Guyana’s draft Local Content Bill is currently being ‘fine-tuned’ and Attorney General Anil Nandlall SC says that it will be laid in Parliament before year-end as promised by government.
“It is receiving the attention of the Chief Parliamentary Counsel and team…it will be laid before the end of 2021,” Nandlall told Stabroek News on Thursday when contacted.
Only the First Schedule of the Bill has been seen by this newspaper, and it deals with “Minimum Local Content Levels”. The First Schedule is heavily centred around the new-found oil and gas sector as most of the specificities on joint ventures, skills training and transfer, and provision of services, are linked to the petroleum industry.
“Local content must be a means to promote economic development by creating opportunities for the Guyanese labour force and business sector in defined areas of work where the skills are available. Local content is an important strategic issue in the oil and gas industry. The government and other stakeholders are seeking to secure greater local benefits from oil and gas production,” the document states.
“These expectations are important factors in the way the government is determining which companies gain access to hydrocarbon business opportunities. Thus, the GoG will work with local companies to realise a range of additional business benefits in terms of: Building sound relationships with project-affected communities and establishing and maintaining a social licence to operate. Capturing the performance and efficiency benefits of a qualified local workforce, developing cost-effective, efficient, and responsive supply chains [and] Contributing to the development of stable and prosperous host societies that are better places to do business,” it adds.
According to the document, contracting companies must comply with the proposed sliding scale targets of the respective sectors so as to ensure maximum participation of local suppliers in the petroleum sector and development of Guyanese persons. But whilst Guyana’s policy that foreign firms working here must ensure that goods and services are from locals or locally owned companies, it only requires that the company “show” 51% of equity shares belong to locals or local companies, a loophole that the Georgetown Chamber of Commerce and Industry (GCCI) has consistently bemoaned. This is because there have been no changes to this country’s Companies Act concurrent with the rapid changes occurring within the new oil and gas sector. Companies operating here just have to show on paper, at minimum, that the majority of their shares are owned by Guyanese.
“Guyanese Company” can mean any company incorporated under the Companies Act with at least fifty-one percent (51%) of equity shares issued to Guyanese Nationals or Guyanese companies,” the document states. GCCI’s President Timothy Tucker told this newspaper that the Companies Act needs to be looked at and amended so that foreign companies cannot use that loophole to register and then be termed a local business. “Here you have Guyana-registered but foreign owned companies. The Companies Act allows it to happen and the GCCI has been asking that it be updated… The local content will deal with oil and gas but if we amend that Act, we address so much more,” he had said. Tucker last week said that the GCCI has only seen the First Schedule and will withhold its comments on the draft Bill until it is seen in its entirety.
In the meantime, the private sector body has asked to meet with Minister of Natural Resources Vickram Bharrat and that meeting is tentatively set for next week. “We cannot comment until we see the draft Bill in its entirety and we have not had that opportunity as yet,” he said. The First Schedule identifies this country’s local content attainment objectives over a ten-year span; the proposed percentage attainment commences from year 0-3 years, then 5, 7 and until the 10th year of corresponding span. Commensurate with the 10 year plan, petroleum sector jobs are subdivided into three levels – up, mid and downstream level. The proposed draft states that management staff for companies in extraction and production should have at least 10% of its staff at the management level be locals when it starts, 20% by three years, 25% by five years, 35% by seven years.
At the supervisory level, it is proposed that (oil) companies commence Year 1 with 15 percent of their staff as locals, moving that target to 25% after three years, 25% at five years, and 50% at 7 years and by 10 years add an additional layer of 15%. The table below summarizes local content levels to be attained over the proposed timeframe 0-10 years:
Regarding Front End Engineering and Design (FEED) services, different targets have been stipulated for onshore and offshore facilities; for onshore it is proposed that there be a 20% local staff at startup increasing to 90% by year 10. However, for offshore facilities it is proposed that there is 10% of Guyanese at startup expanding to 95% by the 10th year.
Procuring and delivery of materials were sectionalized and specifically state that materials such as steel types (plates, flat sheets, steel pipes), protective paints and glass reinforced epoxy amongst others with set targets, should be procured from local suppliers and distributors.
“Steel Pipes refer to services to pipes sourced locally, imported, or added value. These services include treading and repair of pipes. Low Voltage Cables and High Voltage Cables refer to the final stage processing of these cables in-country. Valves and pumps refer to the certified maintenance of certified Original Equipment Manufacturer (OEM) parts in-country. Drilling mud-baryte, bentonite refer to the movement of prime contractor services in country,” the first schedule of the draft legislation states. “Cement refers to the procurement through a third-party. Heat Exchangers and other piping accessories refer to the certified maintenance of certified OEM parts in-country. Steel ropes and other mooring accessories refer to its installation support and servicing. Protective Paints refer to the procurement of these services from suppliers in-country and operations and maintenance support in-country. Glass Reinforced Epoxy (GRE) pipes refer to such pipes procured from suppliers in country,” it adds.
Transportation supply and disposal services are determined by sliding scales; remotely operated vehicles (ROVs) or tugs should have 30% Guyanese involvement at the start up and 90% participation by year 10. Tugs and ROV support refer to both support and technical staff (technicians) as well as the related equipment. The draft document explains that given that some services, such as well cementing services, ROVs, directional drilling services, tools and wireline logging are currently being implemented by International Tier 1 Contractors, “Guyana is moving towards an encouragement of more joint ventures and partnerships through technological adaptation and skills transfer”. It added “This would allow for our local labour force and business to better participate in the provision of these services”.
Financial and Insurance Activities are documented under a section with stated outcomes as illustrated in the table below:
The document states that local insurance companies are to be utilised for the respective targets of risks along with international assurance or insurance companies. “International insurance requirements – the choice of insurer is reserved for certain policies such as hull and machinery. This is to ensure that drilling contractors meet any vessel mortgage covenants and access economies of scale across the global fleet,” the document states. “Over time, it is expected that local insurers would build more net capacity to insure larger industry risks. In so doing, local insurers would be able to use reinsurance to guarantee itself 100% capacity for massive O&G risks from day one (in gross terms) and thereby be able to grow at a much faster rate to secure the industry. Local companies will grow because the reinsurers will pay commissions to the insurers who in turn will apply these commissions to build capital reserves and hence, capacity for taking on more risk themselves,” it adds.
Having scrapped an earlier document created under the former APNU+AFC government for lack of initiatives for local participation in the sector, President Irfaan Ali and his Cabinet, in August of last year, tasked a new Local Content Panel with “undertaking a review of policy initiatives on local content in the petroleum sector and to provide guidance for the development of Guyana’s Local Content Policy and Legislation.” Chaired by Shyam Nokta, the panel comprised former Minister of Foreign Affairs, Carl Greenidge; trade unionist Carvil Duncan; Trinidadian Energy & Strategy Advisor Anthony Paul; former Trinidadian Minister of Energy Kevin Ramnarine; chartered accountant Floyd Haynes; and the Ministry’s Legal Officer Sasha Rajkumar-Budhan. The team completed the report last November.
They determined after analyses from stakeholders that the definition of local content “should be clear and take into account the realities of Guyana including the available local expertise in Guyana’s diaspora.” The panel said that local content should be modeled after the Nigerian, Trinidadian and Ghanaian definitions. Nigeria’s definition describes ‘local content’ as “the quantum of composite value added to or created in the economy by a systematic development of capacity and capabilities through the deliberate utilization of local human and material resources and services”.
