Digitalisation, integration and the oil and gas supply chain
The World Economic Forum believes that digitalisation is a $1
Africa has seen a huge growth in gas and oil exploration and extraction this millennium, and many experts predict this decade will see its emergence as an important global energy hub. The continent is believed to have 7.5% of the world’s oil reserves and 7% of its untapped gas. With international energy prices recovering from their slide at the midpoint of the decade, lots of opportunities for suppliers are springing up too.
Finding the right expertise and capability among suppliers will be key to making sure these projects are a success over the long-term.
Located on the coast of Mozambique’s northernmost province, the Rovuma basin offshore natural gas field is an epic example of the potential opportunities across Africa. The Total (formally Anadarko)-led Mozambique LNG project in Offshore Area 1 is looking to extract the 75 trillion cf of recoverable gas laying 40km offshore at depths of around 1,600 metres. This is equivalent to roughly 12 billion barrels of oil.
“Mozambique LNG is one of a kind asset that perfectly fits with our strategy and expands our position in liquefied natural gas”, said Patrick Pouyanné, Chairman & CEO of Total.
A project of such large-scale potential requires equally big thinking to fully realise. August 2019 saw construction of the LNG facility begin – including a gathering system capable of handling 2 billion cubic feet of gas per day.
Mozambique has the largest untapped natural gas resources in the region and has seen a huge influx of foreign investment and activity over the last decade. The government has put in place a number of requirements for mega oil and gas projects in an effort to make sure this flow of capital benefits local communities and economies. The most important of these is the idea of local content in Mozambique, where buyers and suppliers must give preference to local products and services when building a supply chain.
There are some important caveats here . If local providers are not available, do not have the required capabilities or their price exceeds 10% of the price of the imported alternatives available, this requirement for local preference can be waived. This means there are still lots of opportunities for suppliers from outside of the country’s borders to participate in its ongoing energy projects.
Sourcing local content in Mozambique offers value beyond supply chain compliance. For the Total Mozambique LNG project in the Rovuma basin, meeting those local content requirements means devoting serious time and energy to developing a comprehensive local network. Supply chain mapping is essential to fully understand the capabilities of Mozambique’s local suppliers, and identify what gaps need to be plugged by international companies.
Every country is unique, with ingrained business cultures, relationships and local markets. Without gaining an insight into these idiosyncrasies, it is impossible to accurately assess and mitigate risk, as well as develop a coherent long-term localisation strategy.
Mapping gaps and opportunities for suppliers
The legal requirement to preference local suppliers and subcontractors wherever possible creates a unique logistical challenge. It’s also the kind of situation that we are experts at creating solutions for.
Firstly, through extensive supply chain mapping, it is important to determine exactly where local capabilities or experience wasn’t at the level required. But it can also help identify the best opportunities for suppliers from abroad to partner with local ones to supplement each other. Some exciting and productive joint ventures may even be possible.
“EPC contractor CCS JV will use the Achilles system to identify potential suppliers of goods and services. Where there are gaps in local capability, Achilles will also be used to identify international suppliers who could partner with local suppliers”, says Ben Cavel, AMA1 National Content Manager, Total Mozambique LNG.
Instead of viewing local content in Mozambique as a challenge, it can offer a great way for international suppliers to make constructive contacts and expand their networks into a region and country that is likely to see a lot of activity in the coming decades. These partnerships between global and local also help Total ensure they are not only complying with local regulations, but working to global standards too.
But creating these relationships would likely be a long and complex process without the right communities to help ensure compliance and level the playing field.
Our Oil and Gas Africa Community has over a thousand suppliers already registered, the majority of which are local content in Mozambique. These companies are looking for international partners to help boost their capabilities and unlock more local opportunities for them. CCSJV, the consortium that awards engineering, procurement and construction contracts for the Mozambique LNG facility project, are currently offering around $100 million in contract opportunities for suppliers through their forward workplan which is available to Oil and Gas Africa community members. It may seem that gaining access to opportunities like these in the Rovuma basin may be out of the reach of most suppliers, but joining the right communities can open up a world of new possibilities.