## _wp07213

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---

### Introduction and analytical approach
- Focus: local content promotion in the oil industry using São Tomé and Príncipe as a case study; emphasis on inter-sectoral linkages and institutional pre-conditions for local content promotion.
- Approach:
  - Uses an Input-Output (I-O) description of the economy to quantify consistency between prospective oil-sector development (impact on domestic absorption and exports) and growth of other sectors.
  - Identifies a universe of potential oil-sector activities based on public information from multiple countries (mainly Nigeria and Angola) and narrows these to activities realistic for São Tomé and Príncipe using economic criteria.
  - Viability of each activity gauged with a numerical scorecard system to assess acceptability and avoid distortions from rent-seeking.
- Policy objective:
  - Identify specific public inputs the government must provide to support a market-driven process rather than subsidizing “winners” via direct credit, subsidies, or tax incentives.
  - Emphasizes limited, judicious industrial policy to provide public inputs essential for self-discovery while protecting against public distortions.

### Conceptual framework and operational principles
- Relationship to literatures:
  - Resource curse and Dutch Disease literatures (Sachs and Warner, 2001; Auty, 1998).
  - Linkage theories (Auty, 2006) emphasize limited forward/backward linkages of extractive industries.
  - Industrial policy and self-discovery literatures (Rodrik, 2004; Hausmann and Rodrik, 2006) support selective government involvement for public inputs and coordination.
- Key conceptual points:
  - Extractive industries often have limited backward linkages and forward linkages; high shares of revenue and inputs flow abroad.
  - Market failures include lack of ex-ante price signals, uncertainty, information externalities, and coordination externalities.
  - Public inputs are often highly specific (e.g., targeted training, specialized regulation, coordination institutions).
- Three operational principles for targeting/promoting activities (drawn from Rodrik, 2004):
  1. Incentives should focus on activities that allow diversification by generating new areas of comparative advantage.
  2. Target activities (not whole sectors) to capture cross-cutting opportunities.
  3. Promoted activities should provide sufficient spillovers and demonstration effects.

### International experience: approaches and lessons
- Spectrum of approaches summarized:
  - Norway: proactive state intervention with state-owned company (Statoil) and Goods and Service Office (GSO).
  - United Kingdom: Offshore Supplies Office (OSO) model with monitoring, reporting, and auditing.
  - Australia: explicit “no local content policy” stance in early industry development; facilitator role (ISO).
  - Brazil: Petrobras-centric model with strict local content and technology transfer.
  - Malaysia: Petronas-led registration and local procurement requirements.
  - Nigeria and Angola: state oil companies (NNPC, Sonangol) central; foreign firms captured large shares absent robust institutional frameworks.
  - Trinidad and Tobago: proactive training and small-enterprise capacity building for gas industry.
- Good-practice policy elements:
  - Accountability: dedicated and independent authority to monitor local content (examples: OSO, GSO).
  - Adequate metric/definition: unambiguous definitions measuring employment, value added, and project expenditure impacts.
  - Efficiency considerations: calibrate targets to technical feasibility; recognize capacity constraints.
  - Information dissemination: registries of qualified vendors; advice on joint ventures; support for training and R&D.
  - Safeguards: transparency, benchmarks, sunset clauses, independent monitoring to limit state capture.
- Notable numeric policy targets referenced:
  - Nigeria: official goals reported of 45 percent local content by 2006 and 70 percent by 2010.
  - Nigeria upstream business value reported as US$2.8 billion (2002); indigenous companies captured about 8.3 percent of overall upstream expenditures in 2002 (from source table breakdown: 0.2, 0.5, 0.2, 1.9, 2.8 and percent distribution 8.3, 17.2, 8.1, 67.9, 100.0).

### São Tomé and Príncipe: initial conditions and I-O structure
- Country facts:
  - Small island country in the Gulf of Guinea about 400 kilometers west of Gabon.
  - Total population estimated about 160,000 inhabitants in 2005.
  - Per capita income about US$400.
  - Population distribution: São Tomé estimated 55,400; Príncipe about 7,000 permanent residents.
- Statistical context:
  - Limited statistical quality; authors constructed a stylized I–O representation by combining a sources-and-uses national accounts table for 2001 with technical coefficients from other developing economies.
- I-O activities (standard ISIC classification, ten activities):
  - Agriculture, forestry, and fishing; Mining; Manufacturing; Energy and water; Construction; Transport; Commerce and services (includes hotels and restaurants); Public administration; Education and health; Other services.
- Two central I-O assumptions:
  - A single technique of production for each product/economic activity.
  - A linear fixed-coefficient production function.

### Stylized I-O findings and inter-sectoral linkages
- Sectoral linkage ranks and technical coefficients (selected):
  - Manufacturing: backward linkage 0.91; strong forward linkages to construction, agricultural, services.
  - Commerce and services (mainly hotels and restaurants): backward linkage 0.819.
  - Agriculture (including forestry and fishery): backward linkage 0.26; limited imported input requirements; top contributor in value added.
  - Construction and transport: important in value added but small backward linkages (0.26 average).
  - Public administration: large role in value added and inter-sectoral linkages; Leontief inverse implies 1 dobra increase in public administration final demand leads to a 1.97 dobra aggregate output increase.
  - Mining (including oil): weak linkage; Leontief inverse implies 1 dobra increase in mining final demand leads to only 1.2 dobra increase in aggregate output.
- Manufacturing–agriculture technical coefficients:
  - Manufacturing uses agricultural inputs with coefficient 0.042 per unit of gross output.
  - Agriculture uses manufacturing inputs with coefficient 0.031.

### Joint Development Zone (JDZ) assumptions and institutional framework
- Territorial and treaty facts:
  - Area in dispute: 34,548 square kilometers.
  - February 2001 treaty between Nigeria and São Tomé and Príncipe created the JDZ.
  - Joint exploitation period: 45 years, review in the thirtieth year; benefits allocation: Nigeria 60 percent; São Tomé and Príncipe 40 percent.
  - Governance: Joint Development Authority (JDA) based in Abuja; Joint Ministerial Council (JMC) is ultimate decision body; decisions by consensus.
- Conservative oil discovery projection used in analysis:
  - Discovery of only one commercially-exploitable block in the JDZ (out of five auctioned).
  - Reserves: 500 million equivalent barrels of oil.
  - Average production: 70,000 barrels per day.
  - Production start: around 2012.
  - Production lifespan: 20 years with peak in the third year and gradual decline.
  - Oil price assumption: US$30 per barrel, constant 2006 U.S. dollars.
- Macroeconomic implications under these assumptions:
  - Share of oil–to–total GDP above 80 percent during peak years of production.
  - Share of oil–to–total GDP above 50 percent on average during the twenty–year production period, assuming non–oil GDP growth rates of around 7 percent per year and constant US dollar government spending in perpetuity.
  - Spending rule context: application of Friedman’s permanent income hypothesis (PIH) type spending rule contained in the Oil Revenue Management Law (ORML), at a level equivalent to 130 percent of 2006 GDP.

### Medium-term shock calibration and final-demand growth assumptions
- Discovery assumption repeated: 500 million equivalent barrels; São Tomé and Príncipe share: 40 percent.
- Shock calibration:
  - Shock year calibrated at around the year 2021.
  - Oil production in 2021 (representative midlife year) assumed at 70,000 barrels per day.
  - Well lifespan assumed at 20 years, starting in 2012.
- Behavioral and policy assumptions:
  - Concurrent increases in oil exports and domestic investment.
  - Public consumption and non-oil exports lag growth of other final demand components.
  - Permanent Income Hypothesis (PIH) spending rule applied; Permanent Fund accumulation.
  - Conservative non-oil export growth to reflect mild Dutch Disease effects.
- Final demand average growth rates (Shock, 2001-2021, in percent):
  - Private consumption: 7.1
  - Public consumption: 6.5
  - Investment: 8.7
  - Exports: 18.5
    - Of which: non-oil: 6.6
  - Total final demand: 10.7

### Quantitative I-O projections (2001 to 2021, in billions of 2001 dobras; average growth rates)
- Table 9: Actual and Forecasted Sectoral Output, 2001-2021 (values: 2001 -> 2021 ; average growth rate)
  - Agriculture, forestry & fishing: 261,586 -> 568,370 ; 4.0
  - Oil and Mining: 7,035 -> 3,944,723 ; 37.2
  - Manufacturing: 578,506 -> 2,420,181 ; 7.4
  - Energy & water: 43,703 -> 383,038 ; 11.5
  - Construction: 226,708 -> 1,507,935 ; 9.9
  - Commerce & Services: 111,894 -> 674,396 ; 9.4
  - Transport & Communication: 251,736 -> 1,166,920 ; 8.0
  - Public administration: 113,602 -> 413,930 ; 6.7
  - Education & health: 21,132 -> 114,434 ; 8.8
  - Other services: 45,405 -> 183,181 ; 7.2
  - Economy's total output: 1,661,305 -> 11,377,109 ; 10.1
- Table 10: Sectoral shares (percent of total output) — 2001, With Oil (2021), Without oil (2021 rescaled)
  - Agriculture, forestry & fishing: 15.7 / 5.0 / 7.6
  - Oil and mining: 0.4 / 34.7 / ...
  - Manufacturing: 34.8 / 21.3 / 32.6
  - Energy & water: 2.6 / 3.4 / 5.2
  - Construction: 13.6 / 13.3 / 20.3
  - Commerce & services: 6.7 / 5.9 / 9.1
  - Transport & communication: 15.2 / 10.3 / 15.7
  - Public administration: 6.8 / 3.6 / 5.6
  - Education & health: 1.3 / 1.0 / 1.5
  - Other services: 2.7 / 1.6 / 2.5
  - TOTAL: 100.0 / 100.0 / 100.0
  - Notes: 1/ Total output includes imports of goods and services. 2/ Rescaled to exclude oil and mining sector for comparison purposes with pre-oil era. 3/ Figure for 2001 includes commodity imports equivalent to 16 percent of total output.
- Key quantitative findings:
  - By 2021, output from oil and mining alone (constant 2001 dobras) would be more than twice the output of all sectors of the economy in 2001.
  - During peak years of oil production (2014-15), the relative size of the oil economy would be even higher.
  - Electricity and water would double their share in total output (2.6 to 5.2 percent excluding oil).
  - Construction would increase its output share by almost half (13.6 to 20.3 percent excluding oil).
  - Agriculture’s share would be broadly halved, from 15.7 percent in 2001 to 7.6 percent (excluding oil) in 2021.
  - Manufacturing’s share would marginally decrease from 34.8 to 32.6 percent (excluding oil), implying average annual growth rate of 7.4 percent during 2001-21.

### Local content candidate activities and scorecard methodology
- Assessment framework:
  - Universe of activities defined using UN ISIC classification across primary, secondary, and tertiary sectors.
  - Viability evaluated with a scorecard using seven economic criteria; individual activities scored -1, 0, or 1 per criterion.
  - Cumulative score interpretation:
    - -6 to -3: very strong reasons not to establish the activity.
    - -2 to +1: substantial risks; may be established after infrastructure/institutional improvements.
    - >= +2: substantial development potential.
- Seven rating criteria:
  - Capital/output ratio.
  - Production scale.
  - Know-how technology intensity.
  - Skilled labor intensity.
  - Location constraints.
  - Physical infrastructure requirements.
  - Legal and other institutional requirements.
- Promising candidate activities (about one-third of 13 activities assessed; selected items):
  - Building and maintenance of equipment for storage and distribution of oil and derivates.
  - Data processing and storing of seismic data.
  - Air transportation services related to the oil industry.
  - Technical/professional development of staff (training).
  - Sectoral logistical support (including provision of financial intermediation services and procurement).
- Selected scorecard numeric entries (excerpted):
  - Pesquisa & Producao (Oil Exploration and Development): total score -5.
  - Sonamer (Deep-water drilling activities): total score -5.
  - Petromar (Building and Maintenance of equipment for production, storage, and distribution of oil & derivates): total score -6.
  - Sonasurf (Supply of sea vessels to oil industry): total score -3.
  - Sonangol Shipping (Oil shipping): total score -3.
  - Sonangol Distribuidora (Distribution of crude oil & gas): total score -5.
  - Refineria da Luanda (Oil Refining): total score -3.
  - Sonamet (Production of structures for oil industry): total score -6.
  - TECHNIP Angola (Engineering services for oil enterprises): total score -1.
  - Sonair (Airline Services SA — charter planes): total score 2.
  - ESSA (Professional development & training of staff): total score 4.

### I-O table construction and key raw data figures (2001, in million dobras, 2001 producer’s prices)
- Supply-and-uses basis: raw supply and uses table for 2001 used to construct I-O table; multiple external technical coefficient sources used (Mauritius, Fiji, Israel 1958).
- Selected I-O row totals and final demand fragments (as presented):
  - Agriculture, forestry & fishing: TOTAL INTERMEDIATE OUTPUT 44,299; Private Consumption Expenditure 186,291; Gross Fixed Capital Formation 8,067; Changes in Inventories 22,928; Exports 217,286; TOTAL OUTPUT 261,585
  - Mining: TOTAL OUTPUT 7,035
  - Manufacturing: TOTAL INTERMEDIATE OUTPUT 147,818; Private Consumption Expenditure 412,125; Gross Fixed Capital Formation 64,882; Changes in Inventories -47,278; Exports 957; TOTAL OUTPUT 578,504
  - Energy & water: TOTAL INTERMEDIATE OUTPUT 23,003; Private Consumption Expenditure 20,700; TOTAL OUTPUT 43,703
  - Construction: TOTAL INTERMEDIATE OUTPUT 40,053; Gross Fixed Capital Formation 186,656; TOTAL OUTPUT 226,709
  - Commerce & Services: TOTAL INTERMEDIATE OUTPUT 70,100; Private Consumption Expenditure 17,553; Exports 24,242; TOTAL OUTPUT 111,894
  - Transport & Communication: TOTAL INTERMEDIATE OUTPUT 188,332; Private Consumption Expenditure 27,465; Exports 35,937; TOTAL OUTPUT 251,734
  - Public administration: TOTAL INTERMEDIATE OUTPUT 24,741; Government Consumption Expenditure 84,352; Exports 4,509; TOTAL OUTPUT 113,601
  - Education & health: TOTAL INTERMEDIATE OUTPUT 11,016; Private Consumption Expenditure 10,115; TOTAL OUTPUT 21,131
  - Other services: TOTAL INTERMEDIATE OUTPUT 11,839; Private Consumption Expenditure 26,939; Gross Fixed Capital Formation 6,620; Changes in Inventories 8; TOTAL OUTPUT 45,406
  - TOTAL SUPPLY (presented aggregation): 261,586; 7,035; 578,506; 43,703; 226,708; 111,894; 251,736; 113,602; 21,132; 45,405; -1,192; 1,660,113
- Aggregate production and supply figures (as presented):
  - Domestic Production sequence (partial): 63,250; 863; 211,158; 11,680; 64,583; 81,422; 43,057; 67,655; 4,717; 19,091; 0; 567,476; 651,662; 90,972; 251,538; -38,443; 136,907; 1,092,636; 1,660,112
  - Gross value added (presented): 193,118; 3,465; 51,595; 32,023; 162,125; 20,279; 189,685; 21,205; 14,583; 26,302; 0; 714,381
  - Import of goods & Services (presented): 5,136; 2,707; 271,027; 0; 0; 10,192; 18,994; 24,741; 1,832; 11; -1,192; 333,448
  - Taxes on Products (presented): 82; 0; 44,726; 0; 0; 0; 0; 0; 0; 0; 0; 44,808

### Policy implications and priority recommendations
- Overarching policy challenge:
  - Ensure complementarities between oil and non-oil economy materialize to maximize local benefits and avoid patronage capture of oil rents.
- Core policy principles to adopt:
  - Transparent rules for monitoring a narrowly defined local content concept.
  - Provision of market information through designated and professional government bodies (e.g., registries, outreach) about investment opportunities and spin-offs.
  - Monitoring of employment and value added gains, and project expenditure impacts (including tax payments) as proxies for local content at different project stages.
  - Combine targeted public inputs (training, regulation, coordination institutions) with safeguards: benchmarks, sunset clauses, independent monitoring.
- Priority areas where São Tomé and Príncipe may realistically develop oil-related activities:
  - Building and maintenance of equipment for storage and distribution of oil and derivates.
  - Data processing and storing of seismic data.
  - Air transportation services related to the oil industry.
  - Technical/professional development of staff.
  - Sectoral logistical support (including provision of financial intermediation services and procurement).
- Institutional steps recommended:
  - Strengthen the National Petroleum Agency (ANP) to become a center of technical excellence.
  - Integrate local content objectives into JDA and JMC deliberations; ensure Sãotomean representatives actively influence JDZ spending decisions.
  - Establish registries of local firms, designate JDA officers for monitoring local content, and coordinate with international oil companies to avoid predatory pricing and “gold plating.”

*Source: _wp07213 - excerpted content unit provided in the supplied PDF.*

### Appendix I. Development of an Input-Output Table for São Tomé and Príncipe...................37

### Appendix I. Development of an Input-Output Table for São Tomé and Príncipe

### Appendix structure and neighboring appendices
- Appendix I. Development of an Input-Output Table for São Tomé and Príncipe...................37
- Appendix II. Local Content Policies in Selected Countries ....................................................41
  - A. The United Kingdom ..............................................................................................41
  - B. Norwegian Continental Shelf ..................................................................................42
  - C. Denmark ..................................................................................................................43
  - D. Australia ..................................................................................................................43
  - E. Brazil .......................................................................................................................44
  - F. Malaysia...................................................................................................................44
  - G. Nigeria.....................................................................................................................45
  - H. Angola .....................................................................................................................46
  - I. Trinidad and Tobago ................................................................................................46
- Appendix III. Scorecard for Oil Sector Development............................................48

### Figures listed in the source
- 1.         Governance         Indicators,         2004 .........................................................................................6         

### Tables listed in the source (selected references appearing in the document)
- 1.  Oil and Gas Industry Suppliers by Country.......................................................10
- 2.  Nigeria: Allocation of major Contracts in Oil and Gas Industry (2002).................. ...11
- 3.  Intersectoral Linkages and their Ranking.........................................................16
- 4.  Input-Output Technical Coefficients...............................................................16
- 5.  Universe of Oil and Gas Activities................................................................ 21
- 6.  Criteria Applied for Rating of Technologies...................................................... 22
- 7.  Angola: Employment by Nationality and Profession in Oil Sector, 2002........................23
- 8.  Composition of Final Demand......................................................................27
- 9.  Actual and Forecasted Sectoral Output, 2001-2021.............................................28
- 10. Actual and Forecasted Sectoral Output, 2001-2021.............................................29

### Boxes listed in the source
- 1. Policies to Foster Local Content: International Comparison at a Glance............... 13
- 2. Joint Development Zone: Institutional Framework and Oil Extraction Potential......17
- 3. Medium-Term Projections—Basic Assumptions..........................................27

### Appendix II table referenced
- 1.  Total Intersectoral Flows, São Tomé and Príncipe, 2001.......................................40

*Source: Appendix I. Development of an Input-Output Table for São Tomé and Príncipe, from the supplied PDF content unit.*

### 1.  Scorecard on Universe of Oil and Gas Activities................................................48

### 1.  Scorecard on Universe of Oil and Gas Activities

### Introduction
- Focus: local content promotion in the oil industry using São Tomé and Príncipe as a case study; emphasis on inter-sectoral linkages and institutional pre-conditions for local content promotion.
- Approach:
  - Uses an Input-Output (I-O) description of the economy to quantify consistency between prospective oil-sector development (impact on domestic absorption and exports) and growth of other sectors.
  - Assesses sectoral policies and “niche” activities within the oil industry that could maximize local benefits from oil exploration.
  - Identifies a universe of potential oil-sector activities based on public information from multiple countries (mainly Nigeria and Angola) and narrows these to activities realistic for São Tomé and Príncipe using economic criteria.
  - Viability of each activity is gauged with a numerical scorecard system to assess acceptability and avoid distortions from rent-seeking examples elsewhere.
- Objective of policy emphasis:
  - Not to pick “winners” or subsidize them through direct credit, subsidies, or tax incentives, but to identify specific public inputs the government must provide to support a market-driven process.
  - Aligns with arguments that governments should engage in limited, judicious industrial policy to provide public inputs essential for self-discovery while protecting against public distortions.

### Related literature and conceptual framework
- Relationship to existing literatures:
  - Resource curse and Dutch Disease literatures (Sachs and Warner, 2001; Auty, 1998) focus on macroeconomic and institutional frictions that can hamper long-term development.
  - Linkage theories (Auty, 2006) emphasize limited forward/backward linkages of extractive industries.
  - Industrial policy and self-discovery literatures (Rodrik, 2004; Hausmann and Rodrik, 2006) support selective government involvement to provide specific public inputs and to manage coordination/information externalities.
- Key conceptual points:
  - Extractive industries often show limited backward linkages because a high share of mining revenue flows abroad to service foreign capital and inputs are largely imported; forward linkages are rare since processing/marketing often occur near final markets.
  - Emergence of new productive activities is hampered by lack of ex-ante price signals, uncertainty, information externalities, and coordination externalities among private agents.
  - Public inputs to production are often highly specific (e.g., targeted training, specialized regulation, coordination institutions) and require careful, delimited government involvement with institutional checks to avoid state capture.
- Three operational principles for targeting/promoting activities (drawn from Rodrik, 2004):
  1. Incentives should focus on activities that allow diversification by generating new areas of comparative advantage.
  2. Target activities (not whole sectors) to capture cross-cutting opportunities.
  3. Promoted activities should provide sufficient spillovers and demonstration effects.
- Paper tasks:
  - Review international practices for local content promotion in oil.
  - Use I-O analysis to (i) quantify inter-sectoral linkages, (ii) identify activities with potential based on ranking criteria, and (iii) project the impact of oil-sector growth on the rest of the economy.
  - Assess complementarities between oil and non-oil sectors and evaluate whether local content protection can support diversification.

### Oil-producing countries and the debate on local content
- Oil-sector structural trends:
  - Since the early-1990s the industry moved into deeper offshore waters and unconventional fields, requiring sophisticated technologies and a highly-skilled labor force, coinciding with consolidation into a smaller group of integrated multinational firms.
  - Offshore oil and gas supply and service industry includes many multinational firms; the US is identified as the world’s leading supplier with many headquarters in Texas and Louisiana.
- Empirical evidence on supplier geography (Table 1 summary as presented):
  - Total6061 100.0 (aggregate across listed country/region breakdown in the source table).
- Nigeria upstream contracting and local capture:
  - Nigeria’s upstream business value reported as US$2.8 billion (2002).
  - Indigenous companies (with substantial value added in Nigeria) captured about 8.3 percent of overall upstream expenditures in 2002.
  - Contract distribution patterns (number of contracts and categories shown in the source) indicate indigenous firms entering consultancy, environmental services, hotel and catering, ICT, procurement, and maintenance, but core high-value activities remain largely foreign-captured.
- International policy approaches to foster local content:
  - Spectrum of approaches:
    - Norway: proactive state intervention leveraging initial conditions with state-owned company (Statoil) and a strong institutional apparatus (Goods and Service Office, GSO).
    - United Kingdom: 1970s Offshore Supplies Office (OSO) model with monitoring, reporting, and auditing procedures.
    - Australia: early-stage stance of “no local content policy” explicitly stated in regulations in industry’s early development years.
    - Brazil: Petrobras as a large state-run enterprise with strict local content policies and pro-active technology transfer.
    - Malaysia: Petronas with state-run presence and local content monitoring.
    - Nigeria and Angola: state oil companies (Nigeria’s NNPC, Angola’s Sonangol) play central roles; experience shows foreign firms capture large shares absent robust institutional frameworks.
    - Trinidad and Tobago: proactive engagement in worker training, small-enterprise capacity building, and technology development to support gas industry positioning.
- Policy considerations and good-practice elements for local content promotion (as synthesized from international experience):
  - Accountability: Creation of a dedicated and independent government authority to monitor local content (examples: OSO, GSO) with qualified accounting personnel and industry knowledge.
  - Adequate metric/definition: Develop unambiguous definitions of local content; monitor employment, value added gains, and project expenditure impacts (including tax payments) across project phases.
  - Efficiency considerations: Assess technical/capacity constraints; recognize areas beyond local technical reach at given times; calibrate targets to technological feasibility.
  - Information dissemination: Establish public outreach and analysis functions to (i) develop registries of qualified local vendors, (ii) advise locals on joint ventures and cooperation with foreign firms, and (iii) support local capacity building, training, and R&D.
  - Acknowledgement of spin-off benefits: Monitor and publicize complementarities and spillovers between oil and non-oil sectors (examples: fertilizer production from oil inputs; hospitality sector linkages such as hotels and entertainment).
- Notable numeric policy targets and measures referenced:
  - Nigeria: an official goal reported of 45 percent local content by 2006 and 70 percent by 2010 (as cited in the source).
  - Contracting memo (Nigeria, 2002): Dollar value of contracts (in billion dollars) listed in source table as 0.2, 0.5, 0.2, 1.9, 2.8 with percent distribution shown as 8.3, 17.2, 8.1, 67.9, 100.0 (source table labels and breakdown as provided).
- Institutional architecture guidance:
  - Emphasize coordination/deliberation councils for information exchange and social learning.
  - Implement transparency and accountability mechanisms to limit state capture and rent-seeking.
  - Combine targeted public inputs with safeguards (benchmarks, sunset clauses, independent monitoring) to enable self-discovery while minimizing distortion risks.

*Italic line: Source: _wp07213 - 1.  Scorecard on Universe of Oil and Gas Activities (excerpt) from the provided PDF content.*

### Box 1. Policies to Foster Local Content: International Comparison at a Glance

### Box 1. Policies to Foster Local Content: International Comparison at a Glance

### São Tomé and Príncipe: initial conditions and overview
- São Tomé and Príncipe is a small island country in the Gulf of Guinea about 400 kilometers west of Gabon.
- Total population is estimated at about 160,000 inhabitants in 2005.
- Per capita income is about US$400.
- Population distribution:
  - Capital, São Tomé: estimated population of 55,400.
  - Príncipe: about 7,000 permanent residents.
- Statistical information on the country’s sectoral structure is limited in quality and quantity; authors constructed a stylized Input–Output (I–O) representation by combining a sources-and-uses national accounts table for 2001 with technical coefficients from other developing economies.

### Stylized Input–Output findings and inter-sectoral linkages
- Manufacturing:
  - Ranks first among economic sectors in terms of backward and forward linkages.
  - Estimated backward linkage: 0.91 (the sector’s (domestic and imported) input requirement per unit of output is the highest in the economy).
  - Manufacturings supplies significantly to construction, agricultural, and services sectors (strong forward linkages).
- Agriculture (including forestry and fishery):
  - Backward linkage: 0.26, with insignificant imported input requirements.
  - Top contributor in terms of value added to the economy.
  - Institutional arrangements (self financing of seeding and harvesting of small plots; almost nonexistent taxes on agricultural products) imply most agricultural output represents value added and goes to satisfy final demand (consumption, change in inventories, and exports).
- Commerce and services (mainly hotels and restaurants):
  - Backward linkage: 0.819, suggesting growth in this sector generates significant intermediate input demand for the economy.
- Construction and transport:
  - Important contributors in terms of value added, but record rather small backward linkages (0.26, on average), reflecting intermediate input demand from manufacturing.
- Manufacturing–agriculture technical links:
  - Manufacturing uses agricultural inputs with an input coefficient of 0.042 per unit of gross output.
  - Agriculture uses manufacturing inputs with a technical coefficient of 0.031.
  - Interpretation: manufacturing is as much dependent on agriculture as agriculture is on manufacturing; farm products sold to manufacturing include mainly cacao for fermentation, drying and exporting. Agriculture uses substantial transport inputs to deliver output to processing centers clustered in manufacturing.
- Public administration (including education and health):
  - Plays an important role in terms of value added and inter-sectoral linkages (Leontief inverse matrix).
  - Much of public administration’s value added is wages and salaries paid to public employees in defense, public health and education services, and other social and recreational affairs and services undertaken by government.
  - After commerce and services, public administration has the largest estimated inter-sectoral linkage.
  - The inverted Leontief matrix shows that 1 dobra increase of final demand by the public administration (public consumption and/or public investment) leads to a 1.97 dobra increase in aggregate output of the economy, given the estimated I–O technical coefficients.
- Mining (including oil sector):
  - Has neither important value added contributions to the economy nor a significantly large inter-sectoral linkage effect.
  - The inverted Leontief matrix shows that 1 dobra increase in mining sector final demand leads to only 1.2 dobra increase in aggregate output of the economy.
  - This indicates a challenge for authorities to better integrate mining with the rest of the local economy.
- I–O identity and solution used in analysis (as presented by authors):
  - (I – A) X = Y, where X is the proposed vector of gross output figures, A is the Leontief matrix of technical coefficients, I is the identity matrix, and Y is the vector of final demand.
  - When assessing the vector of gross outputs required to produce a proposed vector of final outputs, the formula is rewritten as X = (I-A)^{-1} Y.

### Local content debate and policy implications for the oil sector
- Central issue: translating international debate on punctuated and judicious industrial policies—including local content promotion in oil—into São Tomé and Príncipe’s reality, given the country’s sectoral structure.
- Stakes:
  - Given the small size of the Sãotomean economy, a small fraction of overall business in the Joint Development Zone (JDZ) could have a big impact on the islands’ economy.
- Priorities identified for policymakers:
  - Increased local content needs to go hand-in-hand with increasing the efficiency of spending within the sector and the economy in general.
  - Local content policy should be used to integrate the Joint Development Authority’s (JDA’s) budget with the local economy.
  - Rigorous cost–benefit analysis is required to maximize rent channeling through market efficiency considerations and to minimize rent flows through patronage channels.
  - Sãotomean representatives should take a proactive stance at the JDZ’s Joint Ministerial Council to influence spending decisions within the joint exploration area.
  - The newly-established National Petroleum Agency (ANP) needs to develop into a center of technical excellence to advise the government on oil sector exploration and development policies.
  - Formulation of the legal framework underpinning local content policy and establishment of public bodies accountable for implementation are tasks ahead.

*Source: I-O Table devised by the authors, Box 1 content from the provided PDF excerpt.*

### Box 2. Joint Development Zone (JDZ) : Institutional Framework and Oil Extraction Potential

### Box 2. Joint Development Zone (JDZ) : Institutional Framework and Oil Extraction Potential

### JDZ legal and institutional framework
- São Tomé and Príncipe filed a territorial claim in 1998 to establish an Exclusive Economic Zone (EEZ) based on the median line principle under UNCLOS; Nigeria contested the claim.  
- Area in dispute: 34,548 square kilometers.  
- February 2001 treaty between Nigeria and São Tomé and Príncipe for joint development of petroleum and other resources in the disputed maritime areas, creating the Joint Development Zone (JDZ).  
- Treaty features:
  - Joint exploitation of natural resources for a period of 45 years, unless otherwise agreed after a review in the thirtieth year.  
  - The treaty can be extended by mutual agreement after the initial term.  
  - Allocation of benefits and obligations: Nigeria 60 percent; São Tomé and Príncipe 40 percent.  
- Governance:
  - Joint Development Authority (JDA), based in Abuja, manages exploitation in the JDZ.  
  - Joint Ministerial Council (JMC) composed of two to four ministers or equivalent from each country is the ultimate decision-making body.  
  - JDA and JMC decisions by consensus; JMC deadlocks referred to the heads of state.

### Oil extraction potential assumptions and macroeconomic implications
- Exploration status at time of drafting: drilling in Obo-1 well (Block 1) ongoing; no commercial findings yet; estimates subject to substantial uncertainty and margin of error.  
- Conservative oil discovery assumption used in projections:
  - Discovery of only one commercially-exploitable block in the JDZ (out of five blocks already auctioned).  
  - Reserves: 500 million equivalent barrels of oil.  
  - Average production: 70,000 barrels per day.  
  - Production start: around 2012.  
  - Production lifespan: 20 year lifespan of the well, with a deep-seawater production profile peaking in the third year and gradually declining thereafter.  
  - Oil price assumption: US$30 per barrel, in constant 2006 U.S. dollars.  
- Macroeconomic impact estimates under these assumptions:
  - Share of oil–to–total GDP above 80 percent during peak years of production.  
  - Share of oil–to–total GDP above 50 percent on average during the twenty–year production period, assuming non–oil GDP growth rates of around 7 percent per year and constant US dollar government spending in perpetuity.  
  - Spending rule context: application of Friedman’s permanent income hypothesis (PIH) type spending rule contained in the Oil Revenue Management Law (ORML), at a level equivalent to 130 percent of 2006 GDP.

### Local content policy and implementation steps
- Government intention (JDZ and EEZ context) to address local content development with regard to best principles.  
- JDZ draft local content policy targets inclusion of local content clauses in bid submissions and Production Sharing Contracts.  
- Ongoing implementation steps include:
  - Designation of JDA dedicated officers for monitoring local content implementation (accountability principle).  
  - Establishing a register of all local indigenous companies to benefit from the local content program (information dissemination principle).  
  - Policies to avoid predatory pricing by international oil companies and “gold plating” (adequate metric/definition principle).  
  - JDA coordination with international oil companies to ensure long-term cooperation and active participation in local content activities (efficiency considerations principle).  
  - Emphasis on maximizing complementarities between oil and non-oil economies in Nigeria and São Tomé and Príncipe (spin-off benefits principle).

### National Oil Company (NOC) — considerations
- Potential benefits of establishing a NOC:
  - State participation in the sector and influence in commercialization.  
  - State access to know-how of oil sector operations.  
  - Possible across-the-board participation by national companies and enhanced emphasis on value-added spillovers.  
- Potential limitations and risks of a NOC:
  - State’s limited ability to handle risks in an industry with important price fluctuations.  
  - Tight budget constraint to finance competing investments in oil and non-oil sectors.  
  - Low productivity/efficiency and high operating costs, especially in early years.  
  - Delays in accrual of oil tax revenues while NOC is developed.  
  - International evidence that many NOCs are run poorly from a financial and economic point of view.

### Local content candidate activities and assessment methodology
- Assessment framework:
  - Universe of activities defined using UN ISIC classification across primary, secondary, and tertiary sectors.  
  - Viability of activities evaluated with a scorecard system using seven economic criteria; individual activities scored -1, 0, or 1 per criterion; cumulative scores interpreted as:
    - -6 to -3: very strong reasons not to establish the activity.  
    - -2 to +1: substantial risks; may be established after infrastructure/institutional improvements.  
    - >= +2: substantial development potential.  
- Seven criteria applied for rating technologies:
  - Capital/output ratio.  
  - Production scale.  
  - Know-how technology intensity.  
  - Skilled labor intensity.  
  - Location constraints.  
  - Physical infrastructure requirements.  
  - Legal and other institutional requirements.

- Promising areas for local content development identified (about one-third of 13 activities assessed):
  - Building and maintenance of equipment for storage and distribution of oil and derivates.  
  - Data processing and storing of seismic data.  
  - Air transportation services related to the oil industry.  
  - Technical/professional development of staff (training).  
  - Sectoral logistical support (including provision of financial intermediation services and procurement).

### Evidence and sectoral complementarities with the non-oil economy
- International and regional evidence:
  - Angola and Nigeria firms operate across the oil value chain; Nigerian competence could be critical given participation of Nigerian firms in consortia for Blocks 2-4.  
  - Angola employment in oil sector (Table 7, Angola: Employment by Nationality & Profession in Oil Sector, 2002) — Grant Total figures:
    - Grant Total: 11126, 2507, 1924, 220.  
- Potential complementarities and spillovers:
  - Tourism: oil-related demand (housing, services for foreign workers) can help tourism reach critical thresholds; requires preservation of natural assets, environmental protection, transport, health, sanitation, governance, and skills.  
  - International trans-shipment and entrepôt services: geographic advantage (within two hours flight from 12 countries in West Africa); potential to develop from warehousing to processing, quality control, customs, and logistics services.  
  - Agriculture and fisheries: oil-driven demand linkages and revenues could support consolidation into larger-scale agri-business, diversification of artisan fisheries toward tourism services, and food processing (e.g., artisan chocolate).  
  - Training, financial intermediation, and procurement: setting up training facilities and financial services could spread know-how and support local suppliers for offshore rigs.

### Analytical approach to economy-wide impacts
- I-O forecast methodology (section VI):
  - Step 1: Project medium-term growth of real GDP and components of final demand (private/public consumption, investment, oil and non-oil exports) using medium-term macro projections about timing and magnitude of the prospective oil shock.  
  - Step 2: Multiply projected final demand by the inverse Leontief matrix to derive sectoral output consistent with macro projections: X = (I-A)^{-1} Y.  
- Limitations acknowledged:
  - Use of a constant-parameter model and linearly evolving technology space is an imperfect projection method given expected structural change, but considered a valid first approximation to identify potential bottlenecks and policy priorities.  
- Results (described qualitatively in the source) indicate sizable projected growth in total output stemming from increased oil exports and investment in secondary and tertiary sectors consistent with industry linkages implied by the I-O analysis.

*Source: _wp07213 - Box 2. Joint Development Zone (JDZ) : Institutional Framework and Oil Extraction Potential*

### Section IV. Our projections show that sectors such as energy and water, construction,

### _wp07213 - Section IV. Our projections show that sectors such as energy and water, construction,

### Medium-term assumptions and calibration
- Discovery assumption: only one commercially-exploitable block in the JDZ, with 500 million equivalent barrels of oil in reserves.
- Revenue sharing: 40 percent of total receipts would accrue to São Tomé and Príncipe in line with the JDZ agreement with Nigeria.
- Timing and calibration:
  - Shock year calibrated at around the year 2021.
  - Oil production in 2021 (representative midlife year) assumed at 70,000 barrels per day.
  - Well lifespan assumed at 20 years, starting in 2012.
  - Note: if the shock is assessed earlier than 2021, the impact of the oil export boom would be considerably larger (due to larger oil production and smaller non-oil economy).
- Behavioral assumptions:
  - Concurrent increases in oil exports and domestic investment.
  - Public consumption and non-oil exports are assumed to lag growth of other final demand components.
  - Permanent Income Hypothesis (PIH) spending rule applied to government use of oil proceeds; resources accumulated in a Permanent Fund for Future Generations.
  - Conservative non-oil export growth assumption to reflect mild Dutch Disease effects.

### Production profile and final-demand calibration
- Final demand average growth rates (Shock, 2001-2021, in percent):
  - Private consumption: 7.1
  - Public consumption: 6.5
  - Investment: 8.7
  - Exports: 18.5
    - Of which: non-oil: 6.6
  - Total final demand: 10.7

- Sectoral composition shift:
  - Increased share in total expenditure by secondary and tertiary sectors (away from agriculture, forestry and fishing) as the economy reaches a higher stage of development.
  - Secondary sectors with current infrastructure gaps (energy and water, construction) and some service sectors (commerce and services, education and health) would need very high growth rates to be consistent with projected final demand.
  - Primary sectors (agriculture, forestry and fishing) with lower inter-sectoral linkages would lag.

### Quantitative sectoral output projections (2001 to 2021, in billions of 2001 dobras; average growth rates)
- Table 9: Actual and Forecasted Sectoral Output, 2001-2021
  - Agriculture, forestry & fishing: 261,586 -> 568,370 ; 4.0
  - Oil and Mining: 7,035 -> 3,944,723 ; 37.2
  - Manufacturing: 578,506 -> 2,420,181 ; 7.4
  - Energy & water: 43,703 -> 383,038 ; 11.5
  - Construction: 226,708 -> 1,507,935 ; 9.9
  - Commerce & Services: 111,894 -> 674,396 ; 9.4
  - Transport & Communication: 251,736 -> 1,166,920 ; 8.0
  - Public administration: 113,602 -> 413,930 ; 6.7
  - Education & health: 21,132 -> 114,434 ; 8.8
  - Other services: 45,405 -> 183,181 ; 7.2
  - Economy's total output: 1,661,305 -> 11,377,109 ; 10.1

### Sectoral shares (percent of total output) — 2001, With Oil (2021), Without oil (2021 rescaled)
- Table 10: Actual and Forecasted Sectoral Output, 2001-2021 (In percent of total output)
  - Agriculture, forestry & fishing: 15.7 / 5.0 / 7.6
  - Oil and mining: 0.4 / 34.7 / ...
  - Manufacturing: 34.8 / 21.3 / 32.6
  - Energy & water: 2.6 / 3.4 / 5.2
  - Construction: 13.6 / 13.3 / 20.3
  - Commerce & services: 6.7 / 5.9 / 9.1
  - Transport & communication: 15.2 / 10.3 / 15.7
  - Public administration: 6.8 / 3.6 / 5.6
  - Education & health: 1.3 / 1.0 / 1.5
  - Other services: 2.7 / 1.6 / 2.5
  - TOTAL: 100.0 / 100.0 / 100.0
  - 1/ Total output includes imports of goods and services.
  - 2/ Rescaled to exclude oil and mining sector for comparison purposes with pre-oil era.
  - 3/ Figure for 2001 includes commodity imports equivalent to 16 percent of total output.

### Main findings from the I-O projections
- By 2021, output from oil and mining alone (at constant 2001 dobras) would be more than twice the output of all sectors of the economy in 2001.
- During peak years of oil production (2014-15), the relative size of the oil economy would be even higher.
- The oil and mining sector becomes the predominant sector; other secondary (energy and water, construction) and tertiary sectors (commerce and services, including tourism) also increase their shares in total output at the expense of agriculture and manufacturing (in the margin).
- Electricity and water would double their share in total output (2.6 to 5.2 percent excluding oil).
- Construction would increase its output share by almost half (13.6 to 20.3 percent excluding oil).
- Commerce and services (including tourism) projected to increase rapidly; important due to large backward linkages and labor intensity.
- Public administration’s share in total output would decrease from 6.8 to 5.6 percent excluding oil over 2001-2021, while government’s contribution to final demand grows at an average rate of 6.7 percent (2001-2021).
- Agriculture’s share would be broadly halved, from 15.7 percent in 2001 to 7.6 (excluding oil) in 2021.
- Manufacturing’s share would marginally decrease from 34.8 to 32.6 percent (excluding oil), implying an average annual growth rate of 7.4 percent during 2001-21.

### Policy implications and recommendations
- Optimal policy response likely requires judicious government involvement to promote local content while minimizing patronage capture of oil rents.
- International experience suggests a proactive approach toward local content development can succeed when guided by efficiency considerations, but results have varied across countries.
- Key policy principles and best practices for supporting local content:
  - Transparent rules for monitoring a narrowly defined local content concept.
  - Provision of information to the market through designated and professional government bodies about investment opportunities and spin-offs from oil sector development.
  - Monitoring of employment and value added gains, and project expenditure impacts on the local economy (including tax payments) as proxies for local content at different project stages.
- Priority areas where São Tomé and Príncipe may have realistic opportunities to develop oil-related activities:
  - Building and maintenance of equipment for storage and distribution of oil and derivates.
  - Data processing and storing of seismic data.
  - Air transportation services related to the oil industry.
  - Technical/professional development of staff.
  - Sectoral logistical support (including provision of financial intermediation services and procurement).
- The policy challenge: secure that complementarities between the oil and non-oil economy materialize to maximize local benefits from oil exploration.

*Source: IMF working paper section (as provided in the supplied content).*

### APPENDIX I. DEVELOPMENT OF AN INPUT-OUTPUT TABLE FOR SÃO TOMÉ AND PRÍNCIPE

### APPENDIX I. DEVELOPMENT OF AN INPUT-OUTPUT TABLE FOR SÃO TOMÉ AND PRÍNCIPE

### The raw data
- The raw data was a supply and uses national accounts table for 2001 recording supplies from domestic industries (legal entities/corporations and household units) and imports, and how these supplies were allocated between intermediate uses and final uses, including exports.
- The supply and uses table provided sources and uses by product and industry for 2001; it served as the basis for constructing the input-output table.

### The input-output table: structure and assumptions
- The IO table rearranges the supply and uses table so rows and columns use the same classification, establishing direct links (products-to-products or economic activities-to-economic activities) rather than the products-to-industries links in the supply and uses table.
- Two important assumptions underlying the input-output analysis:
  - A single technique of production for each product/economic activity.
  - A linear fixed-coefficient production function.
- International comparators were used to assess representative techniques of production for the ten economic activities included in the I-O table. The activities (standard ISIC classification) are:
  - Agriculture, forestry, and fishing
  - Mining
  - Manufacturing
  - Energy and water
  - Construction
  - Transport
  - Commerce and services (includes hotels and restaurants)
  - Public administration
  - Education and health
  - Other services

### Estimation approach for technical coefficients
- Ideal approach: estimate technical coefficients econometrically from a large sample of firms (regressing inputs on outputs). In practice, point estimates (ratio of sum of inputs to sum of outputs) are commonly used.
- Due to lack of a single reliable body of data for São Tomé and Príncipe, the authors used multiple sources:
  - Sectoral information from the Ministry of Agriculture and the Ministry of Finance.
  - Data from the airport and seaport authorities, and the electricity company.
  - Technical coefficients from comparable small states (examples used: Mauritius and Fiji) and detailed I-O data for early years of Israel (1958).
- The authors sought consensus and used the most reliable source when disagreements arose, or compromise figures/coefficients when necessary.
- The process involved substantial trial-and-error in consultation with national account experts in São Tomé; the resulting synthetic technical coefficients matrix is presented in the main text (Table 2). The actual I-O table (in dobras of 2001) is presented in the appendix.

### Technical observations supporting constant coefficients and aggregation
- Common first approximation: constant input coefficients. This is a strong assumption because branch composition and average input ratios change over time, but becomes more plausible with more disaggregated I-O tables for homogeneous products (example: raw cotton input to spinning industry).
- Aggregation is acceptable when:
  - Input structures of different branches are similar (input coefficients the same). Aggregated sector’s coefficient equals that of component sub-branches.
  - Demands for products of different branches move in the same direction (constant relationship between outputs): aggregated sector coefficient equals weighted average of component coefficients.
  - Example of permissible aggregation: industries whose output is mostly input into another industry (e.g., leather and shoes, weaving and clothing).

### Key figures from the constructed I-O table and supporting aggregates (as presented)
- Selected sectoral intermediate and final demand entries (values are as presented in the source):
  - Agriculture, forestry & fishing intermediate uses row (partial entries shown): 7,531; 0; 24,152; 0; 1,879; 9,610; 1,127; 0; 0; 0; TOTAL INTERMEDIATE OUTPUT 44,299; Private Consumption Expenditure 186,291; Gross Fixed Capital Formation 8,067; Changes in Inventories 22,928; Exports 217,286; TOTAL OUTPUT 261,585
  - Mining row (partial and aggregated formatting as presented): 00  006,275  0  0  000; 6,275; 0; 0; 0; 760; 0; 760; 7,035
  - Manufacturing row (partial entries shown): 8,048; 296; 71,813; 2,582; 24,270; 29,841; 4,787; 0; 1,181; 5,000; TOTAL INTERMEDIATE OUTPUT 147,818; Private Consumption Expenditure 412,125; Gross Fixed Capital Formation 64,882; Changes in Inventories -47,278; Exports 957; TOTAL OUTPUT 578,504
  - Energy & water row (partial entries shown): 416; 301; 3,796; 3,243; 2,926; 4,251; 589; 2,501; 757; 4,223; TOTAL INTERMEDIATE OUTPUT 23,003; Private Consumption Expenditure 20,700; TOTAL OUTPUT 43,703
  - Construction row (partial entries shown): 0; 0; 4,458; 0; 9,820; 7,740; 2,014; 16,021; 0; 0; TOTAL INTERMEDIATE OUTPUT 40,053; Gross Fixed Capital Formation 186,656; TOTAL OUTPUT 226,709
  - Commerce & Services row (partial entries shown): 24,468; 266; 8,661; 2,268; 8,113; 14,297; 4,229; 5,470; 926; 1,402; TOTAL INTERMEDIATE OUTPUT 70,100; Private Consumption Expenditure 17,553; Exports 24,242; TOTAL OUTPUT 111,894
  - Transport & Communication row (partial entries shown): 22,521; 0; 92,855; 2,988; 11,300; 13,627; 28,702; 15,586; 753; 0; TOTAL INTERMEDIATE OUTPUT 188,332; Private Consumption Expenditure 27,465; Exports 35,937; TOTAL OUTPUT 251,734
  - Public administration row (partial entries shown): 0; 0; 2,474; 0; 0; 0; 0; 22,267; 0; 0; TOTAL INTERMEDIATE OUTPUT 24,741; Government Consumption Expenditure 84,352; Exports 4,509; TOTAL OUTPUT 113,601
  - Education & health row (partial entries shown): 266; 0; 2,562; 599; 0; 1,321; 1,073; 1,430; 1,100; 2,665; TOTAL INTERMEDIATE OUTPUT 11,016; Private Consumption Expenditure 10,115; TOTAL OUTPUT 21,131
  - Other services row (partial entries shown): 0; 0; 387; 0; 0; 735; 536; 4,380; 0; 5,801; TOTAL INTERMEDIATE OUTPUT 11,839; Private Consumption Expenditure 26,939; Gross Fixed Capital Formation 6,620; Changes in Inventories 8; TOTAL OUTPUT 45,406
- Adjusted Variable entries (as presented): -49,527; 0; 0; 0; 48,335; -1,192; -1,192; -
- Aggregate production and supply figures (as presented):
  - Domestic Production (partial sequence as presented): 63,250; 863; 211,158; 11,680; 64,583; 81,422; 43,057; 67,655; 4,717; 19,091; 0; 567,476; 651,662; 90,972; 251,538; -38,443; 136,907; 1,092,636; 1,660,112
  - Gross value added (as presented): 193,118; 3,465; 51,595; 32,02 3; 162,125; 20,279; 189,685; 21,205; 14,583; 26,302; 0; 714,381; this is GDP by sector
  - Import of goods & Services (as presented): 5,136; 2,707; 271,027; 0; 0; 10,192; 18,994; 24,741; 1,832; 11; -1,192; 333,448
  - Taxes on Products (as presented): 82; 0; 44,726; 0; 0; 0; 0; 0; 0; 0; 0; 44,808
  - TOTAL SUPPLY (as presented): 261,586; 7,035; 578,506; 43,703; 226,708; 111,894; 251,736; 113,602; 21,132; 45,405; -1,192; 1,660,113
- Final production and demand fragments shown (as presented):
  - PRODUCTION (partial numbers as presented): 256,368; 4,328; 262,753; 43,703; 226,708; 101,701; 232,742; 88,860
  - TABLE 1 title: TOTAL INTERSECTORAL FLOWS, SAO TOME AND PRINCIPE ECONOMY, 2001 (IN MILLION DOBRAS, 2001 PRODUCEŔS PRICES) — INTERMEDIATE DEMAND

*Source: APPENDIX I. DEVELOPMENT OF AN INPUT-OUTPUT TABLE FOR SÃO TOMÉ AND PRÍNCIPE (extracted from the provided content).*

### APPENDIX II. LOCAL CONTENT POLICIES IN SELECTED COUNTRIES

### APPENDIX II. LOCAL CONTENT POLICIES IN SELECTED COUNTRIES

### A. The United Kingdom
- Resource base and infrastructure:
  - As of end-2002: 96 platforms in operation producing oil and gas from over 140 fields.
  - Total production in 2002: about 770 million barrels of oil and condensates and 3.8 Tcf of natural gas.
  - Continental shelf infrastructure includes over 10,000 kilometers of oil and gas pipelines and a number of onshore terminals.
- Evolution of government policies:
  - Early 1960s: no offshore oil policies and regulations existed.
  - 1965: a licensing system and a fiscal regime developed; discretionary licensing allocated blocks to prospective oil companies generally committed to rapid exploration programs and use of UK-based suppliers.
  - 1970s: policy review triggered by discovery of Forties and Brent fields, the first oil shock, and concern that British firms were not capturing a significant share of supplies work.
  - 1973: New offshore policies:
    - Offshore Supplies Office (OSO) created.
    - Provision of financial assistance to the UK supplies industry starts.
    - Auditing procedures for monitoring purchases by oil companies established; audits required quarterly reports listing contracts in excess of 100,000 pounds, the successful bidder and the list of UK firms who had bid or been approached.
    - UK share defined as “representing the value of contracts and main sub-contracts placed with companies which made a substantial contribution to the UK economy through employment, manufacturing, or sub-contracting.”
    - No legal sanctions for low UK local content; companies were likely to expect difficulties in future bidding rounds.
  - Early 1990s: with strengthened relationship with the European Union, focus shifted from promoting local content within the UK offshore industry to supporting private investors develop export markets in a competitive environment.

### B. Norwegian Continental Shelf
- Resource base and economic significance:
  - By 2001: domestic petroleum sector accounted for 23 percent of GDP, 45 percent of exports, and 2 percent of total investment.
  - Crude oil production in 2002: about 1.2 billion barrels and 2.3 Tcf of natural gas.
  - Extensive infrastructure (pipelines, onshore terminals, fabrication yards) developed over 40 years.
- Evolution of government policies:
  - 1965: Norwegian Petroleum Law enacted, enabling government choice of international oil company partners to maximize local benefits; early preference to companies joining with local business interests.
  - By 1967: government equity participation in offshore development required; percentage could be reduced if Norwegian interests included in licensed group.
  - 1970s: state participation emphasized via Statoil and Norsk Hydro, given preferences in licensing decisions to increase entry chances for Norwegian suppliers.
  - 1972: Article 54 of the Royal Decree directed government to prefer Norwegian goods and services provided they were competitive in price, quality, schedule and service.
    - Goods and Services office established to monitor and cooperate with international oil companies, stimulate local supply industry via joint ventures, encourage R&D and technology transfer, review tendering procedures, ensure local companies full and fair bidding opportunity, and establish targets for local participation.
  - Early 1990s: Norway entered the European Economic Area; Article 54 rendered invalid and measures curtailed. Current emphasis on supporting international expansion of local supply industry with market principles and efficiency considerations.

### C. Denmark
- Resource base:
  - Exploration began in 1965; production began in 1972.
  - By 2002: Denmark produced some 135 million barrels of crude oil and 0.4 billion cubic feet of natural gas per year.
- Evolution of government policies:
  - No local preference or purchasing policies in place.
  - Initially most work performed locally; as Denmark’s economy evolved within the EU, import restrictions and local preferences became irrelevant.
  - Larger platforms and structures usually supplied by European companies; Danish suppliers competent in services and as suppliers of small to medium sized structures and equipment.

### D. Australia
- Resource base:
  - Offshore petroleum industry began in 1965; some 240 significant discoveries in offshore basins.
  - Production offshore occurs on over 50 producing platforms producing some 260 million oil barrels and 1.3 Tcf of natural gas per year.
- Evolution of government policies:
  - No local content policy in place; petroleum regulations state there is no local preference policy, although operators are encouraged to use Australian suppliers and manufacturers to the greatest extent possible.
  - 1984: Industrial Supplies Office (ISO) established as a facilitator for project developers and local industry; ISO provided information on Australian suppliers, encouraged joint ventures, and assisted Australian companies with tendering.
  - 2001: Australian Industry Participation Framework (AIPF), agreed by all state governments, articulates policies and strategic directions to enhance Australian industry participation in large investment projects.

### E. Brazil
- Resource base and industry structure:
  - Petrobras formed in 1953; granted exploration and production licenses and made responsible for refining, transportation, and distribution.
  - Offshore industry began in the 1960s; by mid-1970 further offshore discoveries led to deep and ultra-deep field development.
  - Brazil produces approximately 1.5 million barrels of oil and 44 million cubic meters of natural gas per day (some 550 million and 0.6 Tcf annually) and is the 15th leading oil producer in the world.
- Evolution of government policies:
  - Government maintained active role since early 1950s, including formation of Petrobras.
  - Petrobras predominant despite opening of the industry in 1997; about 50 international oil companies entered through licensing rounds.
  - National Petroleum Agency (ANP) established in 1998 to regulate petroleum activity and ensure local benefits.
  - Average local content commitments in Round 5 licensing (August 2003): 78-100 percent in exploration activities, 30-55 percent in drilling, and 5-90 percent in development.

### F. Malaysia
- Resource base:
  - Offshore industry started in the 1950s; first oil discoveries in 1962.
  - 2002 oil production averaged some 800,000 barrels per day or 250 million for the whole year.
  - Annual gas production reached 2.1 Tcf in 2002.
- Evolution of government policies:
  - Objective: maximize local benefits through development of local capabilities and industrial base.
  - Prior to 1974: concession system with royalties.
  - 1974: Petroleum Development Act established Petronas, giving it full ownership and rights to all lands for oil exploration and development.
  - Petronas used licensing to develop local suppliers: registration required to be a registered bidder, with key requirements including:
    - establishment of an incorporated business in Malaysia with sufficient local equity participation;
    - agreement to observe official guidelines regarding management, employment and the use of local resources;
    - agreement to acquire all materials and supplies locally and if not available locally, to purchase them directly from manufacturer.
  - Petroleum Sharing Contracts (PSCs) require oil companies to purchase goods and services locally to the maximum extent possible.

### G. Nigeria
- Resource base:
  - Industry began in 1930 with Royal/Dutch Shell exploration in onshore Niger Delta.
  - By 1972 onshore and shallow waters oil production had reached 2 million barrels per day.
  - 1995: discovery of Bonga field prompted move to offshore operations.
  - Daily production in Nigeria limited by OPEC quota which averaged 2 million barrels per day in 2002 (740 million total for 2002).
- Evolution of government policies:
  - Member of OPEC since 1971.
  - Historically, Nigerian companies received a very small share of benefits from oil and gas expenditures; NNPC estimates in 2000 suggested Nigerian companies received less than 5 percent of the US$3 billion annual expenditures by oil companies operating in the country.
  - Since 1999: government moved to increase local content.
    - Local Business Development/Global Procurement Unit established through Chevron Nigeria Ltd. and NNPC joint efforts to increase contracts to Nigerian firms, farm out oil fields to local companies, facilitate technology transfer, and hold Local Content Development fairs.
    - Reported result: Chevron Nigeria increased its local content from 25 percent in 1997 to 82 percent in 2001.
    - Noted discrepancy between the 5 percent national estimate (2000) and Chevron’s 82 percent (2001) highlights lack of monitoring and standard definitions in measuring local content.
  - 1997: One Oil and Gas Free Zone established; since its inception some 90-100 companies located in the free zone, developing a cluster of expertise and creating thousands of job opportunities for local residents.

### H. Angola
- Resource base and production:
  - Oil production started in 1955 with onshore discovery in the Kwanza basin; production off Cabinda started in 1968.
  - Early 1990s: exploration of deep and ultra-deep fields began with strong success.
  - By end-2005: Angola produced some 1.4 million barrels of crude oil per day.
- Evolution of government policies:
  - 1976 post-independence: national oil company Sociedade Nacional de Combustíveis (Sonangol) set up.
  - 1978: petroleum law (law 13/78) promulgated, making the state sole owner of petroleum deposits and establishing Sonangol as exclusive concessionaire while allowing Sonangol to enter associations with foreign companies.
  - Sector dominated by international companies; Sonangol establishes partnerships via Production Sharing Agreements (PSAs) and stakes in contractor groups or joint ventures.
  - Since mid-1990s: Sonangol restructured into a holding company with autonomous subsidiaries (e.g., Sonangol Pesquisa e Produção; Sonangol Distribução).
  - Sonangol established numerous joint ventures providing helicopters, supply boats, support bases, seismic studies, civil construction and drilling, giving Sonangol significant leverage and in some fields a virtual monopoly in the local market.

### I. Trinidad and Tobago
- Resource base and industry focus:
  - Historically a small oil producer; rapidly becoming an important natural gas producer.
  - Large proven natural gas reserves developed into LNG and petrochemical industry.
- Evolution of government policies:
  - 2004: government adopted a Local Content and Local Participation Framework Policy for the energy sector across the value chain.
    - Policy defines local content to include ownership, control, decision-making and preferential access to financing.
    - International companies required to commit to contracting with local companies.
    - Education and training of workers and support for local businesses to develop “strategic” skills are critical elements.
    - Government to establish a database on status of projects and opportunities for local suppliers.
  - Government identified a potential US$2.7 billion in annual business across the economy that domestic businesses are losing to foreign competitors.
  - Centre for Energy Enterprise Development established to provide small- and medium-size companies with advice and tools to compete.
  - Government actively engaged in job training, small business capacity building and technology development to supply industry needs and create export opportunities.
  - Important strategy element: development of the non-oil economy to create alternative pillars of economic growth after oil reserves are depleted.

### Appendix III: São Tomé and Príncipe — Scorecard for Oil Sector Development (excerpted table content)
- The scorecard ranks oil- and gas-related activities by input requirements across criteria including:
  - Capital/technology ratio, know-how intensity, skilled labor intensity, physical location constraints, legal and institutional requirements, Angolan output requirements, and production scale.
- Selected entries and total scores (as shown):
  - Pesquisa & Producao (Oil Exploration and Development): total score -5.
  - Sonamer (Deep-water drilling activities): total score -5.
  - Petromar (Building and Maintenance of equipment for production, storage, and distribution of oil & derivates): total score -6.
  - Sonasurf (Supply of sea vessels to oil industry): total score -3.
  - Sonangol Shipping (Oil shipping): total score -3.
  - Sonangol Distribuidora (Distribution of crude oil & gas): total score -5.
  - Refineria da Luanda (Oil Refining): total score -3.
  - Sonamet (Production of structures for oil industry): total score -6.
  - TECHNIP Angola (Engineering services for oil enterprises): total score -1.
  - Sonair (Airline Services SA — charter planes): total score 2.
  - ESSA (Professional development & training of staff): total score 4.
  - Base do Kwanda (Logistical support to oil production and oil services sectors): entries indicated but specific total score not captured in excerpt.
- Notes attached to the scorecard:
  - Source: Sonangol' group's internet site and Alvesson et. al. (2003).
  - 1/ Proxied by the size of sector's investment to total investment in the economy.
  - 2/ Number in parenthesis indicates Sonangol's share in company's capital (in percent).

*Content based solely on the supplied PDF text.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07213.pdf_