New draft Local Content Policy seeks to temper expectations

May 18, 2018 News

Business Minister (with responsibility for Local Content), Dominic Gaskin

The authors of the second draft of Guyana’s Local Content and Value Addition Policy Framework have taken a special interest in tempering expectations for the coming oil and gas industry.
Local content policies usually aim to set out guidelines to be observed by foreign companies operating in an economy. It is supposed to secure maximum benefits for citizens of a country. Guyana’s local content policy, formulated specifically to guide players in the oil industry, was supposed to be no different. In fact, the authors, including Trinidad’s Anthony Paul of Chatham House, stated in the policy that the intention is to secure benefits for Guyanese. However, there is little that states clearly how this is going to happen.
Instead, much focus was placed on tempering expectations.
The policy stated that while Guyanese naturally see the development and production of oil and gas providing opportunities for participation, “we are acutely aware of the realities of the situation in which we find ourselves”.
First, the authors pointed out the very obvious, which is that the oil and natural gas industry in Guyana is in the embryonic stage of development.
It was then stated that although the oil discovered thus far is very significant, development will take place during a period of low oil prices and global oversupply of both the commodities and services required by the sector.
The drafters also noted that Guyana is a small, developing country, in terms of human capital, technology base, services capability, infrastructure, facilities and equipment availability, international competitiveness of indigenous businesses and the size of the economy and capital markets.

Local Content Expert, Anthony Paul

The fact that Guyanese have limited capability and experience in the oil and gas sector, including among those in the Diaspora, was also pointed out.
The policy also states that many of the goods and services used by the sector are highly specialized, requiring very high levels of technology, innovation, investment capital and experienced specialists.
The authors then registered the fact that the oil and gas sector is a high risk business, involving very high levels of capital and technology and hazards that can put people, property and the environment at risk, therefore requiring high standards of performance by its participants to mitigate operational and business risks.
The authors were keen to note that, “Relative to its potential economic impact, the petroleum industry does not directly generate large numbers of jobs, but of those created, many are of high quality, in terms of the competencies required/developed and benefits to employees. That said, additional employment is created through the multiplier effects of the supply chain, the ability of other sectors to grow as a consequence of the enhanced supply chain and government revenue generated by the sector.”