Government should stay away from supporting any non-oil project requiring subsidized energy, and instead focus on maximizing the revenues received from the non-oil economy and supporting local content initiatives to push that.
This is the advice from Chatham House, and Dr Valérie Marcel, co-founder and project lead of the South-South peer-to-peer network of 30 emerging oil and gas producer countries, the New Producers Group.
“There are some pitfalls Guyana should avoid: supporting non-oil sectors (or anything) with subsidized energy, not factoring in the cost of externalities, like emissions from refining, and starting to value the petroleum sector more than its forests,” Marcel told the Sunday Stabroek after a review of this country’s first local content laws.
Marcel was impressed that the local content policy emphasized lateral linkages, which aim to create jobs, supply chains and infrastructure in non-petroleum sectors, notably the green economy. But she advised that with “both the local content policy and its fiscal policy, Guyana needs to keep a focus on that non-oil economy and encourage it.” “The devil is in the details or rather, in implementation,” she added.
The enactment of the local content law in late December last year came six years post-discovery of offshore oil, and more than two years after commencement of production. It sets out the minimum percentage of local employment and goods and services procurement, along with a reporting mechanism for annual data submission and substantiation. The law earmarks forty sectors or services and stipulates a minimum percentage of the total value of expenditure of those services that oil companies and their sub-contractors must procure from Guyanese suppliers.
During his budget presentation last Wednesday, Senior Minister with responsibility for Finance Dr Ashni Singh, said the law provides an enabling framework for the development and expansion of Guyanese companies, and most importantly, business and job opportunities for Guyanese nationals. Singh provided an update on the local content initiatives undertaken by government and announced that a Local Content Secretariat is being established to come on stream within a matter of weeks, thus allowing for “the efficient operationalization of the Act.”
Government had previously said that it [the Act] was a work in progress, given that oil and gas is a new sector, and both Minister of Natural Resources, Vickram Bharrat, and Attorney General, Anil Nandlall, noted that whatever changes occur in the future, the law must continue to ensure that Guyanese benefit from the sector.
Responding to heckling from the opposition side of the House, Bharrat had said that the bill is a ‘working” and “living” document. “No local content bill can remain static in any country in the world…Nothing in the local content bill is cast in stone,” he argued.
When the bill was first laid in Parliament, government rejected all 14 of the amendments proposed by the opposition APNU+AFC. However, 10 of those 14 amendments were later modified and agreed to with similar wording as found in the government propositions.
However, Marcel said that prior to the crafting of the bill, Guyana should have first assessed what services and opportunities are to be had by liaising with the companies already working here as in that way a balance could have been struck as to the specificity in job requirements and the types of local services to be supplied. Government has not disclosed if there were prior discussions with any of the multinational companies, and if numbers of specific skill sets and jobs required were discussed, but promises to ensure that human resource capital here would be enough for the sector. In the 2022 national budget, Singh announced that $420 million would be set aside to train 1,000 persons to “ensure that we have a pool of Guyanese persons equipped to take up jobs in the oil and gas industry.” “Under this programme, training and certification will be provided to welders, stevedores, heavy vehicle operators, and others. This programme will continue into the medium-term and will see up to 4,500 persons trained over the next four years,” Singh said. He also criticized the former APNU+AFC government for not putting enough programmes in place since the discovery of oil in 2015 to ensure that an oil and gas workforce and necessary businesses would be in place when production commenced. Singh said that even as this country sees more discoveries and prepares for expanded offshore activity, training will continue to be a priority.
To ensure diversity, Singh said that a further $2.5 billion is earmarked to strengthen Technical and Vocational Education and Training (TVET) programmes across the country at post-secondary levels, not only for oil and gas, but as preparedness for various skills’ building to foster entrepreneurship. “This will equip approximately 4,500 young people with the skills to pursue entrepreneurship and ensure employability. Additionally, nine secondary schools will complete a pilot of the Level 1 Caribbean Vocational Qualification (CVQ) programme across various skills, including crop production, furniture making, electrical installation and masonry. This will now create the opportunity for students to access the technical institutions that offer Levels 2 and 3 CVQ, qualifying them as independent workers capable of managing their own operations and as supervisors, respectively with a first batch of 129 students expected in 2022,” the Finance Minister stressed.