Proposed law demands locals supply oil sector with materials not produced in Guyana

Nov 26, 2021 News

Local Content legislation…

Kaieteur News – Guyana’s proposed Local Content Bill has been condemned by some international experts as being ‘unrealistic’ and a perusal of the first schedule of the draft bill would see the assumption appearing to bear true, since it demands and reserves for Guyanese, the supply of several types of materials currently not produced in Guyana.

Some Guyanese employed in the oil and gas sector

Table four of the Bill’s Schedule outlines that in ten years time, the supply of Steel Plates, Flat Sheets, Sections, Steel Pipes, Low Voltage Cables, High Voltage Cables are all to be supplied 100 percent by Guyanese companies. Guyana produces none of the items reserved as materials to be procured exclusively by Guyanese. According to the draft schedule, other demands being reserved for Guyanese to supply up to 95 percent, include the supply of valves and pumps, Drilling mud-baryte, bentonite, Cement, Heat Exchangers and other piping accessories, Steel Ropes and other mooring accessories, Protective Paints and Glass Reinforced Epoxy (GRE) pipe.

Additionally, when it comes to legal services, all legislative drafting for the sector has been reserved for Guyanese from day one as well as Legal Consultancies. The proposal does allow for a sliding scale at the lower end of between 50 and 60 percent, to at the end of 10 years, 95 percent of in-house legal work as well as legal Advisory services be supplied exclusively by Guyanese. Another red flag in the proposed legislation is the fact that it reserved 100 percent for Guyanese in relation to Accounting Services. These include, tax return preparation, payroll support, accounting support, tax advisory accounting and finance employment. With the exception of Financial Advisory a service, which in ten years is reserved 95 percent for Guyanese, each of the other slots are to be supplied exclusively by Guyanese.

Notably, on the administrative side of things, Management Staff has only been reserved at 45 percent for Guyanese, while supervisory staffing positions at the end of ten years should be provided by a 65 percent local workforce. Technical and professional support staff has been capped at 80 and 90 percent respectively while all of the semi skilled and unskilled administrative labour will be reserved for Guyanese throughout. Other services that see high expectations on the part of the ratio of work to be provided for by Guyanese include Front End Engineering and Design (FEED), Detailed Engineering and other services.
These positions, as contemplated by the proposed bill, are to be reserved by as much as 90 percent for Guyanese. Fabrication, Construction and Storage also accounts for a high supply of Guyanese input between 80 and 100 percent, in addition to transportation, supply, and disposal services.
The first schedule did point out that “Given that some services such as well cementing services, ROVs, directional drilling services, tools and wireline logging are currently being implemented by International Tier 1 Contractors, Guyana is moving towards an encouragement of more joint ventures and partnerships through technological adaptation and skills transfer.”
This, the draft bill said “would allow for our local labour force and business to better participate in the provision of these services.”

Guyana’s Draft Local Content Policy and proposed legislation, making the requirements legally binding, have been condemned by some as being unrealistic. One such expert—Co-Founder of Americas Market Intelligence (AMI)—Arthur Deakin is of the firm belief that Guyana has still fallen short of outlining realistic procurement, training and employment goals for oil companies. In one of his most recent columns, Deakin highlighted that the government, for example, expects that within 10 years, Guyanese firms should be used to cover 95 percent of the energy sector’s insurance risks.

Deakin was keen to note that this alone is just not practical. Except for Brazil, which has managed oil and gas projects for half a century and has the 12th largest economy in the world, the analyst said, no other Latin American country has the local insurance capacity to provide this type or level of coverage. Using this reasoning, he concluded that such an expectation or target shows a mismatch between the government’s expectations and the current reality on-the-ground.

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