The COVID-19 pandemic continues to significantly impact negatively on businesses worldwide. The oil and gas industry received a double whammy when an earlier collapse in oil prices combined with the global restrictions on movement brought about by the incidence of the coronavirus pandemic. The oil industry continues to face numerous challenges in the present environment.
The realities on ground foisted an enormous uncertainty on the oil & gas industry, making it inevitable for companies to drastically restructure their operations, from remote working to furloughing workers to discounted salaries and reduced headcounts, to mention but a few.
These, including also the termination of contracts, have become routine business sustainability actions in this dire time. There are also reports of places where such actions were taken to the extreme.
Oilfields were abandoned with the total evacuation of all staff, not an option the investors will favour, bearing in mind hundreds of millions of dollars invested in acquisition, exploration, and development of the fields, but it happened in several locations and this culminated in the loss of production of tens of thousands of barrels of crude oil per day.
When eventually, the pandemic eases, more a huge amount of money will have to be spent to bring the fields back to life, yet another cost to the investors.
Insofar as we are humans, our initial reactions are understandable.
Faced by a novel pandemic that has caused unprecedented mass death and a global stampede, people want to go home and be close to and among their families or loved ones.
However, this could have been done in a manner that protects investors and communities, bearing in mind that investors are custodians of people’s savings and pensions, and that local communities derive a livelihood from oil and gas activities within their territory.
In most of those fields that were abandoned, the management and operations staff constitute more than 96.5 percent expatriates.
You cannot blame them for wanting to head home in uncertain times, but the management has questions to answer: Why were there no forward plans for emergencies like the COVID-19 Pandemic? Why run operations with greater than 20 percent expatriate workforce in any location in the world? It makes no economic sense.
The global coronavirus crisis has demonstrated the intrinsic value of local content or local value proposition to the sustainability of businesses.
Without doubt, it now makes sense that investors know the management of companies or organisations they invest in. Know your Management (KYM). When management is reluctant to accept diversity and bring on board locals, know it that the game plan is to ensure to look after or protect themselves, and your investment is at risk. It is natural for investors to insist on having some of their own on the board of the businesses they invest in; however, to protect their investment, they should also insist on diversity, not having more than 20 percent expatriates as staff in any location in the world.
Not too long ago, the excuse used to be that you cannot find suitably qualified locals in some parts of the world. Oil & Gas technology, engineering and business, is old; if you search diligently, you can always find adequately qualified locals within the territories; and if there are not, those available could be trained up in a short time. Afterall, Oil & Gas jobs do not require rocket science or neuroscience skills.
To have a consistent, reliable and sustainable business, investors must impress on management to, where possible, source locally and get involved in local talent development. We all can see the obvious fact now that with the global restriction on movement and the shutdown of international flights, expats would not return to their jobs in numerous locations globally. Only companies whose management planned will be able to sustain their business with the support of their well-trained local staff.
Local content is not new. It is good for businesses and the communities where they operate. It has been around for many years and is practised in various forms in all countries on earth.
In recent times, developing nations have been showing some seriousness about local content.
Businesses should not shy away from it, but rather take it on board and invest locally as long as they see the local value proposition translate into sustainable returns for their companies and their shareholders.
As part of their risk assessment, investors, among other things, should entrench Know Your Management (KYM) policy and must also insist on seeing and approving the local content plan of the companies they invest in. No one wants to see their investment completely abandoned for lack of adequate local content.
Emmanuel Okoroafor
Okoroafor is the MD/CEO of Holbark Consultant Management Services Ltd.
