It is of no use to try to close the stable doors after the horse has bolted. Guyana failed to ensure local content requirements in its oil contract with ExxonMobil. As a result, it is the foreign firms which are reaping the benefits of the opportunities in the local petroleum industry.
Panic is stepping in. The Georgetown Chamber of Commerce is beginning to realize the consequences of the lack of proper local content provisions in the contract with Exxon and in Guyana’s laws in general. As a result, Guyana, which has limited capacity in almost all the services, which will be required by those exploring and drilling for oil, will enjoy only limited benefits in the provision of such services while the foreign firms will enjoy a virtual monopoly in providing services and goods to the oil companies.
If before signing the agreement with Exxon, there was an attempt to pass local content laws, which would have specified that a certain percentage value of all contracts had to be sourced from companies, which have Guyanese involvement, this would helped local content. But Guyana not only signed away its wealth to Exxon and company but it also neglected to ensure local content requirements.
There are various ways in which the government could have promoted local content in the oil industry. It does not require local firms to have the capacity. Local content policies can be flexible to allow for local firms to form partnerships with foreign firms, to provide services. This will overcome the handicap of a lack of local capacity by allowing partnerships in which local firms benefit.
Right now, apart from the shore base facilities provided by local companies, not many benefits are flowing into the hands of Guyanese businesses because of local content in the petroleum sector. And the government did not have the foresight to recognize this need early.
We are now just two to three years from first oil and it is the foreigners who are grabbing the greater portion of the spin-offs of the oil and gas industry. Foreign firms are dominant in providing goods and services for exploration and production.
And the trend will continue. The Trinidadians are already here. They know the industry and they have a huge advantage over locals. This is all the more reason why there should have been an insistence on local content legislation.
The local private sector is beginning to have headaches. The Georgetown Chamber of Commerce and Industry has signaled its concern over the signing of a Memorandum of Understanding between Trinidad and Tobago and Guyana. It is believed that with the problems in PetroTrin, Guyana’s oil is seen as means of saving Trinidad’s oil industry.
The Chamber is worried that the MOU will see more business going that country’s way. It is concerned about the delay in local content legislation.
But just what use will that legislation be to Guyana at this stage. “Boat already gone a falls!” The deal with ExxonMobil has been signed. That deal includes provisions whereby should any new law conflict with Exxon’s interest the government is required to fix the problem in Exxon’s interest.
The contract provides that if at any time after the signing of the agreement, Guyana’s laws are changed and these changes adversely affect Exxon’s economic interests, then the government is required to take affirmative action to restore the economic benefits which would have been lost as a result of the changed laws.
Guyana can pass however much local content legislation it wants. It will not change the modus operandi of Exxon and her contractors. The laws of Guyana, present and future, have to bend to Exxon’s demands.
In the meantime, the foreigners are pouring into Guyana to do business. They are making hay while the sun shines. Guyana companies are much too small and much too poor to compete with these firms.
And this was all the more reason why local content legislation should have been put in place even before the Exxon Mobil contract was renegotiated. This would have allowed local firms more time to build partnerships and linkages to benefit from contracts in the petroleum industry.
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