— Guyana, other producers must also make local content is a major priority –Industry Analyst
By Kiana Wilburg
Ensuring high levels of local participation in the oil sector is not something that happens overnight. But with the right investment by oil companies and the will of the government to put locals first, remarkable outcomes can be achieved for emerging oil producers like Guyana in the long run, says International Petroleum Industry Environmental Conservation Association (IPIECA).
To prove its case, IPIECA said one only has to look at Trinidad and Tobago. There, IPIECA said that local content is a major priority of the Trinidad and Tobago Government, which aims to ‘maximize the level of participation of its national people, enterprises, technology and capital through the development and increasing use of locally-owned businesses … and human capabilities in the conduct of all activities connected with the energy sector’.
Committed to achieving this, IPIECA said that Trinidad made the crucial decision to have its locals build offshore platforms that were needed.
IPIECA said, “BP Trinidad & Tobago (BPTT) is that country’s leading oil and gas producer and a significant profit centre for BP globally. As part of BPTT’s expansion, the company needed a series of `new offshore platforms: Cannonball, Mango and Cashima.
Rather, procuring the design and construction of these facilities from established suppliers in Louisiana, the company took a ‘strategic approach’ to this investment decision.”
The Association continued, “BPTT considered the design and construction of these platforms to be valuable opportunities for building competitive local engineering and fabrication capacities. This was a challenging decision in the initial instance, because the local fabrication of the first platform (Cannonball) would incur a US$10M cost premium (on a total project cost of US$54M) relative to international fabrication; and it was necessary to enhance local skill levels in engineering, design and fabrication to support local participation.”
The transparency body added, “BPTT facilitated local fabrication by supporting the creation of two Joint Ventures (JVs). One was for engineering and construction management with Fluor Corporation (USA) and Summit.
The second was for fabrication with Trinidad Offshore Fabricators Co. Ltd. (TOFCO), a JV of Chet Morrison Contractors (USA) and Weldfab Limited.”
IPIECA said that both JVs provided the means to develop local capacities through technical training and mentoring.
Since the beginning of the Cannonball project in 2002, IPIECA emphasized that the benefits of the strategic approach for BPTT have been significant. IPIECA highlighted that there was the development of competitive local suppliers. In this regard, the Association noted that TOFCO and the Summit JV won the subsequent contracts to construct the Mango and Cashima platforms through a competitive tendering process. TOFCO has also secured further platform construction contracts with BHP Billiton and EOG Resources.
The Association noted that there were cost savings too. It said, “BPTT realized more than US$11 million savings on the construction of the two subsequent platforms through reduced design, engineering and procurement costs and shorter fabrication times. The company could achieve additional savings on future facilities required under long-term production infrastructure requirements.”
With respect to BPTT staff capacity development, the Association noted that a local BPTT staff member managed the project internally. It said that this helped develop the company’s internal capacities in project and supply chain management.
As for local economic development benefits, the Association said that local fabrication activities encouraged the development of nearby SMEs, increased local employment in a previously deprived area of Trinidad and paved the way for wider export opportunities in oil and gas fabrication.
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