Apr 04, 2021 News
By Kiana Wilburg
Kaieteur News – Almost one year ago, international Energy Lawyer, Mr. J. Jay Park, had conducted a review of the provisions in the Guyana-ExxonMobil Production Sharing Agreement (PSA) for the Stabroek Block. Following his assessment, Park found that the clauses, which should ensure Guyanese get first preference for jobs and contracts in the oil sector, leave much to be desired. The terms were found to be so poor that he had given the said provisions an “F Grade.”
The renowned energy expert, who has practiced energy law for over 30 years, with a specific focus on creating optimum petroleum regimes for States, had explained that the reason for such a grade is premised on the fact that the provisions would put Guyanese at a disadvantage, as they give Exxon and its contractors, enough room to make excuses for not giving first preference in the award of contracts to local businesses. Less than one year of making this pronouncement, Park’s words are coming to past.
Kaieteur News was recently informed that a local manufacturing company had submitted an Expression of Interest to supply SBM Offshore, one of ExxonMobil’s prime contractors, with Personal Protective Equipment (PPE). Despite joining forces with W.W Grainger, an internationally recognized supplier of PPE, the local company was still told that it was not eligible to submit a bid. The Guyanese company, which was hopeful of getting a foot into the oil industry, was rejected on the basis of having zero experience in supplying the industry with PPE.
In an email seen by Kaieteur News, SBM Offshore said, “Dear (withheld on request for anonymity) Thank you for your email. We had to run our technical pre-selection amongst a significant number of suppliers and based on the feedback that your company provided, your company has not been approved for applying to this tender. Immediate justification that I received from the team was the lack of previous experience(s) in supplying PPE within the Oil and Gas industry and in Guyana.”
Speaking with Kaieteur News, the medium sized manufacturer said it is quite astonishing that after partnering with W. W. Grainger, Inc, an American Fortune 500 industrial supplier founded in 1927, it had thought that it would have been able to prequalify. The local firm said it was flabbergasted to learn that it could not tender for the contract because it had no experience. “How do you expect the small man to benefit from the sector when he can be shut out for not having experience in a sector that is new to the country? How do you expect the small man to have experience in the first place? We are being told to ready ourselves and form partnerships and invest our money but when we do, we are shut out became of lack of experience. This needs to be addressed,” the local company expressed.
In his analysis of Guyana’s PSA with ExxonMobil, Park –one of the world’s leading energy attorneys – had placed under the microscope Article 18 of the agreement (page 46) which states, “In the conduct of petroleum operations pursuant to this agreement, the contractor shall require than the Operator give preference to: (a) the purchase of Guyanese goods and materials, provided that such goods and materials are available on a timely basis of the quality and in the quantity required by the operator at a competitive price; and (b) the employment of Guyanese sub-contractors insofar as they are commercially competitive and satisfy the operator’s financial and technical requirements and meet the requirements of Article 18.1 (a)…”
Park was quick to note during a webinar last year that he has a problem with the foregoing provision. The international lawyer had said that the provision does not create any kind of preference for Guyanese goods and services.
Expounding further, Park said that a local businessman can provide goods but the contractor, which is ExxonMobil, can simply say, “I can find it some other part of the world and get it at a lesser price.”
The lawyer continued, “And let’s say you do match or better all the prices in the entire solar system, the contractor can then say, ‘Sorry, I have found a better quality someplace else.’ Then you might say you can also find equal quality and sooner too. But even then, the contractor can say ‘Sorry, I need 10 times as much as what you have and I can get that at another source’.”
In other words, the Managing Partner of Petroleum Regimes Advisory and Park Energy Law said that Article 18 in the Stabroek Block deal is not a local preference clause. He said, “It is basically a clause that says ‘Yea, we will buy Guyanese goods that are competitive with everything else in the world and with every possible factor that can be used…”
The lawyer alluded to the fact that it would be virtually impossible for Guyanese businessmen to compete with the rest of the world for contracts in their own backyard.
Taking everything into consideration, Park said the Stabroek Block deal gets an F, as it provides no environment to create a local preference at all. The PPP/C Government is hopeful that with a robust policy and law for local content, this state of affairs could be improved.
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