Local Content in the Oil and Gas Sector

A number of countries have recently discovered and are developing oil and gas reserves. Policy makers in such countries are anxious to obtain the greatest benefits for their economies from the extraction of these exhaustible resources by designing appropriate policies to achieve desired goals. One important theme of such policies is the so-called local content created by the sector- the extent to which the output of the extractive industry sector generates further benefits to the economy beyond the direct contribution of its value-added, through its links to other sectors. Local Content Policies (LCPs) were first introduced in the North sea in the early 1970s and ranged from restrictions on imports to direct state intervention in the oil sector. While LCPs have the potential to stimulate broad-based economic development, which is necessary to alleviate poverty and achieve the United Nation's Millennium Development Goals (MDGs), their application in petroleum-rich countries has achieved mixed results. This paper serves to introduce the topic by describing policies and practices meant to foster the development of economic links from the petroleum sector, as adopted by a number of petroleum-producing countries both in and outside the Organization for Economic Co-operation and Development (OECD). The paper is organized as follows: chapter one defines local content and briefly illustrates the links between the petroleum sector and other economic sectors (where policies may be able to increase the economic benefits of the petroleum sector). An attempt is made to measure local content levels in a wide sample of petroleum-producing countries including net importers and net exporters, and countries at different stages of economic development to put LCPs in context and to consider if the structure of an economy is a key driver of local content levels. Chapter two discusses the arguments that have been used in favor and against the use of productive development policies in general and LCPs in particular. Chapter three provides an outline of the tools and types of LCPs that have been used by petroleum producing countries, and present their strengths and weaknesses. Chapter four focuses on issues related to the measurement and monitoring of LCPs, and discusses the limitations of alternative metrics. Chapter five provides a description of LCP objectives, implementation tools, and reporting metrics used in a selected sample of oil-producing countries including Angola, Brazil, Kazakhstan, Indonesia, Malaysia, and Trinidad and Tobago and draw initial lessons that may be relevant to other countries.

Bibliographic Details

Main Authors:	Tordo, Silvana, Warner, Michael, Manzano, Osmel E., Anouti, Yahya
Format:	Publication biblioteca
Language:	en_US
Published:	Washington, DC: World Bank 2013-07
Subjects:	Accounting, adverse effects, agriculture, approach, arbitrage, bilateral trade, budget constraints, capital investment, climate, comparative advantage, comparative advantages, competitive advantage, competitiveness, construction workers, consumers, consumption of commodities, crude oil, debt, deposits of hydrocarbons, Development Policies, development policy, distillation, domestic oil, domestic production, domestic supply, drilling, drivers, dry gas, economic benefits, economic costs, economic diversification, economic efficiency, economic geography, economic growth, economic impact, economic sectors, Economics, economies of scale, EI, electricity, Employment, employment opportunities, environmental damage, exchange rates, externalities, externality, extraction, feedstock, financial crisis, financial flows, financial sector, fiscal incentives, foreign direct investment, foreign workers, free trade, fuel, fuel oil, fuels, future research, gas activities, gas companies, gas company, gas exploration, gas exports, gas extraction, gas facilities, gas fields, Gas Industry, gas oil, gas operations, gas production, gas reserves, gas sectors, gas taxation, gas treatment, gas-producing countries, gasoline, GDP, general equilibrium, general equilibrium model, gross domestic product, gross output, growth potential, heat, human capital, hydrocarbon potential, hydrogen, Import quotas, import substitution, imports, income, industrial plants, industrialization, inefficiency, innovation, insurance, jobs, kerosene, Labor Economies, labor force, labor mobility, liquefaction, liquefied petroleum gas, living standards, LNG, macroeconomic policies, market equilibrium, market failure, market failures, market outcomes, methane, monitoring arrangements, national economy, national oil, national oil companies, natural gas, natural gas liquids, natural resources, Natural-gas, negative externality, NGLs, Oil, Oil and Gas, Oil and Gas Sector, oil company, oil field, oil industry, oil production, oil products, oil recovery, Oil refining, oil sector, oil wells, oil-producing countries, oil_ and_gas, oil_ and_gas_sector, oil_and_gas, oil_and_gas_sector, opportunity costs, outputs, penalties, per capita consumption, petrochemical industry, petrochemicals, petrochemicals industry, Petroleum, Petroleum Industry, petroleum products, petroleum reserves, Petroleum Sector, petroleum supply, pipeline, pipeline networks, pipelines, policy advice, Policy makers, policy response, political economy, power, power generation, power plants, power station, Primary distribution, private sector, process uses, production costs, production of fertilizers, productivity, profit margins, property rights, protectionism, public good, quantitative analysis, refined products, refineries, refinery, refining, rents, reservoir, reservoir rock, reservoirs, safety, salt caverns, search for oil, seismic surveys, spillover effects, storage facilities, submersible pumps, Suppliers, Sustainable Energy, tax incentives, Total Output, trade liberalization, trade proposals, transportation fuels, unintended consequences, Uruguay Round, utilities, value added, wage rates, Wages, wealth, World Trade Organization, WTO,
Online Access:	http://hdl.handle.net/10986/15930
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