in Business Aviation / Features

CHC contracts cancelled over ‘local employment’ row

Posted 13 February 2019 · Add Comment

A row over how many local people are employed by an international company has seen Equatorial Guinea cancelling contracts with CHC Helicopter. Jon Lake reports.

The Ministry of Mines and Hydrocarbons of Equatorial Guinea has directed the country’s petroleum operators – including Mobil EG Inc (Exxon Mobil) and Noble Energy – to cancel all contracts with Canadian-based CHC Helicopters.
This extraordinary measure was reportedly taken due to CHC’s alleged non-compliance with Equatorial Guinea’s national content regulations.
In particular, CHC was accused of failing to implement local content laws that were meant to create jobs for locals.
Equatorial Guinea is a member of the Organization of the Petroleum Exporting Countries (OPEC) and is Africa’s third-largest oil producer.
It established a ‘National Content Regulation of the Hydrocarbons Law’ in 2014, which directed that preference would be given to local companies when awarding service contracts, and that agreements with international companies should have local content clauses and should make provision for local capacity-building.
Announcing the move against CHC, Gabriel Mbaga Obiang Lima, the Minister of Mines and Hydrocarbons of Equatorial Guinea, said: “We expect all companies operating in here to follow the laws of the Republic of Equatorial Guinea.”
He added that it was: “the responsibility of the Ministry of Mines and Hydrocarbons to ensure strict compliance to our country’s laws”, while stressing: “We are eager to work with international companies who partner with Equatorial Guinea in the development of our industry.”
Oil companies operating in the country were given 60 days to dismantle their contracts with CHC and to find new suppliers. Only those companies that were in compliance with the local content provisions, established in 2014, would be allowed to bid for the new contracts.
CHC was still flying from Malabo in mid-November, using Sikorsky S-76s, but local sources insisted that it would not be working in the country from next year.
The minister explained: “These laws are in place to protect and promote local industry, create jobs for citizens, and promote the sustainable development of our country.”
He added that his ministry was: “aggressively monitoring and enforcing the compliance of these requirements”.
CHC Helicopter responded that the company had operated in Equatorial Guinea for almost two decades and had built up a comprehensive training programme.
The Sikorsky S-76C+ replaced Bell 212s operating in support of Mobil Equatorial Guinea Inc’s offshore installations in March 2004. A company spokesman said that CHC was confident that it was in compliance with Equatorial Guinea’s National Content Regulations, and that it welcomed planned further discussions with the relevant authorities.
CHC was created in 1987 through the merger of Sealand Helicopters, Okanagan Helicopters, and Toronto Helicopters, and expanded through an aggressive acquisition programme, acquiring a stake in British International Helicopters in 1993, then buying Norwegian company, Helikopter Services Group, in 1999, and acquiring the Netherlands-based Schreiner Aviation Group in 2004.
By 2014, the company was the world’s largest commercial operator of heavy and medium helicopters, servicing the booming oil industry around the world.
The company owned 67 helicopters and leased the remainder of its 238-aircraft fleet, which included 43 AW139s, seven Bell 412s, seven AS365/H155s, 34 AS332L/L1/L2s, 40 H225s, three H135/H145s, 50 S-76 A++/C+/C++ aircraft, and 46 S-92s.
The collapse in oil prices, combined with a heavy debt burden, forced CHC to file for Chapter 11 bankruptcy protection in May 2016. It was able to secure investment worth $450 million and reduced its fleet to 137 aircraft, including 32 AW139s, seven Bell 412s, 12 AS332L/L1s, 29 S-76s, 46 S-92s, and 11 other aircraft of various types. The proportion of leased helicopters has been reduced to 55%.
The company currently operates on six continents, serving the oil and gas, search-and-rescue (SAR), emergency medical service, energy and utility sectors. Its three regional divisions include one that covers Europe, the Middle East and Africa (EMEA).
Some 68% of CHC’s revenue still comes from the oil and gas sector, with emergency medical services and SAR accounting for another 15%, and the Heli-One maintenance, repair and overhaul (MRO) business providing 17%.
Following the action against CHC, Equatorial Guinea moved to a second phase of action against oil companies that were failing to respond to the ministry’s increased focus on local content.
Oil and gas services firms FMC, Schlumberger, and Subsea 7 reportedly faced being banned from working in Equatorial Guinea unless they committed to creating more jobs for citizens by the end of September.
 

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