Government anticipates that its Local Content Secretariat (LCS) will become functional by this month end and is continuing to push for maximal opportunities in the oil and gas sector for locals in partnership with ExxonMobil’s Centre for Local Business Development (CLBD).
Minister of Natural Resources Vickram Bharrat told the Sunday Stabroek recently that the government is grateful for the guidance that the CLBD provided for persons to be trained and certified in a number of areas.
“The CLBD …is working with us. We do not see getting rid of the Centre, but [instead] looking at having us work closely together. I know the Head of CLDB and the LCS have already been working together to look at ways at which they can collaborate,” the minister said in the interview. “What they have been doing, is a lot of training and capacity building and they will continue to do that. They have been doing a good job at building capacity for local businesses to grab opportunities in the sector. But the actual registration for local businesses will have to be done at the LCS,” he added.
Regarding staffing of the secretariat, Bharrat said that not many vacancies exist as employees from the Department of Energy [DoE] will be reassigned to the LCS. The minister said that the government did not terminate the services of any of the employees of the DoE, except for its Head, Mark Bynoe.
“We have staff, and we have someone who has been working in the department and who will head the Secretariat. We also have staff from the Department of Energy. We didn’t send home anybody, except for Mr. Bynoe…,” he said. “That staff was there and underutilized for the last year so we will utilize them in the LCS because they are good staff. They have been with the department for a couple of years and have gained some experience,” he added.
The Local Content Act sets out parameters for employment and states that a Local Content Secretariat will be established within the Ministry of Natural Resources; the law lists the Secretariat’s functions which includes developing and maintaining measures for the effective implementation of local content by contractors, sub-contractors and licensees. The Secretariat is required to ensure development and implementation of strategies that give preferences to, or ensures equal treatment of Guyanese nationals and companies.
The Secretariat will develop and maintain a local content register of qualified Guyanese nationals and companies and recommend for approval or refusal, master and annual plans submitted. A Director of the Secretariat will be appointed by the minister and other members can also be chosen by the minister if they meet the requisite experience, qualification and capacity to perform the duties set out. Those duties ensure that contractors meet the 45-day stipulation to submit [to the secretariat] their performance report on local content activities.
ExxonMobil, in announcing on Friday that its second platform in the offshore Stabroek Block had started producing oil, noted that the more than 3,500 Guyanese are now supporting its activities in Guyana. It said ExxonMobil and its direct contractors spent approximately US$219 million with more than 880 local suppliers in 2021, a 37% year-over-year increase.
Wins
The Local Content Bill 2021 was passed in December [2021] and assented to by President Irfaan Ali on December 31st. The president had contended that the Bill ensures Guyanese will win when it came to securing jobs from the oil and gas sector.
“This Local Content Bill will give us the opportunity for Guyanese to win; to set the framework for Guyanese to win, and that is what we’re interested in. When the people of Guyana win, the world wins,” he had said at the signing of the Bill. Bharrat said that it must be clear, that while it is encouraged that all local businesses intending to get work in the sector be registered, it [registration] is not compulsory. “We never said a company that isn’t registered will not get work. They will not be counted as local content. There is nothing barring a local company from doing business with Exxon or any oil company and subcontractors, they just won’t be counted as local and the companies know this,” he said.
He is urging locals to assemble all relevant documentation for registration, and to be prepared to activate the registration process when the Secretariat opens. According to the minister, the total number of registrants will inform government how local content job specifications are stratified and their statistical representation.
The law when presented to the National Assembly was touted as the primary vehicle through which Guyana seeks to negotiate a tradeoff between investors engaged in the petroleum sector and Guyanese nationals and Guyanese companies involved in the petroleum sector.
Its explanatory memorandum says it is aimed at economic diversification through prioritising Guyanese nationals and Guyanese companies in the procurement of goods and services for the enhancement of the petroleum sector value chain. “This prioritisation will guarantee that there is an increased retention of the economic benefits in Guyana, while simultaneously allowing for upsurges in the number, competencies, and capabilities of Guyanese nationals and Guyanese companies participating in the petroleum sector,” it states.
To deliver on its legislative target, the bill puts in place regulatory mechanisms to implement, investigate, supervise, co-ordinate, monitor, and evaluate participation in local content in Guyana.
The bill defines a “Guyanese company” as “any company incorporated under the Companies Act – (a) which is beneficially owned by Guyanese nationals who ultimately exercise, individually or jointly, voting rights representing at least fifty-one per cent of the total issued shares of the company; and (b) that has Guyanese nationals holding at least seventy-five percent of executive and senior management positions and at least ninety percent of non-managerial and other positions.” A “Guyanese national” means a citizen of Guyana.
More attractive
Vice President Bharrat Jagdeo says that the legislation safeguards locals. While non-nationals might rail against it, he noted, they must understand that each country tries to protect their own, a necessity which explains the existence of similar policies in other oil producing countries. It is to this end, the Vice President said that locals must be given the same tax concessions given to subcontractors of oil companies so that they can compete, and are not automatically placed at a disadvantage. Prior to that, Jagdeo had late last month said in an interview with the state-run NCN that the agreement with ExxonMobil was already lopsided in favour of the oil major and its partners. But by having a local content law, Guyanese can assuredly benefit from their resource. Jagdeo further opined that another way of looking at the legislation is that it is one way of recouping some benefits.
Pointing out that locals have the capacity to provide goods and services for at least 40 areas singled out in the Act, he said that monies expected from those areas “could be US$400 million to US$600 million in a year in those areas that we have carved out for our people already.” He said that government will continue to train its human resources so that “they can even go into other areas, not just the 40 areas, but we can start expanding that list into more complex operations like fabrication, etcetera.” He said that by setting local content parameters, government was making local companies more attractive to foreign businesses looking to invest here as they would be more inclined to go into partnerships.
“They now have to go and form joint ventures with our people because the law says in order for the company to be registered, you have to have 51% Guyanese ownership, 75% management and 90% of your staff must be Guyanese,” he said. “There is more money to give to support our people more and to expand the opportunities. That is what I meant by transferring some of our wealth to people. We can’t build the FPSOs, but apart from the royalty that we get, apart from the share of profit oil, we have to get some of the business opportunities. That is how you seek to rebalance the lopsided agreement, by forcing some of the business opportunities to come to our people,” he added.
