas, in partnership with The National Oil, Gas and Biofuels Agency (ANGP), developed the workshop initiative specifically for the oil and gas industry in Angola.

At the workshop, the Angolan Minister Diamantino de Azevedo was present including the Secretary of State for Oil and Gas, José Barroso, Belarmino Chitangueleca, Acting President of ANPG, and several Angolan companies.

The workshop showcased the available opportunities in the new local content regime to Angolan Companies. The action plans implemented at the workshop include the execution of development plans with local stakeholders; definition of the

PDRHs follow-up procedure; publication of Instruction No. 6/21, of 4 November (which regulates Presidential Decree 271/20 in Diário da República); publication of the list of goods and services to be provided on an exclusive and preferential basis by Angolan companies; the definition of the digital support platform for local content activities, as well as the process of registering and certifying companies.

Regarding the investment opportunities available to Angolan companies in terms of local content, the areas of cartographic data collection stand out: the collection of samples of rocks, soil, and oil; logistical support (transport, catering, and telecommunications, among others); the provision of PPE & office supplies; and survey support services are key areas of opportunities.

Belarmino Chitangueleca, Acting President of ANPG, underlines that this is a very important process for the strengthening of Angolan companies in the oil sector and that the National Agency for Petroleum, Gas, and Biofuels will do everything to support Angolan business people in the realization of their projects of investment.

“The challenges are huge, but so are the opportunities.

“ANPG has been working actively with all stakeholders so that the implementation of the Presidential Decree that regulates local content is a successful case in our country, and that it effectively contributes to the correct and comprehensive inclusion of national companies in the full development of the sector. oil, a sector that continues and will continue to be strategic for our economy and that faces countless challenges.”

The increase in the operational experience of Angolan companies; the optimization of the contractual cycle/return on investment binomial; the execution of contracts within the approved times and budgets without compromising the safety and quality of the projects; the correct definition of the location and costs of the logistic support bases; the sustainability of the investment capacity and the logistics to respond to each of the contracts in execution; and attracting and retaining qualified labor are, for now, the major challenges facing Angolan companies that work and want to work under the Presidential Decree that regulates local content.

In conclusion, guaranteeing the access of Angolan companies to projects related to petroleum resources and optimizing their contribution to the development of the sector is the main objective of Presidential Decree 271/20, of 20 October.

Also, it ensures the preservation of the national interest, promotes national entrepreneurship, promotes national companies, and ensures the protection and promotion of competitiveness of the national industry.

Lastly, it creates conditions for maximizing national revenues and creating employment opportunities and qualifications of the Angolan workforce, as well as protecting the jobs of national staff.

Local Content will again form the core value and major talking point at the 3rd edition of Angola Oil and Gas Service and Technology Conference (AOTC) scheduled to hold on 23 – 25 November 2022 at the Palmeiras Suite Hotel in Luanda, Angola.