By Kiana Wilburg
Since the release of the Production Sharing Agreement (PSA) between Guyana and ExxonMobil, analysis and viewpoints of all fashion have been flooding the oil and gas debate. For example, some commentators contend that if one were to compare Guyana’s PSA with that of other countries, the citizenry would have a clearer idea of how Guyana was robbed of several opportunities to develop its wealth and the industry as a whole.
In fact, this newspaper has found glaring instances where Governments of several African countries were able to negotiate much better terms for their people. The case of Uganda is a prime example of this.
In 2012, the Government of Uganda signed a PSA with British operator, Tullow Oil. That entity is also exploring in Guyana’s deep waters. One of the many commonalities between Guyana’s PSA and that of Uganda, is that they both address the subject of Local Content. This speaks to the use of local goods, skills and services in the development of the oil and gas industry.
In Uganda’s PSA with Tullow, the Local Content provisions are as pellucid as they are detailed.
PURCHASES IN UGANDA
In the area of procurement, the Government notes in its PSA that the Licensee shall give preference to goods which are produced or available in Uganda and services which are rendered by Ugandan citizens and companies unless such goods and services are offered on terms which are not equal to or better than imported goods and services with regard to quality, price and availability at the time and in the quantities required.
The Licensee is expected to establish appropriate procedures, including tender procedures, for the acquisition of goods and services which shall ensure that the suppliers and subcontractors in Uganda are given adequate opportunity to compete for the supply of goods and services.
According to the PSA, the tender procedures shall include, inter alia, the financial amounts or value of contracts which will be awarded on the basis of selective bidding or open competitive bidding, the procedure for such bidding, and the exception to bidding in cases of emergency, and shall be subject to the approval of an Advisory Committee.
Within 60 days after the end of each calendar year, the Licensee is to provide the Government with a report outlining its achievements in utilizing Ugandan goods and services during that year. The PSA also specifies that goods shall include equipment, materials and supplies.
TRAINING/ EMPLOYMENT IN UGANDA
According to Uganda’s PSA, the Licensee agrees to train and employ suitably qualified Ugandan citizens in its Petroleum Operations and, following the effective date, to undertake the schooling and training of Ugandan citizens for staff positions. The PSA specifies that these posts must include administrative and executive management positions. The Agreement states that the Licensee will also require its sub-licensees to do the same.
The PSA also makes it clear that the Licensee must undertake to gradually replace its expatriate staff with suitably qualified and experienced Ugandan citizens as are then available. However, if the Licensee satisfies the Ugandan Advisory Committee that no suitably qualified and experienced Ugandan citizens are available who are capable of filling key senior management or technical position, the Licensee shall employ expatriate staff in such positions.
The PSA goes on to state that an annual programme for training and phasing in of Ugandan citizens shall be established by the Licensee and shall be submitted for approval to the Government’s Advisory Committee, along with the annual Work Programmes and Budgets. Additionally, within 30 days of the end of each calendar year, the Licensee is to submit a written report to the Government describing the number of personnel employed their nationality, their positions and the status of training programmes for Ugandan citizens.
The oil company is even required to establish an annual programme, satisfactory to the Government, to train personnel of the Government to undertake skilled and technical jobs in Petroleum Operations. It is also required to deposit with government, or its nominee, on the effective date and each anniversary of the effective date of the contract thereafter, the certain amounts for training of Government personnel selected by the Government and other associated costs for each Licence.
For the Exploration period, Tullow was called on to pay US$100,000 per six months. During the development phase, the oil operator was required to pay US$150,000 per 12 months. Following the commencement of production it was asked to deposit US$ 300,000 per 12 months.
LOCAL COTENT & GUYANA’S PSA
When compared to Guyana’s PSA, one would notice some distinct differences.
Guyana’s PSA notes that the local content activities will be carried out not by the Contractor, but by an Operator appointed by the three companies making up the Contractor.
In respect of goods and services, the Operator is expected to give preference to Guyanese goods and materials of a quality and quantity, timely delivery and competitive prices. In respect of Guyanese Sub-Contractors, preference is to be given if they are commercially competitive and meet financial and technical requirements.
Article 18.2 requires the Contractor to establish tender procedures for the acquisition of goods, materials and services which shall ensure that Guyanese suppliers and Sub-Contractors are given adequate opportunity to compete for the supply of goods and services. Further, Article 18.3 requires the Contractor to train Guyanese suppliers and Sub contractors in the procedures for participating in tenders and competing for contracts to be offered in the Operations.
The contract also outlines that the Government shall provide the necessary work permits and other approvals required by the contractor for employment of expatriate employees in Guyana for the purpose of petroleum operations.
Without prejudice to the right of the contractor to select employees and determine the number thereof in the conduct of petroleum operations, the contractor shall require the operator to employ and contractually obligate sub contractors to employ Guyanese citizens having appropriate qualifications and experience in the conduct of petroleum operations in Guyana.
During each year of the term of the petroleum prospecting licence, or any renewal thereafter the contractor shall pay to a Government account for the Ministry responsible for Petroleum the amount of US$300,000.
The money can be used to provide Guyanese personnel nominated by the Government with on-the-job training in Contractor’s operations in Guyana and overseas and /or practical training at institutions abroad; send qualified Guyanese personnel selected by the Government on courses at universities , colleges or other training institutions; to send Guyanese selected by the Government to conferences and seminars related to the petroleum industry and to purchase for the Government, advanced technical books, professional publications , scientific instruments or other equipment required by the Government.
Within 60 days prior to the beginning of each year, the contractor and the Minister shall provide a yearly plan for the utilization of qualified Guyanese personnel for the upcoming year. Following the submission of this plan, the Contractor and the Minister shall meet to discuss and consider the effectiveness of the plan.
The contractor is also expected to provide half yearly reports within 30 days after the end of each half year to the Minister outlining achievements in utilizing qualified Guyanese personnel during the previous half year and make appropriate adjustments to the yearly plan to better accomplish the goal of increasing the number of qualified Guyanese personnel available for use by the Contractor in its Petroleum operations and other entities performing petroleum operations in Guyana.
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