With first oil months away, government has assured that its “fit for purpose” local content policy will be completed before then and has promised “considerable focus” on capacity development.
“The primary goal of this policy is to facilitate the active participation and development of Guyanese labour and suppliers in the petroleum sector and to give rise to benefits from expenditure in the sector on labour, goods and services for Guyanese industry, the economy and wider society,” states the 36-page document, circulated to the private sector and other stakeholders.
“In an effort to maximise benefits and retain long-term value from Guyana’s petroleum resources, considerable focus shall be given towards local capacity development in addition to local participation, such that our Local Content policy does not drive additional costs into the petroleum sector but instead strengthens our competitiveness,” it adds.
Head of the Department of Energy, Dr Mark Bynoe has said that the final draft will cover loopholes, such as the definition of local, how local content is specifically measured as it relates to Guyana as well as the critical elements that have to be focused on.
At the same time, he said, it is also important that the requisite framework by which data is captured has a standardised format that comes from the country and not the oil operators.
He had further disclosed that the department is currently setting up a local content compliance unit, which is expected to not only validate information being provided but to also receive any potential issues or concerns from Guyanese contractors or suppliers.
“In terms of granularity [of data received], yes we have seen an improvement but this is a dynamic process and so there is still other more granular information that we have asked the operator to provide to us [so] that we are better able to analyse who is getting what, what is going where, [and] which regions are benefitting more than others,” he explained.
The third draft addresses all the areas that Bynoe said it would and it emphasises the need for, at minimum, half yearly and annual reporting on the local content performance by the oil companies operating here.
The assessment reports will go to the minister responsible for the sector, in this case, the president, as it states that this will guide future plans on development in a “forward-looking, efficient, focused and flexible” way.
“Delivery of this policy shall be measured through standardised, at a minimum, half-year and end-year reporting of local content performance to the minister. Common metrics and definitions shall be applied across the petroleum industry in Guyana. The ministry will use the standardised half-year and end-year reports to measure each operator’s performance against the estimated levels and activities and programmes for local content utilisation in their Local Content Plan,” the policy draft states.
“Reporting will inform the extent of flexibility needed to increase or decrease expectations for utilisation of Guyanese resources and personnel in future Local Content Plans, so as to ensure effective delivery of government policy, take account of changes in the business environment, and consider any emerging unintended consequences, for example, levels of utilisation leading to the movement of capital and labour out of other sectors of the Guyanese economy and into the petroleum sector. The half-year and end-year reports will be used to continuously review and refine the opportunities and constraints in developing local content in Guyana and to inform how government and industry collaborate to drive local content development,” it adds.
The minister will, in turn, disclose the information given, barring legal constraints that may prevent disclosure of reported information on local content, to parties beyond the minister, so that the government can be held accountable for implementation of the policy, and for operators to be accountable for implementation of their Local Content Plans.
Phased implementation
It states that “building on the principle of pragmatism,” the minister may choose to have a “phased implementation” of the parts of the policy, over time, “recognising that many provisions can be delivered immediately, whilst others may need prior capacity building, study or more detailed policy guidance.”
The document states that for a business to be referred to as a Guyanese supplier, it must have at least 51 per cent of its shares owned by a Guyanese citizen, registered with the Guyana tax authority, and is located in Guyana.
The Private Sector Commission has said that the definition of a ‘local company’ should ensure that the company’s board meetings are held in Guyana, its head office is located here, it has at least 70 per cent of its total workforce being Guyanese and the company is registered in Guyana with a Guyanese owning 51 per cent or more.
Meantime, the policy objectives in the new draft of the Local Content Policy are 11 in number and cover a range of issues. The document said that the goal is to achieve the active participation and development of Guyanese persons and suppliers in the petroleum sector. This is done while maximising benefits and retaining value for Guyanese industry, the economy and wider society from expenditure in the sector on labour, goods and services.
“In support of the goal, the objectives of this policy are to be fit-for-purpose: an alignment between the government of Guyana policy goals of stimulating local economic benefits, maintaining a positive investment climate, and assuring the optimal raising of national revenues for economic transformation. Promote the education, inclusion and advancement of Guyanese persons with the expertise and experience required to participate in the petroleum industry. Achieve participation of Guyanese persons in employment opportunities and Guyanese suppliers in procurement opportunities within the petroleum sector, within and outside of Guyana. Localise supply chains in procuring goods and services that serve the petroleum industry to bring efficiency and cost benefits to the sector in Guyana, for example, potentially increase supplier response speeds, reducing spare parts and inventory stock in country, and reducing operation and maintenance costs,” it states.
Align
It also seeks to enhance the capacity of Guyanese persons and suppliers, and Guyanese public and private education and regulatory institutions, to align with good industry standards in the petroleum sector, thereby to enhance local competitiveness and so increase the range and scale of employment and supplier opportunities to Guyanese persons and suppliers, and contribute to efficiency and cost benefits for investors. Further, other objectives include to use the opportunities presented by international companies operating in Guyana to grow the competencies of Guyanese oil and gas professionals and goods and services companies down multiple supply chains, becoming world-class and internationally-competitive, with local suppliers developing export potential; as well as retain value in the Guyanese economy through investments in the petroleum sector and in particular expenditures on local labour, goods and services.
The document said that value retention can be created in Guyana as a consequence of Guyanese persons participating in the petroleum sector, and through the purchase of goods and services provided by Guyanese suppliers and non-Guyanese suppliers alike, where these suppliers are employing Guyanese or supplying locally-produced materials, components or products.
“To determine retained-value, the Government of Guyana, in consultation with industry, may develop standardised multipliers to convert local content performance into direct, indirect and induced economic impacts and may expand capabilities to certify goods as Made-in-Guyana where the production of these goods contributes sufficient domestic value. Build Guyanese persons and supplier competencies, enhance other sectors of the Guyanese economy (i.e. achieve lateral economic linkages) so as to support wider national development policies, and diversify the economic benefits of hydrocarbon discoveries and protect the economy against the inevitability of swings in fortune of oil and gas markets,” the document says.
Building and enhancing institutional capacity in national education, training and research organisations, and in utilities, infrastructure and facilities to support the petroleum sector, through collaboration of the Government of Guyana and private sector forms a critical part of the policy document.
The PSC’s position of inviting partnering between firms for effective capacity building, transfer of knowledge and technology and to enhance the capabilities of Guyanese persons and Guyanese suppliers to participate as fully as possible in the petroleum sector, has also been listed as an objective.
“Various partnering models may overcome the challenges of local suppliers winning work directly, including consortia, sub-contracting, licensing and joint ventures. Mindful of the experience of other countries where mandated joint ventures have encouraged the creation of fronting companies or acted as a disincentive to inward investment, it is the policy of the Government of Guyana to not mandate local-foreign joint ventures as a requirement for market access in the upstream petroleum sector, but instead to encourage such alliances as one among a range of partnering options, and ensure these are market-competitive ventures and effective in supporting competitive local supplier participation and development,” the document says.
It is hoped that that in the process of implementing the policy, Guyana will have world-class capacity in key state institutions and high-quality governance, “which can act as a model to raise the standards of government services across the country, through collaboration of the Government of Guyana and private sector.”
Government promises “good governance” and said that the policy will build off of the tone it sets in this regard.
“It is the long-term growth and diversification in the economy and targeted development of local skills, services, technology and infrastructure that have leveraged sustainable development in those countries who have managed their petroleum resources well and not only focused their policy on the immediate impact of investments for local employment and businesses,” the document states.
“These success stories are characterised by principles of good governance in the petroleum sector. We shall apply this approach to the implementation of our local content policy in Guyana. As a new industry, the petroleum sector in Guyana offers an opportunity to design and operate the required governance framework for local content to the highest standard. Done well, this shall ensure transparent and accountable management of local content in our petroleum resource and assure its contribution to our wider goals of transforming the economy to the benefit of all Guyanese now and in the future,” it adds.
