Local Content legislation must compel oil companies to put Guyanese businesses first – GCCI President

Nov 25, 2017 News

By Kiana Wilburg

GCCI President, Deodat Indar

Local Content Policy will not be enough to compel kings of the oil industry to put Guyanese businesses first for their services and supplies. It will take the power of legislation.
This was essentially the argument put forward yesterday by President of the Georgetown Chamber of Commerce and Industry (GCCI), Deodat Indar.
During a briefing with the press, Indar articulated that Guyana has a short space of time in which to get itself together for the booming oil and gas industry. He said that the failure to address certain critical issues correctly will leave Guyanese businesses out in the cold.
In this regard, he provided details on the observations that he and members of the Chamber made during a recent visit to Canada.
“We went there to look at the oil and gas industry not only from a trade perspective, but we wanted to understand the local content system that they have there. We wanted to learn how they were able to develop their industry when they found oil in 1966…”
The GCCI President continued, “Because oil production kicks in by 2020, we have a short time span. We want to learn from Canada, how our companies can become part of the supply chain when ExxonMobil gets into full swing. Joint ventures between locals and foreigners will be the fastest way to get there and this mission is to help in that regard.”
The businessman added, “While in Canada, we looked at their legal structure, training facilities, response facilities in case anything happens, and what would be their response time…We met with a whole host of people just to understand the structure they have and how we can replicate their strengths here.”
Indar said that he and the delegation from Guyana were able to see firsthand, how Canada’s private sector is able to successfully play a role in the oil and gas sector.
For that to happen here, Indar insists that legislation is needed.
“We need legislation which says you need to come to us first before you go to the Caribbean and further afield for products and services. If you need water, see if anyone here can supply it first.”
The GCCI President said that if this is not done then Guyana’s businesses will lose out.
He commented, “What you need is local content legislation which brings enforcement. Operators may not like it, but for development to take place, our local businesses need production. Give us the opportunity to see if we can supply…”
Strategic Advisor and former Minister for Energy in Trinidad and Tobago, Kevin Ramnarine, recently advocated that having a local content policy would not be enough. He too, insisted that it must be backed by legislation if one intends to really compel companies to utilise local goods and services for the oil and gas sector.
He shared that Trinidad only woke up to Local Content around 2004. He said that this was pretty late for the Twin Island Republic. In spite of the late start, Ramnarine said that the country made the decision to fabricate offshore platforms which were previously manufactured by other nations.
The Strategic Advisor said, “So from 2003 to 2017, we fabricated eight offshore platforms in Trinidad. These used to be fabricated in the United States of America or Mexico before we started it…There is a local content policy in Trinidad. But now, having the benefit of hindsight, it should be legislated.”
Ramnarine added, “The sooner you get there the better, or it will take a lot longer to get there. You have to have the power of law to compel the companies to use local goods and services.”
Minister of Natural Resources, Raphael Trotman has already indicated that it is very likely that come year end, Guyana will have in place, a robust Local Content Policy for the oil and gas sector.
Trotman reminded that the Government has retained the services of world-renowned expert, Mr. Anthony Paul. The Leader of the Alliance for Change (AFC) noted that Paul was keen on completing and having distributed for consultation, the first draft policy.
Trotman expressed, “The idea for this is that we could not move to legislation without first having a policy. Legislation should follow policy rather than the reverse, and so it was thought that we should craft the policy before 2020…”
Guyana’s draft Local Content Policy has been criticised in recent months for lacking provisions which would safeguard against exploitation by companies.
The draft speaks nothing of how to avoid procurement fraud, conflict of interest and favouritism, among other crucial areas.
Instead, the draft Local Content Policy framework seeks to address, the suite of opportunities that may arise and the approaches to be taken in selecting and developing opportunities related to enhancing the capabilities of Guyanese nationals and businesses.
The Policy articulates that this will be done through training, development and employment initiatives (Capacity Development), ensuring availability of ownership participation for qualified Guyanese equity interest (Ownership Value), supplier development provisions for goods and services by locals to support sector operations (Local Content); and well-tailored social contributions for greater impact and benefits (Societal Benefits).
It also describes what will be done to ensure that the activities in the petroleum sector are conducted in a manner that transparently secures the maximum benefit for the people of Guyana, while recognising the limitations of the country and holding all actors accountable to the present and future generations of Guyanese who are the owners of the nation’s petroleum resources.
Additionally, the draft policy recognises that the petroleum resources of Guyana belong to all its citizens, and represent an asset of significant intrinsic value, which, once removed, diminishes the wealth of the nation, unless there is transformation in value from resources below the ground to improved quality of life above it for current and future generations of Guyanese.
The draft says, “Guyana will approach the development of its petroleum resources, people and businesses in a pragmatic, transparent and accountable manner. This will be conditioned by existing circumstances and an analytical approach to understanding the resource, the activities it engenders and our input capabilities. We shall pursue strategic opportunities for local capacity development and participation that give us the maximum possible benefit now and in the future.”
The Policy also states that Guyanese will participate in a manner that gives preferred access and opportunities to improve and enhance the country’s capabilities so that it can become internationally competitive and in the end, the country will progressively provide a greater amount of future services.
Capacity development, to enable more value retention, will be treated as an investment, rather than a cost, the policy outlines.