Published 11 November 2021
Local content rules or requirements (LCRs) are well known tools in the oil and gas industry as they are used to enhance economic development in the host nation, thereby potentially contributing to addressing the resource curse. Host nations aim to increase job creation, fostering technology spillover through ancillary sections via obtaining higher commitment from companies involved (i.e., private, public, domestic and foreign enterprises) to acquire local goods and services and to invest in local capacity building to increase local skills and employment. These are the key issues in local content, combined with a desired transfer of technology for long-term development.
Following the introduction, the next section in this article present the historical influences, goals and considerations for LCRs. Section 3 discusses the contemporary approach adopted by countries to ensure compliance with LCRs. This contemporary approach involves the use of penalties (we call this the "stick" approach). In section 4, we consider an alternative approach to ensuring compliance with LCRs. This alternative approach, which involves the use of incentives (we call this the "carrot" approach), is much less widespread. We consider its merits and demerits. Section 5 discusses the four case studies mentioned above while section 6 provides some recommendations that countries might consider to help them maximise the potential benefits of LCRs. Section 7 concludes the article.