By Dr Tara Singh
The Local Content Act (No 18, 2021) provides support for Guyanese nationals and companies in the “procurement of some 40 services that oil companies, and their sub-contractors must procure from Guyanese players and nationals by the end of the year.”
This Act allows Guyanese and their businesses with limited knowledge in the oil and gas sector, to become active participants and not spectators, in the emerging oil and gas sector (OGS). It also sets out varying targets (ranging from 25% to 100%) to be achieved by the end of 2022 for the various sectors.
Exxon and its partners in association with its sub-contractors say that they have hired more than 4,369 Guyanese workers and transact business with more than 880 local Guyanese companies. Over 50% of Exxon and subcontractors’ labor force are Guyanese, though a lesser percentage (45%) are directly employed by Exxon. The company claims that from 2015 to 2022 they have contributed over $(US) 600 million to local businesses and have spent over 80,000 hours in training Guyanese to upgrade their skills in the professional, technical, craft, and trade categories.
Natural Resources Minister Vickram Bharat pointed out that the legislation will promote “competitiveness and encourage the creation of related industries that would sustain the social and economic development of Guyana.” He continued: “We want Guyanese landlords to be able to rent their accommodation, we want Guyanese welders to be able to get welding business, we want Guyanese accounting firms to get accounting business…” The flow of revenues from OGS into the public treasury thus far is not breath taking as some pundits proclaim. The NRF Fund had a closing balance as of March 2022 of $(G) 150 billion (equivalent to $US 732 million).
Despite various efforts by Government Ministers and top PPPC administration officials to clarify the scope, content, significance, and potential benefits of the “Local Content” legislation, false narratives and distortions continue to flourish in sections of the media as well as among civil society groups. Because of these falsehoods, the public has a tough time to determine the efficacy of information relating to Local Content, and other policy initiatives. The challenge for the government is how could it stop or neutralize this flow of negatives. The answer lies in the continuous pursuit of the truth. Remember, “no matter how fast a lie can run, the truth will always catch up with it.”
During the PNCR-led regime (2015-2020) there were three attempts to produce a local content document, but none materialized. Their last attempt at focusing on upstream activities appears to be an academic exercise. Guyanese companies do not have, yet the capability of providing upstream services (“identify deposits, drill wells, and recover raw materials from underground, as well as to provide related services such as rig operations, feasibility studies, machinery rental, and extraction of chemical supply”).
Guyana could develop the capability to provide downstream [post-production of crude oil (refinery) and natural gas activities] and midstream services (transportation, processing, and storage).
Prior to the passage of the Local Content law foreign companies were flocking into Guyana to join the oil rush. Lacking expertise in the new oil and gas sector (OGS), Guyanese companies and Guyanese could not capitalize on the numerous opportunities that have been unfolding. Foreigners were therefore filling the gaps; and some of them have been aggressive. A foreign Energy company, for example, wanted to set up a branch in Guyana and had failed to engage Guyana’s apex business organization, the Private Sector Commission in consultations.
Stories like this have caused the PPPC government to move swiftly to neutralize this flow of unfettered foreign OGS investments that were putting Guyanese at a distinct disadvantage. Recognizing the gravity of the situation, the PPPC government, upon taking up office in August 2020, set up a Local Content Committee (LCC) to examine how best Guyanese can benefit from the oil and gas sector (OGS), but not necessarily to the exclusion of foreign companies. After extensive consultations that lasted for one year, the LCC prepared a local content policy document for government’s consideration and implementation.
The PPPC government utilized the LCC recommendations to prepare a Bill that was submitted to and granted Parliamentary approval. The important provisions include: (1) foreign companies must form partnerships (with Guyanese companies owning 51% shares) before they could operate in Guyana. (2) The management team of partnerships must consist of 75% Guyanese. (3) Partnerships must hire 90% of Guyanese workers.
These provisions do not sit well with a CARICOM aligned CARICOM Private Sector Organization (CPSO) which had claimed that these are in breach of the CSME treaty, and they therefore threatened legal action. CPSO asserts that it is an Associate Institution of the Caribbean Community, and its mandate is to contribute to the implementation of the Caribbean Single Market Economy (CSME). Guyanese businesses have grave reservations about CPSO’s status, and several local private sector bodies engaged the CARICOM Secretariat, questioning the CPSO legitimacy, its institutional composition, and scope of operations and has called upon CARICOM to re-evaluate the CPSO membership, its institutional structure, and its scope of private sector representation in CARICOM.
CPSO cannot stall the work of the Local Content Secretariat (LCS). The LCS has responsibility for registering (1) Guyanese nationals for employment; and (2) Guyanese companies and nationals from whom goods and services are procured. Each company is required to submit to the LCS a 1-year Local Content Plan and then a 5-year Local Content Master Plan, in addition to submitting a half yearly plan (Second Schedule) on the status of Employment, Procurement, and Local Capacity Development. In the exercise of its monitor, review, auditing, performance evaluation, market analysis, enforcement function, among others, the LCS is supported by a Local Content Advisory Committee (LCAC) that functions in an advisory capacity. The Chair of LCAC is appointed by the President.
The Local Content legislation and administrative machinery provide Guyanese nationals and Guyanese businesses with the opportunity not only to benefit financially through employment and the providing of goods and services, but also, allow them to grow with the oil and gas industry (e.g., develop capacity and expertise). Guyanese will get insights into the depth and success, including any setback, of the Local Content initiative, when the Secretariat issues its annual report.
The views expressed in this article are those of the writer and do not necessarily represent the position or policy of the THE WEST INDIAN.