Oct 18, 2021 News
Even though the Local Content Law is still in the draft stage, the document seen by Kaieteur News shows clearly that the PPP/C Government is determined to secure the participation of Guyanese in a wide cross-section of areas in the oil and gas industry.
According to the draft document, the PPP/C Administration wants oil companies and their subcontractors to achieve local content targets ranging from as low as 10 percent to as high as 100 percent within three to 10 years. Two of the areas where this is expected relate to materials and procurement as well as well drilling services.
In the former, the government is recommending that steel pipes, steel plates, flat sheets, low voltage cables, high voltage cables, valves and pumps, drilling mud bartye, bentonite, cement, heat exchangers, and other piping accessories be secured from Guyanese. With respect to steel pipes, the draft legislation is proposing that oil companies and their subcontractors ensure locals account for 25 percent of the contracts awarded for this with a ramp-up of 50 percent in three years, followed by 85 percent in seven years and 100 percent in 10 years.
In the space of five to 10 years, the government wants more than half of the contracts for the foregoing items to be procured from Guyanese.
With respect to well-drilling services, the draft local content law proposes to have high levels of local participation for some of the most technical jobs in this area. These include but are not limited to: 3D Seismic data acquisition service, Production or drilling service, well overhauling or stimulation services, well crisis management services, extended well test or early production Services including the provision of floating or jack up production unit, and other reservoir services.
For the foregoing, the PPP/C Government wants to see between 30 percent and 90 percent of the contracts going to Guyanese over a period of three to 10 years.
While the foregoing is certainly commendable, the reality is that the industry is new to Guyanese. It therefore means that building the relevant skill sets, getting access to adequate capital, and acquiring the overall capacity needed to tender for these huge and technical contracts which are already being serviced by internationally recognized firms, will not happen for many start-up businesses. And even then, Guyanese would not be able to compete against the years of experience already racked up by its competitors in its oil sector.
It therefore means that joint venture partnerships will be key to avoiding failure in this regard. It is noteworthy that the draft legislation has acknowledged this reality, as part of the document states: “Given that some services such as well cementing services, directional drilling services, tools, and wireline logging are currently being implemented by International Tier 1 Contractors, Guyana is moving towards the encouragement of more joint ventures and partnerships through technological adaptation and skills transfer. This would allow for our local labour force and business to better participate in the provision of these services.”
But even in partnerships, it will be incumbent on the government to ensure that locals are not used as window dressing and that monopolies are not created by those who have greater access to finance or a stronger balance sheet. Mechanisms have to be in place to ensure local content is being achieved; that there is meaningful skill and technology transfer; that locals are equal partners in these arrangements. If fool-proof mechanisms are not in place, the country would very well find itself in a place where only a few super-rich companies dominate the oil sector and front companies are picking up the scraps.
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