With the advent of Local Content requirements in resource-rich countries in the Middle East, many initiatives have been in the works and the National Oil Companies (NOCs) are increasingly inserting Local Content requirements into their legal and operational framework, through legislation, regulations, guidelines, industry contracts and bidding practices.

In February 2018, the ADNOC Group launched and adopted the In-Country Value (ICV) program (https://www.adnoc.ae/en/incountry-value/) – a procurement-led initiative that has the aim of fostering Local Content, by encouraging local supplier selection, development of UAE Nationals – especially SMEs – and localization of critical functionalities in the oil and gas industry.

The definition of criteria to quantify the Local Content creation has been the first step of the new program. In fact, the ICV certification addresses both service providers (EPC Contractors, Engineering firms, …) as well as equipment manufacturers and is defined by the following criteria:

  • Manufacturer – Value of manufacturing costs annually incurred in UAE to total annual manufacturing costs

  • Service Provider – Total spend on category of goods as a percentage of manufacturer ICV over total annual spend on all categories of goods including Sub contracting services

  • Company – Applicable to both Manufacturer and Service Providers alike it analyzes three criteria (Local Investment on Assets, Emiratization and Expat Contribution)

ADNOC has assigned certifying bodies from six accounting firms to provide such certification, which will have a one-year validity.

Looking beyond the Certification, ADNOC has set forth a series of Strategic and Technical initiatives that will nurture the growth of the ICV strategy:

  1. Identifying International and Local strategic suppliers that can act as partners to develop the ICV strategies

  2. Giving higher priority to the entities that have invested in the UAE by placing higher weights on ICV percentages in their supplier evaluation

  3. Working with partners to identify appropriate categories for which local small and medium companies will be invited to participate, speeding up the growth of the initiative

  4. Facilitating focused training programs for Emiratis to increase the employability of the local workforce

The SupplHi Team has identified ~250 local UAE players (mainly SMEs), already mapped on the SupplHi Vendor Management Platform for industrial equipment and services (www.supplhi.com), who are centered around the following categories:

  • Packagers (mainly skid-mounted for water treatment), manufacturers of Static Equipment (mainly pressure equipment up to 100mm of thickness), manufacturers of standard Electrical Components & Systems (ranging from cathodic protection to switchboards), manufacturers of Piping, Fittings and Flanges (mainly non-ferrous pipes & fittings)

  • Local service providers that are mainly focused on Construction and Fabrication services

The number of equipment manufacturers and service providers in the aforementioned categories highlights the presence of a local supply value chain that can set the basis for growth of the In-Country Value initiative for the UAE.

International players with consolidated presence in the UAE are now looking to adapt to the new requirements – aiming to become early movers and partners of the initiative:

  • EPC Contractors require knowledge of the local value chain, performing pre-qualification and qualification of vendors as well as leveraging on previous experiences in the country

  • Equipment manufacturers and service providers need to understand how to maximize their local value added in the country – also through with potential partnerships with local players

Both actors will also need to perform a twist in competences: the ”ability to deliver” needs to evolve into “ability to let the local deliver”.