Localisation brings growth back home
Carla Sertin says localisation will impact all parts of the oil and gas industry, and marks an investment by producers into their long-term growth
One of the main trends to emerge in the regional upstream sector has been localisation.
Major oil producing nations like Saudi Arabia and the United Arab Emirates have been at the head of the localisation movement in the region, with initiatives like Saudi Aramco’s In-Kingdom Total Value Add (IKTVA) program pushing companies to base operations locally, and to hire locals, if they want to do business with Aramco.
Considering Aramco’s position as the world’s leading oil and gas producer, it’s a smart move. These programs encourage the development of the country’s energy infrastructure and supply chain, and provide jobs for its people.
With some overlap between manufacturing and supply activities for oil & gas and other industries, it could also help GCC countries build up their infrastructure for other industrial processes, too.
Because the industry is based on collaboration, these programs have a wide-reaching impact. A change in one’s policies, or outlook, impacts everyone involved.
That was one key takeaway from my recent visit to the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC). Among the 15 halls and hundreds of stands for companies from around the world, almost all of the oil and gas professionals I spoke to noted the same key market trends—localisation, increased collaboration between industry players and digitalisation.
None of these trends are in place by choice; it has always been a matter of survival and growth.The collaborative nature of the market was put into focus during the industry downturn, when low prices squeezed oil and gas operators, in turn squeezing their suppliers and service providers.
As such, when key players turned to digital technology as a potential solution during hard times, the rest of the industry had to follow suit; if customers want it, suppliers will provide it. Digitalisation has seen a strong push from the oil and gas sector, regionally and globally, as a means to cut costs and improve efficiencies.
Now, localisation is in full swing; Saudi Aramco will invest $400bn into IKTVA in the next 10 years and plans to train 360,000 people to enter the labor market by 2030.
The world’s largest oil company has signed up more than 400 companies for IKTVA, including Schlumberger and BHGE.
Basing operations in Saudi Arabia might provide international companies a farther reach into the Middle East, and a launchpad for exports to nearby nations.
However this impact suppliers, producers are putting their growth at the forefront; after decades at the head of the upstream oil and gas sector, GCC producers are making long-term investments into their own development.