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Tullow Oil Kenya BV

Industrial Baseline Survey

Overview

Table of Contents

CONTENTS

Table of Contents....................................................................................................................2

List of Tables ..........................................................................................................................3

Table of Figures ......................................................................................................................4

The Oil and Gas Industry and Local Content ...............................................................................5

Defining Local Content ............................................................................................................... 5

Background to the Industrial Baseline Survey ..................................................................................................... 5

Objectives of Industrial Baseline Surveys .................................................................................. 6

Local Content Opportunities and the Oil Life Cycle ..................................................................... 8

Goods and Services [refer to Figure 1] .......................................................................................................... 10 Employment & Skills ...................................................................................................................................... 12

Standards ................................................................................................................................ 16

Industrial ......................................................................................................................................16 Vocational Training ........................................................................................................................................ 16 The Link between Standards in Industry, Vocational Training and Skills Development: The Enabling

Environment................................................................................................................................ 16 The Kenya Business Environment for Oil and Gas .............................................................................................. 16

Introduction to the Industrial Baseline Survey K enya ............................................................... 17

Purpose of IBS ......................................................................................................................... 17

Methodology ............................................................................................................................ 18

Cement & Steel; Murram, Sand and Aggregates: Goods and Services .................................................................. 19 Bentonite and Baryte ..................................................................................................................................... 20 Vocational Skills Training and Development ...................................................................................................... 20

Key Findings ............................................................................................................................ 21

Key Findings of Industrial Readiness ................................................................................................................ 21 Summary of findings ..................................................................................................................................... 28 Market Categorisation .................................................................................................................................... 28 Key Findings for the Vocational Training Sector ................................................................................................. 42

Key Actions for Capacity Building ........................................................................................... 44

Industry .......................................................................................................................44

Employment & Skills Development ................................................................................................ 44

Skills Requirements ....................................................................................................................................... 45 Skills Development & Experience: Technicians, Senior Professional and Technical and Managerial. .......................... 47 Skills Development & Experience: Semi-Skilled and Skilled................................................................................. 48

Local Content Regulations (Draft) ........................................................................................... 48

Employment of Nationals in Artisan, Junior and Middle Positions ....................................................... 49

Timescales – First Schedule .......................................................................................................... 49

Construction Method: Development Phase ........................................................................................................ 49

List of Tables

Table 1: Sectors for Study in IBS for FEED and Early Works ................................................................................. 18

Table 2: Categorisation of Companies within Sectors .......................................................................................... 20

Table 3: Synopsis of Findings: Murram, Aggregates and Sand ............................................................................. 22

Table 4: Synopsis of Findings: Bentonite & Baryte ............................................................................................... 22

Table 5: Synopsis of Findings: Cement & Cement Additives ................................................................................ 23

Table 6: Synopsis of Findings: Cables Manufacturers ........................................................................................... 23

Table 7: Synopsis of Findings: Civils Bulks, Pipes, Ancillaries and Non-Critical Valves ......................................... 24

Table 8: Synopsis of Findings: Electrical and Instrumentation Accessories & Non-Critical Instruments .............. 24

Table 9: Synopsis of Findings: Generators ............................................................................................................ 25

Table 10: Synopsis of Findings: Industrial Coatings .............................................................................................. 25

Table 11: Synopsis of Findings: Plant and Equipment - Scaffolding ..................................................................... 26

Table 12: Synopsis of Findings: PPE, Welding Gases and Welding Equipment..................................................... 26

Table 13: Synopsis of Findings: Steel Fabricators ................................................................................................. 27

Table 14: Synopsis of Findings: Steel Processors .................................................................................................. 27

Table 15: Synopsis of Findings: Transmission and Communications Towers ....................................................... 28

Table 16: Market Segmentation ........................................................................................................................... 29

Table of Figures

Figure 1: Conflicting Objectives of Regulations and Early Oil Revenues ..................Error! Bookmark not defined.

Figure 2: Oil Life Cycle ...............................................................................................Error! Bookmark not defined.

Figure 3: Direct, Indirect and Induced: 3 Circles: Goods and Services: ....................Error! Bookmark not defined.

Figure 4: Employment & Skills: Direct, Indirect and Induced ...................................Error! Bookmark not defined.

Figure 5: Industrial Baseline Process ........................................................................Error! Bookmark not defined.

Figure 6: Categorisation of Companies within Sectors .............................................Error! Bookmark not defined.

Figure 7: Market Segmentation: Steel Processors ................................................................................................ 30

Figure 8: Market Segmentation: Steel Fabricators ............................................................................................... 31

Figure 9: Market Segmentation: Cables Manufacturers ...................................................................................... 32

Figure 10: Market Segmentation: Electrical and Instrumentation Accessories & Non-Critical Instruments ....... 33

Figure 11: Market Segmentation: Generators ...................................................................................................... 34

Figure 12: Market Segmentation: Transmission and Communications Towers ................................................... 35

Figure 13: Market Segmentation: Cement Producers .......................................................................................... 36

Figure 14: Market Segmentation: Industrial Coatings .......................................................................................... 37

Figure 15: Market Segmentation: Civils Bulks, Pipes, Ancillaries and Non-Critical Valves ................................... 38

Figure 16: Market Segmentation: PPE, Welding Gases & Welding Equipment .................................................... 39

Figure 17: Market Segmentation: Scaffolding ...................................................................................................... 40

Figure 18: Market Segmentation: Pressure Vessels ............................................................................................. 41

Hardcopies of this document are considered uncontrolled. Refer to digital version for latest revision.

THE OIL AND GAS INDUSTRY AND LOCAL CONTENT

DEFINING LOCAL CONTENT

Local Content is the term used in the Oil and Gas industry to describe the value of work completed in country

by local companies and individuals. Host nations regularly encapsulate local content in a legislative framework

which includes targets for the value of local content to be achieved for a wide variety of things but focuses on

goods, services and employment. The nature of the goods, services and skills required by Oil and Gas are at

standards dictated by the international community which represent a barrier to entry for local companies and

individuals. To achieve the targets Capacity Building is needed to bring the local standards to an acceptable

level and facilitate engagement of local companies in the industry through competitive tendering procedures

and give individuals the skills and behaviours necessary for employment.

Very simplistically then, Local Content for IOCs is defined by host nation legislation and by the challenges

associated with achieving targets and by their own internal policies, as with Tullow for sharing prosperity and

leaving a positive legacy.

BACKGROUND TO THE INDUSTRIAL BASELINE SURVEY

The discovery of oil in Kenya has created a great deal of speculation with regard to national wealth, opportunities and

improvements to the standard of living especially among the disadvantaged and in political and civil society, business and

community circles. In the Joint Venture Partnership’s (JVP – Tullow Oil, Africa Oil and Maersk) Area of Operations (AoO) the

Turkana communities hope for better; better everything. This is natural and to be expected and yet these expectations

must be tempered by facts if the Project is to remain economically feasible for the Kenya Government and the JVP.

If left unchecked expectations become exaggerated and infeasible especially in the AoO, placing on the JVP a burden of

impossible demands for improved infrastructure, education and health etc. The expectations by themselves are often

infeasible but even those that are deliverable, can be made impossible because of stakeholders near time horizons with

improvements and opportunities expected immediately upon demand. It is also important to remember that much of what

is demanded by the communities in the AoO is, and should remain, the responsibility if the Sovereign Government.

Nascent Oil and Gas economies have little knowledge of the industry and how long it takes to explore, appraise and

“prove-up” oil finds; develop the infrastructure required to extract and transport the oil to a point of sale and the ongoing

challenges of production. Additionally, few local stakeholders appreciate the challenges and risks involved in financing such

a huge undertaking.

Understanding the Oil and Gas Industry is one thing, understanding local content is another. It may seem like a small

change but it has a fundamental affect on a project. Few stakeholders really appreciate what local content1 is and how IOCs

implement it, measure it and the constraints that limit implementation. Stakeholders need an awareness of how Oil Life

Cycle [OLC] determines the conditions for local content and how Government expectations and urgency to develop their oil

field(s) determines the type and levels of deliverable local content.

1 Refer to Tullow Oil Kenya B.V. Local Content and Capacity Building Framework (2016).


Operational activities, investment risk, human resources, plant and equipment all vary in quantity and value with the OLC.

Similarly local content varies with the OLC with respect to the levels and types of opportunities, value and the challenges

involved in converting opportunities into reality.

The OLC comprises of four stages; Exploration and Appraisal followed by Development, Production and Decommissioning.

The characteristics of these stages in terms of project economics, finance, technical complexity, impacted communities and

expectations vary with the location of the project.

Offshore projects are the most technically complex whereas onshore projects, although not as technically complex are

often more difficult due to their geographic isolation and by the fact they are highly visible to local communities.

In Turkana, from a local content perspective, geographic isolation and historic marginalisation of the communities in the

oilfield complicate operations further because expectations are fuelled by the desperate need of the local populace and an

intense feeling of entitlement. Yet their real ability to engage is severely limited.

Converting expectations into realities in a national business environment that is unaware of oil and gas and not generally

accustomed to working to Oil and Gas standards is also a challenge.

Expectations have various sources as follows:

Production Sharing Agreement (PSA) – initial contract between IOC and Government

Local Content Regulations – delegated powers to the Cabinet Secretary (CS) under the Energy Bill

Community in the Area of Operations

Academia

Business and Industry

Governments’ expectations can be conflicting because local content legislation with targets for local content are

compromised when there is a simultaneous push for early oil production.

Nascent oil economies generally cannot produce goods, services and skills of the type, quality and quantity in time to

facilitate early oil production. Therefore goods and services are imported after being manufactured overseas with skills in

enough numbers arrives to build the facilities. Early oil production is delivered but at the cost of local content as in Figure

1-1. Non-compliance occurs not because the IOC lacks of commitment but from the mutually exclusive ambitions of the

Production License and the Local Content Regulations.

In either event (early oil or not) there remains the gaps in levels of skill and standards or goods and services that must be

overcome before the Kenya industry and labour force can engage with the project. The questions to be asked are:

What is the gap?

How big is it?

What must be done to close it?

How long will it take and can it be done in time?

How much will it cost?

Who should lead and fund gap closing initiatives?

Will the result be sustainable?

OBJECTIVES OF INDUSTRIAL BASELINE SURVEYS


The Kenya Government and the JV Partnership (Tullow, Africa Oil & Maersk) have an overall objective of finding and

producing oil for mutual benefit. Each has local content policies with a commitment to deliver. Local Content policy for the

Kenya Government will be expressed in the form of Legislation with enabled Regulations. For the JV Partnership (JVP) local

content policies are a description of how the shareholders wish to do business in Kenya.

Figure 1: Relationship between Local Content and Rapid Development

The objective of the Industrial Baseline Survey is to gather data to enable the JVP to differentiate between which is and

that which is not feasible. To that end it analyses the legislation and any targets contained therein and studies the Kenyan

economy and socio-economic to establish the potential for delivering local content.

Legislation focuses on a number of criteria as follows:

1. Equity ownership of Licensees and Oil and Gas Service Providers by Kenyans

2. Maximisation of the procurement of Kenyan goods and services with specific references to legal, insurance and

finance.

3. Transparency and fairness in the procurement process with a price advantage for Kenyan businesses.

4. Maximum employment of suitably qualified and experienced Kenyan nationals in the industry with systems for

fast tracking Kenya nationals which is strongly linked to the...

5. ... Transfer of Technology to Kenya business and the ...

6. ... establishment of oil and gas Research and Development in Kenya.

Legislation disaggregates these criteria into a table of targets in the Regulations called the First Schedule. The IBS seeks to

establish the feasibility of achieving these targets and clauses by establishing a Kenya baseline that is compared to the

requirements of the industry Basis of Design and identifying gaps. Measures to close gaps must take into consideration five

criteria that are critical to an Oil and Gas Project, they are:

1. Technical Standards in relation to:

a. Materials and components

b. Methodology and working practices

2. Environmental protection (underpinned by 1 above)


3. Health and safety of the workforce and communities (underpinned by 1 above)

4. Human Rights

5. Sustainable development

The Basis of Design of the Development Project is determined by the Front End Engineering and Design (FEED) process

which under the current schedule is not due to start until October 2016. Therefore gaps cannot be determined in the form

of numerical values. This IBS took the approach of determining gaps in standards by comparing Kenya’s Supply capability in

selected sectors to those required by the project. Capacity gaps can be determined once the FEED process is complete and

therefore the IBS should be seen as a work in progress.

LOCAL CONTENT OPPORTUNITIES AND THE OIL LIFE CYCLE

Each stage of the OLC has potential for a different set of opportunities and challenges for local participation. The stages of

the OLC are shown as linear in Error! Reference source not found., but in practice are interconnected with some

overlap and parallel activity. From a local content and participation perspective successful achievement of targets requires

time to build the necessary skills and capacity in industrial sectors and workforces. Therefore building local capacity for one

OLC stage should be started in a previous stage if national and local companies and skills are to be included in the project

and successfully exploit opportunities.

Opportunities come in two main categories:

1. Goods and Services

2. Employment

Both can be categorised in three ways:

1. Direct (or Specialist Oil and Gas) – businesses that only supply oil and gas – a concentrated and global market

with significant barriers to entry.


Figure 2: Oil Life Cycle Exploration & Appraisal: Opportunities are limited to Indirect Services and Jobs such as logistics, support services and civil engineering. Development: Significant increase in Goods and Services and Job opportunities –still limited to Indirect Services. Opportunities for Kenyans in Direct (and Indirect) Goods, Services and Employment increases through of Joint Ventures or Partnerships – refer to the JV Curve. Production: JVs and Partnerships formed during Development can continue in the operations of the Oil and Gas industry of become Kenyan companies or franchises etc.


2. Indirect (or Specialist)– businesses that supply multiple industries including oil and gas – barriers to entry are

normal for the type of service in country

3. Induced (or Non-Specialist) – businesses that experience income from oil and gas but cannot easily identify the

level of income received

GOODS AND SERVICES [REFER TO ERROR! REFERENCE SOURCE NOT FOUND. ]

EXPLORATION AND APPRAISAL

Exploration and Appraisal starts with 2D & 3D Seismic Surveys. Seismic crews move rapidly across large areas of land using

plant and equipment that are highly specialised. Thus seismic work offers limited opportunities for local content. The

development of new fields in the future provides an opportunity for Kenya companies to joint venture with internationals

and effect technology transfer through employment, training and development. Goods and services opportunities in

Turkana associated with seismic surveys are for the provision of light vehicles, camps/accommodation and security.

When rigs arrive to drill prospects the levels of investment and risk increase exponentially. Rigs are bespoke pieces of

equipment and are very expensive to hire, transport to frontier locations and operate; this is why they work 24/7. Because

there is no guarantee of success this is a very high risk activity in financial terms. The hours and speed of working, the

nature of the rotating and lifting equipment used and its sheer scale results in a very high risk activity from an

environment, health and safety perspective. This underlines the requirement of a skilled and experienced workforce.

The local content opportunities are much the same as for seismic work but increase in number and value depending on

the:

number of planned wells;

number of rigs required;

degree of geographical isolation.

An increase in any of the three factors above widens the scope and value of the demand for goods and services that have

the potential to be supplied nationally or locally to include cranes and forklifts, heavy goods vehicles, utility vehicles

(tippers, excavators, bowsers and trucks), scaffolding and building materials and components, electrical cabling, control

panels and components, tools and equipment, PPE etc.

DEVELOPMENT (AND FIRST OIL)

The transition between E&S and Development is marked by the Front End Engineering and Design [FEED] process. As with

all specialist oil and gas services there are relatively few companies able to supply this service in the global market. The

skills and expertise take a long time to develop and so the opportunities for local content and participation are limited.


Figure 3: Direct, Indirect and Induced: Goods and Services


The nature of onshore oil and gas development is essentially a large construction project with a significant electrical,

mechanical, instrumentation and fabrication element.

Goods and services required for supporting the production drilling, extraction, initial processing and shipment of oil and

gas are bespoke, capital intensive, driven by R&D; often protected by patents and copyright which results in a

concentrated global market with significant barriers to entry in terms of time to develop, capital investment and

technological capital.

Fabricating all the constituent parts of a Central Processing Facility (CPF) is an accurate and quality controlled process,

requiring specialist fabrication, welding and testing facilities. GoK options for sourcing the technical plant and equipment

are “modular“ (fabricated overseas) or “stick-build” (fabricated in Kenya). For Kenya the nearest facilities capable of

supplying quickly, accurately and efficiently are in Southeast Asia.

The time and investment required to develop similar facilities and expertise in Kenya must be weighed against the need for

early First Oil. The question that must be answered is what is best for Kenya; a world class fabrication industry with

uncertain future or the income from selling oil on the world markets?

Wherever the technical plant and equipment for the project is manufactured, processing and shipping of oil requires a

supporting infrastructure and this represents significant opportunities within the capability of national, if not local

companies. Manpower supply, financial services, insurances, customs clearance, freight forwarding, logistics and

warehousing, camps and catering, food supply, plant and equipment hire, civil engineering and building works, scaffolding,

waste management, security etc.

Additional opportunities exist for consultancy studies such as ESIAs and Industrial Baseline Surveys, and for a variety of

other studies required to inform, underpin and protect the JVP’s and GoK’s investment and the environment.

Sustainability of these goods and services are assured because they are in demand in the general economy and demand

will only increase as Kenya enjoys the income from oil revenues.

Onsite technical activities present an opportunity for national companies to enter the Oil and Gas Industry, as specialists,

through joint venture or partnership with an international company. The relationship will promote technology transfer

through the employment, training and development of national and begin the development of national oil and gas

specialists that can tender for work in Production. This is Foreign Direct Investment (FDI) in practice.

PRODUCTION

Construction works are complete and oil is reaching the coast (by whatever means) and is being sold on the global oil and

gas market. Producing oilfields are controlled using sophisticated computer equipment.

The requirements for goods and services are greatly diminished in comparison with Development and are primarily

focused on the operation, security, repair and maintenance of producing wells and the CPF.

Production Well maintenance is conducted using work-over rigs and is a specialist oil and gas activity that presents an

opportunity for a national company to be developed, initially through joint venture and eventually as a standalone, as has

occurred in several cases in the Middle East and Europe.

EMPLOYMENT & SKILLS


The pattern of the Oil and Gas requirement for skills can be illustrated in the same manner as for goods and services. In

terms of the diagramme in

the closer to the well head the more niche the skills become. Expertise is gained in some cases from specialised Higher

Education under-graduate and post-graduate degrees with appropriate experience and development. In other cases

expertise is gained from many years of experience on-the-job with industry training and certification.

CHARACTERISTICS OF OIL AND GAS SKILLS

The employment opportunities for nationals and locals here depend on the quality and currency of the education and

training environment; quality work experience (that itself relies on the Enabling Environment discussed in 3.0 whether

there is previous or current expertise in Oil and Gas locally, nationally or in the diaspora. The skills in oil and gas can be

briefly described as follows:

specialised and bespoke;

engineers and professionals developed from a higher education source in an appropriate discipline developed by

appropriate experience;

engineering technicians with years of experience, developed on-the-job with industry training and in some cases

industry accreditations;

artisans developed from competency-based training with appropriate industry on-the-job experience and in

some cased industry accreditations;

not easily available (depending on oil price) and niche and therefore expensive;

short-lived in country – rely on the global market for continuity of work.


EXPLORATION AND APPRAISAL

Due to the temporary nature of demand of seismic operations there is not time or need to develop in country resources for

early E&A works. However, over time there might be an opportunity for a national supplier developed through joint

venture if further exploration is planned for the future.

E&A drilling operatives are traditionally trained on-the-job (OTJ) starting as labourers. OTJ training is supplemented by

company and industry training programmes heavily focused on doing the job efficiently, safely and with respect for the

environment. Many of today’s drill rig superintendents are the product of years of experience and OTJ training.


In addition to seismic and drilling there is a need for formally trained personnel in geosciences, engineering and

professional roles requiring a variety of University undergraduate and postgraduate qualifications and technical diplomas

from colleges; all of which require a period of development from quality work experience to industrialise the skills and

knowledge acquired. For some roles additional oil and gas industry accreditations and certifications are mandatory.

DEVELOPMENT

To develop and build an oil field and associated facilities many of the skills, qualifications, certifications and accreditations

required for E&A are repeated but operate in different occupational roles. Some new ones are added but are sourced from

an identical quality of educational, training and development background.

As with the goods and services requirement in Development many of the skills required are Indirect and thus transferrable

to other sectors in the economy which is advantageous when considering education and training needs in country.

Artisans are required in significant numbers from occupational disciplines such as welding, industrial electrical engineering,

electrical distribution engineering, mechanical engineering, civil engineering and construction trades and drivers/operators

to name but a few.

Internationally accepted best practice for training artisans is through Competency Based Training (CBT) which in its pure

form requires quality work experience in parallel to college based input. This is because EHS and Standards (quality,

tolerance and fit) are integrated within the training and assessment processes. The need for quality work experience

cannot be stressed too strongly in this model. Apprentices learn most of their skills OTJ as well as absorbing behaviours and

attitudes to work in a process akin to osmosis. Good quality work experience yields good quality artisans; poor quality work

experience yields poor quality artisans (RIRO).

The quality of skills and therefore workmanship in an industry is a direct reflection of the standards demanded by the

Government and clients. It is however not enough to demand; Governments must enforce and clients must pay for the

required standard. If either of these are missing quality will suffer and in turn and because of the symbiotic relationship

between industry requirements and college outputs, the quality of training will suffer.

PRODUCTION

The skills required in this stage are a mixture of specialised oil and gas (Direct) and specialist (Indirect). As with E&A

operatives, Production operatives are trained OTJ with additional industry certifications and accreditations required,

specific to each role. With time every position in the Production stage could be performed by a national.

The requirement for professional, engineering and technician roles will require quality education and training either in

country or sourced from overseas. The decision is a choice between the sustainability and cost of developing and

maintaining appropriate education and training programmes in country compared to the cost of training overseas.


Figure 4: Direct, Indirect and Induced Employment

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GOVERNANCE: GOVERNMENT OF KENYA OIL AND GAS

GoK will require personnel with oil and gas skills to properly administer the industry for the benefit of Kenya. The skills

required are a mixture of oil and gas specialist (Direct) and specialist (Indirect).

STANDARDS

The Oil and Gas Industry works to a set of standards defined by the associated Oil and Gas Producers (OGP).

These standards are a collection of standards written by global standards agencies like the BSI, EN, ISO, ASTM

etc. They are a representation of best practice in several industrial sectors.

Oil and Gas also conforms to standards laid down by the financial institutions that provide finance to projects

in nascent oil and gas economies such as the IFC, specifically the IFC Performance Standards.

Standards are necessary to protect the investment, the environment, the health and safety of the workforce,

the integrity of the facilities, and to reduce maintenance costs over the lifetime of the facilities. Conforming to

standards also facilitates insuring the project and facilities.

INDUSTRIAL

Industrial standards refer to specifications of materials, components and methodologies for construction,

production and waste disposal.

VOCATIONAL TRAINING

Skills’ training in economies governed by such standards is predominantly conducted through Competency

Based Training tautologies. CBT integrates standards into the training system through Occupational Standards.

Trainees are taught to adhere to and demonstrate their knowledge of standards through practical assessments

and theoretical examinations specific to their chosen their occupations.

THE LINK BETWEEN STANDARDS IN INDUSTRY, VOCATIONAL TRAINING AND SKILLS

DEVELOPMENT: THE ENABLING ENVIRONMENT

The enabling environment is the workplace that is governed by national and sometimes international

standards. The workplace that conforms to standards is an environment in which a new graduate can develop

his/her skills to the appropriate standard and levels of productivity. A workplace that does not conform will

not facilitate this growth and produces workforces that cannot comply with standards and are usually

unproductive.

THE KENYA BUSINESS ENVIRONMENT FOR OIL AND GAS

To convert expectations into deliverables an enabling infrastructure must exist, or be in development, together

expectations and infrastructure make up the business environment which from an oil and gas, ease of working perspective,

should include:

skills: produced by contemporary training and education systems and made economically viable though quality

work experience;

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local goods and services of type, quality, quantity and price that assures ROI and technical excellence;

standards to an appropriate level that governs the production of goods and services (KEBS); protects the

workforce and environment (EHS) and defines the competencies of skills through the definition of tolerances and

techniques;

quality assurance and quality control engrained in the culture of production;

open and transparent tendering and opportunity sharing processes;

financial and business practices that are graft resistant and transparent;

supporting work and customer service ethics.

Often in sub-Saharan Africa each one of these requirements is either embryonic or a work in progress. The relevant

Government Ministries, Departments and Institutions are in existence; the concepts and terms are all understood and the

need is accepted; however, the financial wherewithal is often missing and so progress is slow.

The JVP controls its own environment because it is obligated to so do by investors, financiers and legislators and that

means insisting that standards and compliant professional practices are observed. However such action often results in the

exclusion of local communities, workforces and businesses because they cannot comply. The JVP is then accused of using

standards and complex procurement and administrative systems to exclude national and local entities and individuals from

engaging with the Oil and Gas industry. That is not the JVP’s intent.

One solution is to view the achievement of standards as a journey, a capacity building project in its own right. This

approach requires rigorous contract performance management with predetermined incremental improvement action

plans and reviews. Tullow, as the Operator, works to raise awareness and understanding of standards locally and to

develop local entities and individuals before, during and after contracts. This is a challenging task to perform whilst working

to achieve target ROI; it takes time and as such is often at odds with national and local expectations. Anti-corruption and

some EHS requirements however, are not negotiable and require early capacity building through engagement and (PPP)

enterprise development initiatives.

Make the point that the environment is determined by the Regulations Nationally and by County Government locally and

that every solution will have a national and local element attached. Balance is the goal but the economic viability of the

Project is paramount if the JVP is to attract investors.

INTRODUCTION TO THE INDUSTRIAL BASELINE SURVEY KENYA

PURPOSE OF IBS

The purpose of a full IBS is to establish a baseline in Kenya with respect to the local availability of goods,

services and skills relevant to Direct and Indirect sectors of the economy. For the JVP this is essential to

establish the feasibility of achieving the targets set in the First Schedule and take full advantage of local

procurement and employment that will reduce the cost of the project. Therefore the focus of the study is to

identify goods, services and skills of the required specifications, quality and quantity.

To undertake a full IBS the JVP requires detailed knowledge of the Project. The Front End Engineering and

Design process known in the industry as FEED provides a full list of quantities (materials and components) and

estimates the skills required in terms of trades, specialisms, professions and by numbers. FEED is not

scheduled to start until October 2016.

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Without FEED it is not possible, except in the very broadest terms, to identify quantity gaps. However, the JVP

is duty bound to conduct its operations to standards that protect the environment, the health and safety of

the workforce and the integrity of the installations. Therefore it is possible to identify quality gaps by testing

the technical specifications, the production processes with QA/QC, health and safety systems and skills training

and development employed in Kenya.

This phase of the IBS is aimed at investigating these criteria against the needs of FEED and Early Works of the

Development Project. Its finding can be extrapolated to other phases of the project in areas such as QA/QC,

EHS and Skills. The sectors chosen for study at this stage are shown in Table 1.

When FEED is complete and approved it will be possible to identify quantity gaps to supplement this study,

however, increases in production are relatively easy to solve, whereas the increase in standards and numbers

of skilled labour is a much lengthier process; a much more difficult challenge.

METHODOLOGY

Figure 5 diagrammatically illustrates the process adopted for research, analysis and reporting the findings of

the IBS. Following the diagramme is a brief explanation of each stage in terms of what, why, how and who.

Sectors for Study in IBS Phase Cement Producers

Cable Manufacturers

Civils Bulks, Pipes, Ancillaries and Non-Critical Valves

Electrical and instrumentation accessories and non-critical instruments

Generators

Industrial Coatings

Scaffolding

PPE, Welding Gases & Equipment

Steel Fabricators

Steel Processors

Transmission & Communications Tower Manufacturers

Pressure Vessels

Table 1: Sectors for Study in IBS for FEED and Early Works

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Figure 5: Industrial Baseline Process

CEMENT & STEEL; MURRAM, SAND AND AGGREGATES: GOODS AND SERVICES

IDENTIFY AND RANKING BY TURNOVER

Not every company in Kenya is required to publish their company accounts making it hard to identify the top

ten companies in any sector. With the assistance of the financial and private sectors (Equity Bank, KAM and

KPMG) it was possible to identify the top ten in each sector and rank them by their comparative size.

QUESTIONNAIRE

The JVP developed a questionnaire asking basic questions with regard to products, standards, EHS, turnover

and human resources and distributed this to the sample via Survey Monkey Pro. Over 350 companies were

surveyed this way with a response rate of approximately 40% . The results were collated and handed to the

Consultant that conducted the next step for the JVP.

VISIT AND APPRAISE: TESTING OF SAMPLES: MURRAN, SAND & AGGREGATES: CEMENT & STEEL

The JVP tendered the next phase to Kenya companies. SGS from Mombasa succeeded in winning the tender

and began by visiting the companies on our list and conducted insitu appraisals of QA/QC, EHS, human

resources and where appropriate took samples for testing.

In Turkana where the JVP is eager to find and exploit Murram, Sand and Aggregates to the benefit of the

project and to Turkana County; SGS deployed a team to find and take samples for testing from suitable areas

identified through desk top study and an earlier survey conducted by Worley Parsons.

Similarly samples of cement and steel were collected from companies willing to participate to be tested

against the appropriate standards.

CATEGORISATION OF COMPANIES AND SECTORS: CAPACITY BUILDING: SECTOR ANALYSIS

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The results were analysed to produce Sector Analyses and develop suggested initiatives for Capacity Building.

companies within relevant industrial sectors have been categorised as follows:

Cat. Readiness to Work in Oil and Gas

A Ready to work in Oil and Gas with no development required.

B Ready to work in Oil and Gas with some development post-contract award.

C Not ready to work in Oil and Gas. Needs development pre-contract award

D Not ready to work in Oil and Gas. Not enough time or too costly to develop

E Complete unprepared or not interested in Oil and Gas as a potential marketplace.

Table 2: Categorisation of Companies within Sectors

BENTONITE AND BARYTE

These drilling muds are stated in the First Schedule as a material found in Kenya that should be utilized by the

JVP. The first action of the IBS is to explore the potential sources through a desk top study of all the previous

research conducted in country and incorporate the findings in the report.

VOCATIONAL SKILLS TRAINING AND DEVELOPMENT

IDENTIFY

The JVP approached the Ministry of Education, Science and Technology through TVET and asked for a

representative sample of colleges to be nominated across Kenya

TVET nominated six TTIs and two Technical Universities as follows:

Technical Training Institutes:

o Mombasa TTI

o Rift Valley TTI

o Kitale TTI

o Kabete TTI

o Kiambu Institute of Science and Technology

o Meru TTI

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Technical Universities

o Mombasa

o Kenya, Nairobi

Of the nominated sample it was not possible to visit Meru TTI due to weather conditions and TU of Kenya was not prepared for our visit.

VISIT AND APPRAISE

Each institute was appraised against a checklist by a JVP in-house team which asked questions about the

following:

Environment Health and Safety – workshops should be organised and operated with a complete

understanding of and compliance with EHS. A compliant workshop says a great deal about the college

and its teaching staff.

Training Resources – workshops, classrooms, and student facilities

Support Services – Libraries, IT and Student Welfare

Human Resources – Teaching, Support, Management and Governance

Programmes –industrial relevance of curricula

ANALYSE

The results of the visits were analysed to look for thematic issues that are presented in the report and used in

the development of the JVP vocational training strategy. Higher Education was not the focus of this study;

however, the JVP has continuously engaged with the HE sector and has incorporated those findings in its HE &

VT Strategy for Kenya.

KEY FINDINGS

This report condenses the finding of the IBS into Key Findings to bring the main issues to the fore. More

detailed analyses can be found in the main report.

KEY FINDINGS OF INDUSTRIAL READINESS SURVEY BY SECTOR

There follows a number of tables that condense the technical finding of the report into the sectors as defined

by SGS from the original listing supplied by the JVP. They are designed to be a quick reference guide to each

sector with information that identifies the:

Targets (if any) in the First Schedule in the Draft regulations; Market Categorisation (Table 2) that indicates how many companies are in each category from the

sample visited; compliance: feasibility of the JVP being able to comply with the targets as they stand ; Key Issues; Capacity Building recommendations;

Supporting Initiatives to assist companies to engage in tendering for Oil and Gas contracts.

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MURRAM, AGGREGATES AND SAND

Sector / Source: Murram, Aggregates & Sand in Turkana

First Schedule Start 5 Years 10 Years Unit

Targets Not specified in LCR(D): Request from Development Team

Market: (A,B.C = market with potential to prequalify)

A, B, C A B C D E

- - - - - -

Compliance with LCR(D) No regulations apply

Not politically wise to import Murram, Aggregate and Sand into Turkana because local unrest is likely with resulting delays to schedule

Key Issues SGS found significant quantities of: o G8 to G10 o G6 to G9 o Sand for concrete

SGS found no sources of: o G5 or sub-base o G1 base material o Gravel

Capacity Building Recommendations Use stabilisation techniques to produce CPF & road bases

Supporting Initiatives Encourage or establish a rock crusher near volcanic outcrops to produce aggregate and gravel. Good local content initiative.

Table 3: Synopsis of Findings: Murram, Aggregates and Sand

BENTONITE AND BARYTES

Sector / Source: Bentonite & Barytes


Targets cl 3.6 20% 50% 80% Tonnage


A, B, C A B C D E

- - - - - -

Compliance with LCR(D) No current quality tested sources

With no facilitating action it is impossible to comply (Barytes)

Testing of Athi River Bentonite is needed to ascertain quality

Discuss with GoK re: lack of refining facility

Key Issues Bentonite and Barytes both exist in Kenya

Bentonite deposits found in Turkana

One refining facility Athi River – quality not verified

Oil and Gas Service Providers must engage if TKBV wants to comply

Capacity Building Recommendations Further field work required and laboratory testing

Feasibility required to develop refining facility

Supporting Initiatives Encourage Kenya business to develop a refining facility

Encourage Oil and Gas Service Providers to partner in refining facility

Table 4: Synopsis of Findings: Bentonite & Baryte

CEMENT AND CEMENT ADDITIVES

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Sector / Source: Cement (+ Additives)




A, B, C A B C D E

3 1 2 - - -

Compliance with LCR(D) Bamburi can provide quality cement to specification

Sector requires early data regarding specifications

Key Issues Only two companies in market – concentrated

No ISO Accredited Testing Laboratory in Kenya

Refer to Main Report and Appendix B for Laboratory Test Results

Capacity Building Recommendations Some work on QA/QC and EHS – can be part of a contract if felt necessary

Supporting Initiatives Industry wide QA/QC Event

Encourage ISO Accredited Testing Laboratory in Kenya

Table 5: Synopsis of Findings: Cement & Cement Additives

CABLES MANUFACTURERS

Sector / Source: Cables Manufacturers


Targets High Voltage 60% 80% 90% Length

cls. 3.3, 3.4 Low Voltage 60% 80% 90% Length


A, B, C A B C D E

2 - - 2 1 -

Compliance with LCR(D) Risk area – quality in terms of adherence to specification

Sector requires early data regarding specifications

Request regulator to clarify target i.e. % of all length or % of length available to in-country firms.

Key Issues QA/QC, EHS issues in both companies

Only two companies in market – concentrated


Capacity Building Recommendations Interventions required prior to prequalification

QA/QC and EHS verified improvements

Install Third Party QA/QC verification as part of contract



Table 6: Synopsis of Findings: Cables Manufacturers

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CIVILS BULKS, PIPES, ANCILLARIES AND NON-CRITICAL VALVES

Sector / Source: Civils bulks, pipes and ancillaries, non-critical valves


Targets Steel Pipes 40% 80% 100% Tonnage

Cls3.2,3.5 Valves & Pumps 20% 40% 60% Number


A, B, C A B C D E

2 - - 2 3 -

Compliance with LCR(D) No target specified for civils bulks: Development team request

Pipes & valves imported now so compliance relies on importing through Kenya agents

Request regulator to clarify target i.e. % of all tonnage/number or % of tonnage/number available to in-country firms.

Key Issues QA/QC, EHS issues in all companies



Steel Processors also importing products – inclusion in steel pipes market would increase competition

Capacity Building Recommendations

Interventions required prior to prequalification




Table 7: Synopsis of Findings: Civils Bulks, Pipes, Ancillaries and Non-Critical Valves

ELECTRICAL AND INSTRUMENTATION ACCESSORIES AND NON-CRITICAL INSTRUMENTS

Sector / Source: Electrical & Instrumentation Accessories + Instruments – non-critical


Targets cls 3.2, 3.5 10% 50% 80% Number


A, B, C A B C D E

2 - - 2 1 -

Compliance with LCR(D) These products are traditionally imported so compliance relies on importing through Kenya agents

Request regulator to clarify target i.e. % of all items or % of items available to in-country firms.



Electrical safety in installation, maintenance & repair

Capacity Building Recommendations Interventions required prior to prequalification

QA/QC and EHS verified improvements to OGP standards

Train staff in 17th

Regs (NEO Africa course)


Table 8: Synopsis of Findings: Electrical and Instrumentation Accessories & Non-Critical Instruments

GENERATORS

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Sector / Source: Generators




A, B, C A B C D E

6 - 1 5 1 -

Compliance with LCR(D) These products are traditionally imported so compliance relies on importing through Kenya agents


Competitive marketplace

Electrical safety in installation, maintenance & repair



QA/QC and EHS verified improvements to OGP standards

Train staff in 17th

Regs (NEO Africa course)


Table 9: Synopsis of Findings: Generators

PROTECTIVE PAINTS (INDUSTRIAL COATINGS)

Sector / Source: Protective Paints (Industrial Coatings)


Targets cl. 3.10 50% 70% 90% Litres


A, B, C A B C D E

4 - 2 2 - -

Compliance with LCR(D) Kenya companies are franchises of global brands therefore meeting specifications should not be a problem

Request regulator to clarify target i.e. % of all volume or % of volume available to in-country firms

Compliance is achievable

Key Issues Minor QA/QC, EHS issues in all companies




Supporting Initiatives Industry wide QA/QC, EHS Event

Table 10: Synopsis of Findings: Industrial Coatings

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PLANT & EQUIPMENT - SCAFFOLDING

Sector / Source: Plant & Equipment - Scaffolding




A, B, C A B C D E

7 2 3 2 1 -

Compliance with LCR(D) No target specified

Key Issues Market appears good because most Steel fabricators have scaffolding sidelines

Minor QA/QC, EHS issues in all companies


No Accredited scaffold erectors training in Kenya



Establish/encourage Accredited scaffold erectors and inspector training


Table 11: Synopsis of Findings: Plant and Equipment - Scaffolding

PPE, WELDING GASES AND WELDING EQUIPMENT

Sector / Source: PPE Welding Gases & Welding Equipment




A, B, C A B C D E

6 - - 6 1 -

Compliance with LCR(D) No target specified for these items: Development team request

Items imported so compliance relies on importing through Kenya agents


Only two companies in each sub- market – concentrated





Table 12: Synopsis of Findings: PPE, Welding Gases and Welding Equipment

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STEEL FABRICATORS

Sector / Source: Steel Fabricators


Targets 20% 50% 80% Tonnage


A, B, C A B C D E

7 2 3 2 - -

Compliance with LCR(D) Targets apply to pressure vessels and storage tanks

Request regulator to clarify target i.e. % of all tonnage or just % of tonnage available to in-country firms

Key Issues Competitive and a good quality marketplace

No pressure vessel certification from ASTM U-Stamp

Some QA/QC, EHS issues in the market


Encourage firms to acquire U-Stamp certification


Sector needs to JV for heated storage tanks

Supporting Initiatives Industry wide QA/QC, EHS Events

Encourage ISO Accredited Testing Laboratory in Kenya – possibly in Nairobi – NDT Third Party verification.

Industry wide JV Event

Table 13: Synopsis of Findings: Steel Fabricators

STEEL PROCESSORS (MILLS & IMPORTERS)

Sector / Source: Steel Processors (Mills & Importers)




A, B, C A B C D E

4 - 3 1 2 -

Compliance with LCR(D) Request regulator to clarify target i.e. % of all tonnage or just % of tonnage available to in-country firms.

Request Regulator to confirm use of rebar will contribute to targets.

Processors importing finished products from China and India

Key Issues Cost of energy makes national production uncompetitive

QA/QC, EHS issues in all companies



Steel Processors can import steel pipes


Interventions are required prior to prequalification

Some firms require ISO 9001 accreditation

QA/QC and EHS verified improvements – Third Party verifier


Encourage ISO Accredited Testing Laboratory in Kenya –for steel in Nairobi – test, tag and send to field or reject.

Table 14: Synopsis of Findings: Steel Processors

TRANSMISSION AND COMMUNICATIONS TOWERS

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Sector / Source: Transmission and Communication Towers

Local Content Regulations First Schedule

Start 5 Years 10 Years Unit



A, B, C A B C D E

2 1 1 - 2 -

Compliance with LCR(D) No target specified for civils bulks: Development team request

Confirm with Regulator that these items will contribute to use of Kenya compliant steel.

Key Issues QA/QC, EHS issues in all companies – some minor, some major







Encourage ISO Accredited Testing Laboratory in Kenya – possibly in Nairobi – test, tag and send to field or reject.

Table 15: Synopsis of Findings: Transmission and Communications Towers

SUMMARY OF KEY FINDINGS

QA/QC

This is a recurring theme across all sectors. Some companies have ISO 9001 but they are in the minority. Some

others have QA/QC (&EHS) procedures but they are rudimentary and not always followed.

TESTING LABORATORIES

Some companies have their own testing laboratories but none are ISO Accredited and so one cannot be sure if

the testing equipment has been calibrated, that test follow accepted procedures or that the laboratory is

tested against known samples on a predetermined schedule.

Some companies use external testing facilities but even the good testing laboratories in Kenya are not ISO

accredited which leads to the same concerns as above. SGS determined to send samples to their own ISO

Accredited laboratories in South Africa and Pakistan. Accreditation represents a sound business opportunity

for testing facilities in Kenya and should be encouraged strongly.

EHS

As with QA/QC some companies have robust EHS systems, others have rudimentary systems and some have

none at all. Even the robust systems have failings especially in monitoring and recording of incidents and PPE

usage was observed to be highly variable..

MARKET CATEGORISATION

Analysis of each sector with regard to their performance in the appraisals leads to an understanding of the

local market with which the JVP can engage. Not enough companies in the top two categories (A&B) means

the market is concentrated and prices will not be competitive. This is not good for the economic viability of the

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project. The following diagram illustrates how each sector has been analysed to give the reader an

understanding of:

the potential for local content in each sector;

a view of the likelihood of competitive pricing;

need for capacity building.

Figure 6: Categorisation of Companies by Sector

Cat. Readiness to Work in Oil and Gas

A Ready to work in Oil and Gas with no development required.

B Ready to work in Oil and Gas with some development post-contract award.

C Not ready to work in Oil and Gas. Needs development pre-contract award

D Not ready to work in Oil and Gas. Not enough time or too costly to develop

E Complete unprepared or not interested in Oil and Gas as a potential marketplace.

Table 16: Market Segmentation

A+B = Market Place

B + C = Capacity Building

Place

D + E = LT Development

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Figure 6: Market Segmentation: Steel Processors

There are 3 companies in the B category that require significant improvements in QA/QC and EHS with much

improved testing of final products and traceability through the production process. Even with appropriate

QA/QC it is possible that no improvements will be experienced because final product quality could be due to

old and worn machinery.

Kenya’s marketplace does not demand good quality. The sector imports second quality steel billets and mixes

it with scrap. The samples tested failed chemical analysis and furthermore, reinforcing bars were found to be

inconsistent in cross-sectional area. Some of the failed samples bore the KEBS Diamond Mark.

Due to the cost of energy in Kenya steel processors are importing finished steel products from India and China

cheaper than they can manufacture them in country. The JVP does not feel confident in purchasing products

from this sector.

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Figure 7: Market Segmentation: Steel Fabricators

The marketplace for steel fabrication in Kenya is healthy. The top two companies have ISO 9001 but do not

have ASTM certification for Pressure Vessels; something the industry could correct for itself. The remaining

companies in the sector need to make significant improvements in QA/QC and EHS.

The entire sector would benefit from either ISO Accredited in-house testing facilities or access to a third party

testing laboratories with ISO Accreditation.

To benefit from Oil and Gas the sector would need to import steel products to assure the quality of products.

With only two companies in the immediate position to tender the market price has potential to uncompetitive.

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Figure 10: Market Segmentation: Cables Manufacturers

This sector requires significant improvements in QA/QC and EHS. It has the potential to produce cables to

specification but must also improve its testing and product traceability. An option for the JVP is to install third

party QA/QC processes to check the process as predetermined and critical points in the production process.

Alternatively the sector can seek ISO Accreditation and develop, implement and demonstrate its adherence to

appropriate QA/QC and EHS systems by opening up to scrutiny.



With only two companies in the immediate position to tender the market price has potential to uncompetitive

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Figure 11: Market Segmentation: Electrical and Instrumentation Accessories & Non-Critical Instruments

This sector is comprised of importers of finished goods. The specifications of the products are as the client

orders and the QA/QC conducted by the manufactures.

Improvements to the sector relies on the training of installers and maintenance engineers that should follow

the UK 17th

Regs (soon to be the 18th

Regs) to be in accordance with JVP standards. There is a body in Kenya

called NEO Africa that is offering conversion courses for experienced and licensed electrical engineers. This is

an improvement the industry should complete itself.

Installation of components and instruments will be conducted by EPC personnel but the long term

maintenance should be conducted by properly qualified and accredited Kenyan operatives.

With only two companies in the immediate position to tender the market price has potential to uncompetitive

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Figure 12: Market Segmentation: Generators

The suppliers of Generators in Kenya are importers of finished products. The products are as per client

specifications and the QA/QC conducted by the manufactures.

Improvements to the sector relies on the training of installers and maintenance engineers that should follow

the UK 17th

Regs (soon to be the 18th

Regs) to be in accordance with JVP standards. There is a body in Kenya

called NEO Africa that is offering conversion courses for experienced and licensed electrical engineers. This is

an improvement the industry should complete itself.

Installation of components and instruments will be conducted by EPC personnel but the long term

maintenance should be conducted by properly qualified and accredited Kenyan operatives.

With six companies in the immediate position to tender the market price has potential to competitive. The JVP

already sources generators from the local market.

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Figure 13: Market Segmentation: Transmission and Communications Towers

This sector includes some of the Steel Fabricators and so the comments made for that sector are relevant to

this sector. However, the majority of the market in this sector requires very significant effort in QA/QC, EHC,

traceability and other critical business systems. The entire sector would benefit from either ISO Accreditation,

accredited in-house testing facilities or access to a third party testing laboratories with ISO Accreditation.

The industry should complete the improvements itself. However, if the Kenya marketplace does not demand

towers of similar quality to that demanded by the JVP there is doubt to the sustainability of such a market. The

steel fabricators already produce to a high standard and therefore perhaps they should be allowed to

dominate this sector for Oil and Gas. However, with only two companies in the immediate position to tender

the market price has potential to uncompetitive.

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Figure 14: Market Segmentation: Cement Producers

This marketplace contains one producer with the ability to meet JVP demand with early notification of

specifications. The remainder of the sector has potential to supply with improvements to QA/QC.


testing laboratories with ISO Accreditation. Chemical analyses of some samples were found to be non-

compliant with the grade of cement.

With only two/three (one for certain) companies in the immediate position to tender the market price has

potential to be uncompetitive.

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Figure 157: Market Segmentation: Industrial Coatings

The suppliers of Industrial Coatings in Kenya are importers of finished products. The specifications of the

products are as the client orders and the QA/QC conducted by the manufactures. This sector requires notice of

specification in order to supply.

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Figure 86: Market Segmentation: Civils Bulks, Pipes, Ancillaries and Non-Critical Valves

The suppliers in Kenya are importers of finished products. The specifications of the products are as the client

orders and the QA/QC conducted by the manufactures. This sector requires notice of specification in order to

supply.

The sector would benefit from ISO Accreditation to improve its systems, efficiency in product handling and

product traceability.

The JVP expects to be able to source its requirements from this sector.

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Figure 16: Market Segmentation: PPE, Welding Gases & Welding Equipment

The red number refers to welding gases of which two companies are categorised as C and one ad D. The other

numbers refer to welding equipment and PPE resellers of which there are two each in Category C.

The welding gases sector should strive to improve EHS and gain access to ISO Accredited testing.

The welding equipment and PPE sectors are importers. Thus specification comply with clients wishes and

QA/QC is conducted by manufacturers.

With only a few companies in each sector the pricing is likely to be uncompetitive. However these are not the

only companies in these sectors, they are simply the largest of the sample tested.

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Figure 17: Market Segmentation: Scaffolding

Steel Fabricators are in this sector and so similar comments apply to this sector as for the fabrication sector.

The requirements will be independent scaffolding also known as tube and fit to cope with unusually shaped

facilities. The sector as a whole should improve its QA/QC and must train and accredit its erectors.

There are enough companies in this sector to drive competitive prices but the demand for scaffolding is high in

Kenya and the standard of equipment and erection is extremely variable.

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Figure18: Market Segmentation: Pressure Vessels

This sector is another exploited by the steel fabrication companies. There are two good companies in this

sector with ISO 90021 but neither has ASTM Accreditation for Pressure vessels. This is a matter that can be

corrected by the companies in the sector with minimal assistance.



With only two companies in the immediate position to tender the market price has potential to uncompetitive.

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KEY FINDINGS FOR THE VOCATIONAL TRAINING SECTOR

This survey is limited to the Public Sector. The Private Sector Training institutions are the subject of a future

study. In general the facilities and support in TTI and TUs is good but the lack of industrial relevance of the

curriculum, the paucity of training consumables and the lack of industrial experience in the training staffs are

matters for concern.

FACILITIES AND WORKSHOPS

Across the sample workshops were large and reasonably well equipped. Some are new with new

equipment funded by the African Development Bank;

Two institutes’ workshops were old and in need of renewal.

LIBRARY AND IT SUPPORT SERVICES

IT and Libraries are well provisioned across the sector.

TEACHING STAFF

Commonly recruited from the student body;

Trained by GoK standard programme for teacher education.

None have industrial experience prior to teaching or in-service experience.

SUPPORT STAFF

Commonly recruited from the student body;

Trained by GoK standard programme of teacher education– go on to become teachers;

None have industrial experience either prior to teaching while or in-service.

MANAGEMENT STAFF

Commonly recruited from the teaching staff;

Learn to manage institutions as they progress through the ranks;

None have industrial experience either prior to teaching or while in-service.

CURRICULUM

Considered by industry to be out of date and no longer relevant to their needs;

All instruction is focussed on the curriculum and passing exams;

Kenya TVET is changing to Competency Based Training system (CBT) with Occupational Standards formulated to the current requirements of industry and reviewed regularly with industry involvement;

Separate craft programmes have been replaced by multi-skilling programmes.

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INDUSTRIAL RELATIONSHIPS

Most institutions have no contact with industry whatsoever – this is the norm;

Rift Valley TTI is the exception to this rule.

STUDENT FINANCE

95% of students in TTIs and TUs are self-financing;

The fees are relatively high and so students work part time;

Although fees are high they are not enough to ensure adequate consumables are available for craft programmes.

VOCATIONAL TRAINING ENVIRONMENT

Masonry, Carpentry and Plumbing students attend for one term, pick up the basics and leave to join the Jua Kali (informal sector)– therefore skills levels in the construction sector are extremely variable and generally low;

Electricians stay to take exams because they need a college certificate to enter the GoK Electrical Installers License exam;

Automotive students stay to take exams because employers demand the certificate;

Industry is retraining graduates because they have no use for the skills acquired at colleges;

CBT is a step in the right direction but it will take years to implement and embed;

Vocational Training has a poor reputation with the public. Thus the sector does not attract the best students because parents view trades as occupations of last resort.

KEY ISSUES

Curriculum is not relevant to Industry;

Trainers have no industrial experience;

Fees demotivate students and encourage early departure to Jua Kali;

New CBT system will take years to implement and embed;

No local interaction with industry;

Work environment not aligned with KEBS & DOSH and therefore does not provide a quality work environment for new entrants to enhance their skills and productivity.

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KEY ACTIONS FOR CAPACITY BUILDING

INDUSTRY

1. QA/QC initiative

1. Recalibrate KEBS Standards for Oil and Gas;

2. Recalibrate DOSH Standards for Oil and Gas;

3. Enforce both sets of Standards in Industry.

KEBS is guardian of standards in Kenya and as yet has no upstream oil and gas standards. An initiative is

required to introduce appropriate standards to the KEBS catalogue in collaboration with the IOCs. In general

the KEBS standards require enforcing across industry to ensure the quality of Kenya’s industry reaches the

standards Kenya has set for itself.

2. Encourage Kenya Industry wishing to supply Oil and Gas to become ISO Accredited and improve:

1. Technical Standards

2. QA/QC;

3. EHS;

4. Traceability of Products through the production process.

The findings of the IBS are that QA/QC is a major area in which Kenya can make significant progress and

thereby improve EHS standards, productive efficiency, reduce wastage and improve customer service and

product quality. In sectors serving oil and gas it is vital that these standards are raised.

3. Encourage one or all Kenya Testing Laboratories to become ISO Accredited;

Companies in the Oil and Gas industry will be requiring testing facilities that they can demonstrate operate to

the highest standards with accurately calibrated equipment and that are tested against known samples by

accrediting bodies on a regular basis.

4. Feasibility Study for Bentonite and Baryte as Oil and Gas Industry/GoK PPP initiative;

The JVP does not directly purchase drilling muds, they are supplied by the drilling contractors. Thus these

contractors must see a benefit to purchasing in-country and the quality must be to their standards or they

cannot guarantee their work, which is a significant risk to the JVP. All Bentonite and Baryte is imported to

Africa from Europe and so there is an export market on the continent. There are cost benefits to the drilling

contractors and export opportunities for Kenya; ignoring the local market.

5. Encourage and subsequently control and monitor Joint Ventures and Partnering agreements to maximize:

1. Employment , training and development of Kenyans across all industries;

2. Transfer of Technology through long association.

Accreditation of testing facilities is essential to give credence to their findings. This is a business opportunity

for existing facilities and essential for Kenya to be able to validate the quality of its manufacturing and

production industries both inside and outside Kenya.

Oil and gas will require accredited testing facilities.

EMPLOYMENT & SKILLS DEVELOPMENT

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Figure 2 illustrates a rapid Skills Requirement Curve. A large number of skilled workers are required to be

mobilized quickly to maintain schedule. The structure of the workforce will consist of:

Managers and above

Senior Professional and Technical Staff

Technicians

Clerical and Administrative

Skilled

Semi-Skilled

Unskilled

The actual mix and definitive numbers will not be estimated until the FEED process is complete and even then

the figures will not be entirely accurate because of variables outside design engineers knowledge or control.

SKILLS REQUIREMENTS

UNSKILLED

The description is inaccurate because all workers will require some skills. All workers will be taken through EHS

induction; the start of their training. It is how to stay safe and keep others safe and is essentially behavioral

training and essential to a modern project.

This is the largest element of the workforce and will be predominantly Turkanas. From this cohort individuals

will be identified as reliable or as having potential and will be progressed.

SEMI-SKILLED

The distinction between Semi-Skilled and Skilled is a grey area but to make a distinction any person that has

been trained either on-the-job or in college for at least a year to gain the required skills and has enough

experience to make those skills industrially relevant and economically viable is a skilled worker. Any person

that has completed a short period of training and has the required experience is semi-skilled. This is not a

definitive demarcation but it illustrates the principal.

It is possible to categorise further in terms of Oil and Gas relevance by considering if the skills are Direct or

Indirect (refer to Figure 4).

In this category would fall vehicle drivers (Goods Vehicles and Passenger Vehicles), plant, crane and forklift

operators.

SKILLED

These are workers with trades and can similarly be further categorised as Direct and Indirect skills. There will

be fewer of these workers than the semi-skilled and unskilled and they will be required to not only have the

required qualification and experience but many will need industry accreditations. For example a welder can be

qualified and experienced but will also need Coding(s) relevant to the specific work he or she is doing. Rig

workers require specific health and safety certifications and accreditations specific to drilling. Each job role has

specific requirements.

CLERICAL AND ADMINISTRATIVE

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Often forgotten this class of employee is significant and vital to the running of any business. The actual roles

are numerous and the skills requirements of these roles vary too much to be classified. They are not generally

defined as Skilled and yet many have significant levels of skills and knowledge but do not carry tools and do

not perform roles directly related to producing the facilities. Thus they treated as a separate category.

TECHNICIANS

These are highly skilled individuals with college based qualifications and experience. Some use tools others do

not and their activities are generally recognized as a level above skilled artisans. They would include

specialised electrical, instrumentation and IT employees. Their numbers are few compared to Skilled and

Unskilled employees.

They will have college Diplomas and Certificates with a requirement in some roles for Oil and Gas industry

accreditations.

SENIOR PROFESSIONAL AND TECHNICAL STAFF

This category of employees has a University Degree, Masters Degree and in some cases a PhD. This is category

that includes Engineers, Geologists, Geophysicists, Petroleum Engineers, Instrumentation and Electrical

Engineers etc. Other categories of staff also with the same qualification but not attached to Direct Oil and Gas

jobs are also included in this category; employees such as Accountants, Lawyers etc.

Some employees regarded as in this class do not have degrees but do have years of experience and have

worked their way up the ladder through demonstrating knowledge and practical skills related to drilling. Even

these employees are required to pass strict and rigorous industry examinations.

MANAGERS AND ABOVE

Coming from a Senior Professional and technical Staff background these employees have demonstrated a

talent for managing others or projects or very complex tasks. They have skills in finance, business

management, communication and stakeholder engagement. They also have many years experience of relevant

roles in Oil and Gas.

PYRAMID OF EMPLOYMENT

The more technical and senior the position the fewer roles there are as shown in the Employment Pyramid in

Figure 9. As the pyramid illustrates the more senior the role the greater the requirement for higher level

qualification and critically experience and both of these take time to acquire.

To realize the Draft Local Content regulations targets is not economically viable and because of the need for

experienced personnel in Semi-Skilled, Skilled, Technicians, Senior Professional and Technical and Managerial

it is not possible.

Therefore strategies have to put in place to ensure Kenyans are trained and developed during the project and

are supervised by Oil and Gas experienced personnel. Such strategies will differ for each level of the pyramid

48 | P a g e

Figure 9: Employment Pyramid

SKILLS DEVELOPMENT & EXPERIENCE: TECHNICIANS, SENIOR PROFESSIONAL AND

TECHNICAL AND MANAGERIAL.

For Kenya to develop a Technician, Senior Professional and Technical and Managerial workforce for Oil and Gas

there is a need for a proactive strategy within IOCs and O&GSPs to baseline, fast track and performance

manage candidates.

BASELINE

A baseline is a competency matrix for the job roles in oil and gas. It defines the qualifications, skills, behaviours

and industry accreditations and certifications required by the post holder to be considered an autonomous

employee i.e. one that requires minimal supervision.

The baseline is employed at recruitment and selection stages to identify the best candidate and for developing

a Training and Development Plan for the successful candidate to fill in the gaps.

FAST TRACK

For this the individual’s Training and Development Plan is critical. The candidate is assigned a Coach and for

more senior positions a Mentor. The Coach has a duty to ensure the new employee receives all the necessary

experience in a planned and structured way to ensure his or her professional/technical growth.

The experience programme is interspersed with scheduled training and industrial accreditation/certification

training and testing.

PERFORMANCE MANAGEMENT

New employees are regularly performance appraised by the Coach, Line Manager and Human Resources to

assure progress and commitment to the process from the new employee. These are gate reviews; passage

through them is never guaranteed.

Managers and Above

Senior Professional and Technical

Technicians

Clerical & Administrative

Skilled

Semi-Skilled

Unskilled

Increasing

requirements for

qualifications,

experience and

therefore time.

49 | P a g e

SKILLS DEVELOPMENT & EXPERIENCE: SEMI-SKILLED AND SKILLED

To develop Semi-Skilled and Skilled workforce strategies are required to upskill existing workforce and for

developing fresh graduates.

If a decision to act with regard to training & development waits until the Final Investment Decision (FID – refer

to Figure2) it will already be too late.

Both strategies must take into account and protect the schedule, quality and cost of the project.

UPSKILLING

It is possible to upskill workers that have experience but the costs of doing this must be understood and

agreed to be acceptable by all partners. Experienced workers once up-skilled will require a period of time in

the workplace to become accustomed to Oil and Gas methods of working. They will require more supervision

during this time and therefore more supervisors will be required.

NEW ENTRANT VOCATIONAL SKILLED LABOURFORCE

New Entrants will require induction and training very similar to the up-skilling programme above. They will

subsequently enter an apprenticeship programme which will require close supervision. Main contractors in the

Development Phase are accustomed to these types of programmes but it should be written into their contract

so that it can be properly priced and agreed by the partners. The targets set must be realistic and formulated

against the size of supervised work gangs to ensure none are overburdened with inexperienced personnel. An

efficient way to accomplish this is to make it part of the tender requirements for the Engineering and

Procurement Contractor (EPC) to submit a National Training and Development Plan for the Project.

LOCAL CONTENT REGULATIONS (DRAFT)

First Schedule is constructed around timescales and this is problematic because of the potential conflict

between Government ambitions for both a rapid Development Phase and for maximising local content. The

conflict, if it arises will place the JVP in a no win scenario; i.e. driven by deadlines that prevent achieving local

content targets (refer to Figure 1).

The targets for employment do not take into consideration the skills requirement in terms of standards, the

time needed for training, the subsequent need for quality work experience and the importance of experienced

supervision to control schedule, quality, productivity and EHS.

50 | P a g e

EMPLOYMENT OF NATIONALS IN ARTISAN, JUNIOR AND MIDDLE POSITIONS

Kenya has a large labour force many of whom are unemployed. The levels of skills in this labour force

are currently not to the standard required by Oil and Gas;

To train a new entrant into industry takes time; 18 months to artisan (min), 5 years to Foreman (min)

and 7 years to Supervisor (min);

The current training sector does not produce enough graduates to the quality required by Kenyan

Industry;

Industry does not have enough appropriately skilled workers that can be converted to Oil and Gas

without causing labour shortages in other sectors vital to the economy;

Would a skilled Kenyan artisan in a steady job give up that job to be in Oil and Gas for only a few

years?

Placing large numbers of partially skilled/freshly graduated nationals with little or no experience in

artisanal, middle and junior positions will compromise, quality, schedule and productivity and

exacerbate EHS challenges;

To manage a large apprenticeship/up skilled contingent among the workforce will skew the cost of

the supervision required to maintain quality, schedule, productivity and EHS standards.

TIMESCALES – FIRST SCHEDULE

The First Schedule refers to “Start, 5 Years and 10 Years” as target dates for achieving local content to specific

values for specific goods, services and employment of nationals.

Clarifications are required with regard to what is meant by “Start”. Additionally the Development Phase is

likely to be only four or five years in duration making the 10 Year target column redundant.

Considering the time it requires to train and develop employees into junior and middle positions there is

simply not enough time to meet the requirements of the Regulations. Any attempt to comply with the

Regulations on this front will require:

Upskilling Kenya nationals in large numbers and flooding the project with a freshly skilled but

inexperience workforce;

Employing many more experienced supervisors to maintain quality, productivity, schedule and EHS

thus increasing the project cost significantly.

CONSTRUCTION METHOD: DEVELOPMENT PHASE

Any requirement for a rapid Development Phase will dictate that much of the facilities will be manufactured

overseas and imported in order to meet project deadlines (refer to Figure 1). This means that large quantities

of goods, services and the labour force will be procured overseas. This will make achieving the targets

impossible unless they are referring to only the goods, services and skills available to in-country sources.

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