Local Content Policy…Few measures in place to guard against conflict of interest in oil sector

Aug 21, 2017 News

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Guyana’s draft Local Content Policy has very few measures to safeguard against favouritism and conflict of interest in the oil and gas sector.
This Policy is intended to make certain that Guyanese benefit from the oil sector. This can be done through ensuring the use of local supplies by USA oil giant, Exxon Mobil, as well as making sure that the company trains and employs Guyanese. The draft policy is currently in circulation where a number of submissions have been made thus far. This is according to Natural Resources Minister, Raphael Trotman.
Transparency International cautions that several nations have been made to suffer the consequences due to grievous oversights in the Local Content Policies.
The anti-corruption watchdog has pointed out that politicians and decision-makers are usually very close to the economic elite, and in several cases are the main beneficiaries of local content requirements. As such, local content rules end up benefiting and generating revenues for government-affiliated individuals, failing to achieve some of their objectives such as promoting enterprise development and the broader sustainable development of the country.
Transparency International said that there are several examples of conflict of interest and favouritism in the design and implementation of local content policies.
The international body pointed out that this has been the case in Nigeria, where local content may easily be used by the political and economic elite to extract rents, as well as in Uganda, where close ties between senior public officials and the private sector may distort the policy-making process and the award of licences and other local content benefits. Transparency International said that studies have shown that local policies and resources are often directed to groups based on their affiliation, ethnicity and loyalty to the president.
It went on to state that similarly, Angola’s local content policy has been considered highly vulnerable to exploitation by public officials and their close allies in the private sector. The global watchdog said that investigations conducted by Angolan organizations and the US government have raised questions regarding contracts awarded to companies belonging to Angolan decision-makers.
According to the investigations, in compliance with the local content law that requires international companies to partner with local companies to be able to operate in Angola, an American company entered into a consortium with two Angolan companies to participate in oil blocks. However, it turned out that the real owners of one of these local companies were the former chairman and CEO of Sonangol, the Angolan state-owned oil company (responsible for the agreement with the American company), and a minister of state.
Considering the fact that instances of favouritism and conflict of interest have been seen at the level of government for over 20 years, local anti-corruption advocates are calling on the APNU+AFC administration to not be remiss in ensuring that the Local Content Policy guards against the aforementioned.
DRAFT POLICY
According to the draft, the Local Content Policy framework seeks to address, the opportunities that may arise and the approaches to be taken in selecting and developing opportunities related to enhancing the capabilities of Guyanese nationals and businesses.
The Policy articulates that this will be done through training, development and employment initiatives (Capacity Development), ensuring availability of ownership participation for qualified Guyanese equity interest (Ownership Value), supplier development provisions for goods and services by locals to support sector operations (Local Content); and well-tailored social contributions for greater impact and benefits (Societal Benefits).
It also describes what will be done to ensure that the activities in the petroleum sector are conducted in a manner that transparently secures the maximum benefit for the people of Guyana, while recognizing the limitations of the country and holding all actors accountable to the present and future generations of Guyanese who are the owners of the nation’s petroleum resources.
Additionally, the draft policy recognizes that the petroleum resources of Guyana belong to all its citizens, and represent an asset of significant intrinsic value, which once removed diminishes the wealth of the nation, unless there is transformation in value from resources below the ground to improved quality of life above it for current and future generations of Guyanese.
The draft says, “Guyana will approach the development of its petroleum resources, people and businesses in a pragmatic, transparent and accountable manner. This will be conditioned by existing circumstances and an analytical approach to understanding the resource, the activities it engenders and our input capabilities. We shall pursue strategic opportunities for local capacity development and participation that give us the maximum possible benefit now and in the future.”
The Policy also states that Guyanese will participate in a manner that gives preferred access and opportunities to improve and enhance the country’s capabilities so that it can become internationally competitive and in the end, the country will progressively provide a greater amount of future services.
Capacity development

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