Extractive Industries
The quantity of investment in oil, gas and mining (OGM) projects in developing countries over the next twenty years is likely to be greater than total international aid flows. If this investment (and the revenues it produces) are managed to maximise local social and economic development, it will make a major contribution to the achievement of the Millennium Development Goals (MDGs).
Some of the most important societal benefits from this expenditure come through opportunities for employment and for local enterprises to supply goods and services. The need to harness these benefits is also recognised within the industry as critical for establishing a ‘social license to operate’ within the project area and the country as a whole.
Another key consideration is conflict sensitivity. In some low-income, resource-rich countries, extractive industry operations, poor governance and corruption have combined to fuel vicious cycles of poverty, social grievance, civil unrest and entrenched conflict. This pattern has been termed the ‘resource curse’ and it is highlighted by Professor Paul Collier as one of the key traps that keep the ‘bottom billion’ poor. Avoiding the resource curse requires action by all stakeholders involved in regulation, finance, development and management of extractive industry projects. However, it is increasingly understood that that OGM companies and their contractors can make an important contribution through pursuing a conflict sensitive approach to project development.
EAP’s Programme
EAP sees an important developmental opportunity to encourage the positive local economic and social benefits of the extractive industries. We have worked with key players in the oil and gas industry including BP, Amec and Fluor. BHP Billliton and Anglo American, two of the world’s largest mining companies, are corporate supporters.
We have recently published innovative practical guidance to industry on maximising local benefits of OGM projects, including an analysis of the opportunities for engineering services contractors to deliver local content (in partnership with the Overseas Development Institute) and a briefing note on maximising the participation of local enterprises in project supply chains funded by the International Finance Corporation. We have also jointly released a guidance note with International Alert on conflict sensitive business practice for engineering contractors, particularly those working in the extractive industries.
EAP Publications
Briefing Note: Maximising the contributions of local enterprises to the supply chain of oil, gas & mining projects in low income countries
This briefing note provides practical guidance to oil, gas and mining (OGM) companies on how they can maximise the contribution of local enterprises to the supply chain of their projects in low income countries. It focuses on three major opportunity areas to increase local enterprise participation in project supply chains – modifying procurement policies and processes; modifying contract documentation; and supporting the efficacy of supplier development programs. The document was produced with the support and assistance of the International Finance Corporation (IFC) PENSA Program in Indonesia.
Report: Learning from AMEC’s Oil and Gas Asset Support Operations in the Asia Pacific Region – Report II: Bayu-Undan Gas Recycle Project, Timor-Leste.
This report is the second in a series looking at the opportunities for large services contractors in the oil and gas Industry to contribute to local economic and social development. It documents how AMEC used its experience on the Malampaya project to inform its tendering strategy for the ConoccoPhillips Bayu Undan development in Timor Leste. The AMEC JV included two innovative proposals to help the client build opportunities for local workers and businesses to participate in the oil and gas industry: an integrated competency development strategy and the phased development of a multi-user support base to provide a facility for local supply of goods and services and to help build the capacity of local firms. These proposals helped the AMEC JV in securing the Bayu Undan contract. The report looks in detail at the particular developmental opportunities in low income countries like Timor Leste and makes recommendations to both regulators and oil and gas companies on how the opportunities can be maximised through the engineering services supply chain.
Report: Learning from AMEC’s Oil and Gas Asset Support Operations in the Asia Pacific Region – Report I: Shell Malampaya Gas-to-Power Project, The Philippines.
This is the first of two reports looking at the opportunities of large engineering services contractors in the upstream oil and gas industry to contribute to local economic and social development. It examined in detail the operations of an AMEC Joint Venture (JV) as the lead operations and maintenance contractor for Shell’s Malampaya Project in the Philippines. This research demonstrated that engineering contractors can generate substantial benefits to the local workforce and economy through contract delivery and capabilities in employee and subcontractor competency development. It argues that contractors should develop these capabilities and market them to their clients, as a social performance ‘value proposition’ is becoming increasingly important within the industry. It also argues that client oil companies should recognise that major contractors have core competencies that are directly relevant to meeting their strategic challenges of delivering local content and sustainable local development, while building and maintaining ‘social licence to operate’.
Guidance Note: Conflict-Sensitive Business Practice: Engineering Contractors and their Clients
This guidance note is addressed both to engineering contractors and their clients on major projects. It highlights key issues related to conflict, contractors and conflict sensitivity, and introduces conflict-sensitive business practice (CSBP) – steps through which these potential conflict issues can be understood and managed during the design, delivery and operation of major projects.
Date Published: October 30, 2009
Source: Engineers Against Poverty