Tullow Oil sub-contractor employee data reveal contracting driven by market forces, not economic policy in Turkana

Tullow Oil, the British oil company that has discovered an anticipated 1 billion barrels of oil in Turkana, Northern Kenya, took the unprecedented step of declaring both its $22 million USD in tax payments to the Kenyan government last year and its local employment figures as well as those of its subcontractors.

The local population comprises the poorest and least educated citizens of Kenya with poverty at 87% and illiteracy at 93% according to the 2013 Kenya Bureau of Statistics data.  They demanded much of the same data when they staged a protest that forced a two week shut-down of Tullow operations last November.  That data and the Memorandum of Understanding between the Ministry of Energy and Tullow Oil to end the demonstration were never officially made public by either party.

An analysis of the Tullow  sub-contractor employee database and the Memorandum of Understanding obtained for this investigation reveal the financial and legislative challenges in ensuring that the oil discoveries leave the people of Turkana better off.  Beyond rosy reports of 70-90% local employment lie disparities: top management positions are filled almost exclusively by foreigners; sub-contractors import laborers from other regions of Kenya for unskilled work that could be filled by the Turkana and firms with years of international oil industry experience report no or low numbers of unskilled or semi-skilled jobs and local employees. As a result, there are no patterns demonstrating growing local economic opportunities.

Of the 1,772 people employed by Tullow’s subcontractors as of November 2013, when detailed employment figures were disclosed, about half are Turkana, a third are from other parts of Kenya and the remaining are expatriates.

Tullow and the government officials explain that employment is driven by the level of skill required for the job.  According to this logic, Turkana, with the lowest levels of education, are hired largely for the bulk of unskilled and semi-skilled jobs.  Kenyans from areas with higher access to education fill primarily mid-level positions either skilled or managerial. The most limited exclusive expatriate positions are reserved for highly educated and highly specialized jobs requiring experience in the international petroleum industry.

Government and Tullow-funded scholarship and other training programs would ideally evaluate market demand and prepare the local population to grow into higher paying positions both directly in the oil industry and in upstream and downstream production, which would lead to better local employment opportunities.  However the scholarships targeted at general skills needed for the industry,  returning beneficiaries are not required to move back to Turkana and are not guaranteed a spot with Tullow. There is no specific quota or preference for Turkana county residents.

Martin Mbogo, the Tullow Oil Country Manager stated that the process is handled by an independent institution, the British Council, which does not coordinate hiring with Tullow. Among the twenty 2012/13 scholarship beneficiaries, four went to Turkana residents. Stakeholders are now looking for more sustainable ways to build up local skills including partnerships with local technical training institutes. In addition, county officials said closer oversight would stamp out corruption and other forms of nepotism interfering with development. These efforts would forestall the onset of the “Dutch Disease,” which threatens the growth of other industries in Turkana.

Baseline employment trends bear out geographic imbalance due to educational inequalities

The bulk of Turkana employees fill either unskilled or semi-skilled positions with fewer than 2% assuming managerial roles.

Most expatriates hold high level positions.

The major point of contention for the Turkana people are the number of Kenyans brought in from other regions for unskilled or semi-skilled positions that Turkana’s are already qualified for or could qualify for with basic training.  Nearly two-thirds of the positions filled by non-Turkana Kenyan nationals fit this description.

Hiring practices inconsistent across contractors and specialties

Despite recurring regional clashes over employment, there is no national or county legislation in place that establish quotes or preferences for local labor, as evidenced by widely varied employee demographics across different contractors.  Under current conditions, county government officials, including the Turkana county cabinet member in charge of energy, Rodha Loyor, believe that local business simply can’t compete for international tenders so are subject to varied hiring practices from external companies who have no financial incentive to invest in training.

A closer look at hiring practices by international firms carrying out similar activities indicate no universal policy or preference for local candidates or consistency in the proportion of people needed at each skill level.  Within oil drilling rig operators, all have high numbers of expat and non-Turkana employees and reveal sub-contractors’ discretion in choosing labor.  Sakson Group’s and PR Marriott’s labor forces are primarily expat while the largest labor source for Weatherford International are Turkana.

Sakson’s labor distribution of half management or skilled positions and half semi-skilled or unskilled are filled across the board by expats with the exception of a portion of the unskilled workers, filled primarily by Turkana.  Sakson reported that it is in the process of shifting unskilled labor to Turkana employees. “Although these positions are classified as unskilled there is a level of experience that is required to undertake the work,” Sakson stated in its labor report. “Sakson have employed a number of local personnel who are currently training to take over the expat position in the next two months,” the report added.

PR Marriott reports a majority workforce of management and skilled labor dominated by expats.  The remaining semi-skilled positions went mainly to non-Turkana Kenyans and unskilled positions to Turkana.  In the case of PR Marriott, none of the semi-skilled or unskilled positions were filled by expats, more closely following expected hiring practices though top-heavy with high level positions.

Unlike the other two oil rig companies, Weatherford had a nearly even division of skill level across its workforce and employee origin corresponded generally with predictions.  A minority of its employees filled management roles, and all were expats, mostly non-Turkana Kenyans and some Turkana filled most of the semi-skilled positions while the largest labor category, unskilled labor, was filled mostly by Turkana.

Part of the inconsistency of hiring practices may be due to lack of clarity in labor categories.  For example, PR Marriott named many employees as skilled while Weatherford classified many more positions as semi-skilled.  In the absence of regulation, private industry sets its own policies for establishing labor categories and choosing how to fill those positions.  There is little incentive for private industry to invest in its own training when other labor sources are available in other regions of the country or region.

International petroleum industry infrastructure suppliers rely on external hiring and report only high level positions despite lacking infrastructure

Many of the expatriate-dominated positions underscore technical training needs for locals in the petroleum industry and clarity on labor categories. Baker Hughes, with two thirds expat and one third non-Turkana nationals, focus on basic oilfield infrastructure such as cement pouring and laying cables. Of Baker Hughes’ 97 employees, none are reported to be semi-skilled or unskilled. Schlumberger, the world’s largest oilfield services company, has an almost identical employee breakdown and its functions includes a mix of services in directional drilling, fluids management, drilling, fishing and well testing.  They report 9 semi-skilled positions and no unskilled jobs out of their 119 person workforce, all occupied by non-Turkana Kenyans.

The Tullow 2013 report makes it clear that more jobs are coming: “Significant infrastructure upgrades will be required in order to transport the oil from an area largely inaccessible today by roads and rail to the sea, over 850 kilometres away,” states the 2013 report. “Furthermore, Tullow will require access to a wide range of skills as well as competitive, high quality goods and services.”

Yet Baker Hughes is not the only company declaring no entry level positions and no Turkana employment despite the amount of labor required to establish and extend operations in a region where both electricity and water access are rare.  Twelve subcontractors reported no unskilled positions with their firms including KK Security, Baker Hughes, Citiscape, Earthview, Freight Forwarders, Kurrent Technologies, New Edge, Spica Marine Inspections, Alpha Logistics, Halliburton, Schlumberger and Transeast.  These companies cover everything from providing cranes, forklifts and catering services to inspections, telecommunications and security.

Intense competition for low skill security, logistics and support positions among Turkana

On the flip side, the absence of a healthy market economy in Turkana has caused the community to question the hiring practices of companies that contract majority Turkana employees, especially among international companies who leave local contracting to intermediaries.  Of the seven companies with over 50 percent Turkana employment, Turkana employees generally fall into three categories: security (ROLSS Tullow, KK Security and  Newport Africa); camp maintenance and catering (AFEX Group and Ardan) and direct petroleum-related services (Global Geophysical Services Inc. and BGP, the China National Petroleum Corporation).  Local residents complained that those who were hired had political connections to businessmen in the region.  The sector is too new for labor associations or unions to have formed.

Members of the Turkana Transport Association who chose to remain anonymous in hopes of receiving contracts some time in the future, explained that their members had applied for open bids for transportation (vehicle rental and drivers) only to discover that external candidates had already been chosen from Nairobi and flown to Turkana. The positions had been classified as semi-skilled, requiring certifications they did not have or brand new cars they didn’t have the capital for.

World Bank warns of need to mandate local hires and training

The Government of Kenya with support from the World Bank engaged Hunton & Williams and Challenge Energy to undertake a review of Kenya’s existing petroleum sector legal, regulatory, and fiscal framework as a prerequisite for a grant to develop their petroleum resources.  The report warns, “Successful implementation of local content requirements—those that ultimately result in substantial technology transfer, knowledge transfer, capacity building of local industry, and generation of local employment opportunities—are difficult to achieve due to the many variables at play.”

The reports recommends that the Ministry of Energy’s National Fossil Fuels Advisory Committee be tasked with the responsibility and with ensuring that contractors adhere with petroleum agreements that stipulate preference to employment and training of Kenyan nationals in employment operations, and to give preference to the use of products, equipment, and services locally available.

The Ministry of Energy Cabinet Secretary is also tasked with managing a training fund mandated by the Petroleum Act for addressing the lopsided employment opportunities available to locals. It is within his mandate to “issue regulations relating to the employment and training of the citizens of Kenya by petroleum contractors, as well as the procurement of goods and services locally available in Kenya.”

In its annual report, Tullow  reports spending $48 million directly and $47 million through international suppliers with Kenyan businesses in 2013, $3 million of which was with Turkana businesses. The details of that spending have not been made public.  With expansion planned, business is expected to boom.

Oil industry expansion plans roll ahead despite instability and lack of new regulation

With plans to reach an agreement with the Kenyan government to build an export pipeline by 2015/16  Tullow will be tested on managing community relationships.  “In 2013, we focused on developing our capability in emergency preparedness and incident management, EHS, bribery and corruption, social and political risks,” Tullow reports. “Our suspension of operations in Kenya in 2013 was followed by an internal investigation, from which we have learned and will apply changes,” the report stated.

Whether the new agreement with the Kenyan Government or the new draft Petroleum Bill will include targets for local training, transparent contracting or local employment cannot be ascertained either from Tullow’s report or the fifth draft of the Energy Bill. If the bill does pass this year, the Cabinet Secretary would draft such regulations.  In the absence of a transparency law that would make contracts between the Ministry of Energy, Tullow or Tullow and its subcontractors public, oversight of hiring practices may remain a mystery.

*Shitemi Khamadi contributed to this report.

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