Battling for local content in energy sector

They have been given the short end of the stick by the energy industry when it comes to local content, some say. But with the recent upsurge in oil and gas production, local firms are keeping their fingers crossed in the hope that the big energy players realise that they can compete with the best of them.

Wayne Mose, former President of the South Chamber of Industry and Commerce and Managing Director of Anfield Services Ltd, said local companies have been battling to gain recognition and participation in energy projects for a long time. “We battle to sell ourselves all the time,” said Mose in a recent interview. But for some, the battles are being won. Damus Ltd may have been considered a “small fry” by multinational companies before, but with the contracting firm’s recent contributions to the bpTT Cassia B platform, people are starting to take notice. Damus was contracted to build the bridge and flare boom for the Cassia B platform which was handed over last month. This was not the first contracted job for Damus by bpTT, however. The company successfully delivered Bombax Sub Sea Manifold weighing over 400 tones last year. But even with this success, local firms say they are still falling victim to the long-standing relationships of multinationals who have with their preferred international contractors. They end up stuck in the role of sub-contracting to the big firms. Mose said locals are faced with several disadvantages. They are restricted by financial constraints, technical ability and capacity, he said.

But even if this were to be remedied, Moze said, they would still face an uphill battle from energy companies. “If a government contract is funded by an international lending agency, the agency can specify that work be handed out to companies from their country,” said Mose. This is the same with contracts won by multinationals, he said. These companies, he said, usually form agreements with their home companies or companies they have dealt with in the past. “Some multinationals like Shell and bpTT operate all over the world. And for their own internal purposes, they try to have a single supplier handle their operations. They do this to ensure they get the same level of competence and quality and also they can get the best price,” said Mose. But there are also intangible issues that hamper the progress of local content. Mose said some of the multinational companies make an effort to give jobs to local suppliers as part of good corporate relations, but once relationships are built between companies, there is no breaking them. “You will have individuals who have worked in other parts of the world together. And companies tend to gravitate towards them because they know them. It’s not nepotism, but it is personal preference and this is difficult for local contractors to battle against. “You keep having to sell yourself all the time,” said Mose. But even this can be a double-edged sword for some companies. When contractors infiltrate the system and convince a multinational that they can do the job, build relationships with the people, they are transferred and new people come in, said Mose, and the process starts all over. He said locals need to start operating in more than one country to be able to profit from this type of volatile industry.

And with government’s new found commitment to this end, local firms may gain an edge over the internationals. “The government has begun to look at this more realistically. In the past government had not supported local content, but recently they have begun to realise that TT has been losing out because of their policies,” said Mose. He added that rectifying the disadvantage in technical expertise has begun with the introduction of petroleum engineering in UWI and TTIT. This move is a step in the right direction, he added, to avoid falling into the trap of protectionism instead of developing our ability to compete. But not everyone feels the same. API Pipeline Construction Company Ltd has done pipeline and tank construction for companies like National Gas, Petrotrin and Trinmar. According to a spokesperson for the company, they have no problem getting the jobs they want. “We are well equipped to handle big jobs. Our company is the only local firm doing directional boring machines and this is a technology companies like NGC need to have at hand,” he said. But he felt energy companies still by-pass local contractors for international contractors, when they don’t need to. “You should not have international companies bringing in equipment we have here,” he added. But he agreed with Mose that in terms of technical expertise and high-tech equipment, most local companies cannot compete with the international firms. To remedy this, he felt local firms needed to unite to create a body of standards and pre-qualifications for their labour and also in terms of evaluating bid packages.