Oil and Gas Sector…Law firms observe influx of registration by foreign businesses

Dec 03, 2017 News

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–  GCCI maintains call for partnership with locals

By Kiana Wilburg

The Georgetown Chamber of Commerce and Industry (GCCI) has received several reports from its legal partners regarding an influx of registration by foreign businesses for the oil and gas sector.
President of GCCI, Deodat Indar, said that while the Chamber is encouraged by this, it is particularly worried by the absence of partnership with locals. It insists that in order for Guyana’s capacity to grow, there must be joint ventures between foreign companies and locals.
He said that this is one of the vital ways in which businesses here can ensure that they are part of the supply chain of the oil and gas sector.
Indar said, “The foreign companies are not saying ‘you are good at catering and I am good at it, so let’s work on being associates and bid for contracts’. They are setting up and doing their own thing. So the ‘budding up system’ comes into play here.”
The GCCI President added, “We are saying that if you come into this environment, partner with a local so that we can have skills transfer. A host of services are needed here and if we don’t start this process then we would have a sector in which we won’t be able to make much of an input in the next three years.”
Indar said that this was one of the ways in which Canada was able to build an almost self sufficient oil and gas sector.
He said, “On our trip to Canada, we learnt that the country was able to build capacity as their companies ‘buddied up’ with others to supply operators there. That is what needs to happen here. It will take time for locals to build capacity and services.
“If you don’t have it, get into a joint venture with someone who has it and learn the ropes…”
Indar added, “We need to develop Guyana’s capacity, not have companies come and set up shop front. The same way they come and set up shop front, is the same way they come and leave…”
FINANCIAL SUPPORT
The Georgetown Chamber of Commerce and Industry also queried, recently, if the coalition Government was able to insert into its contract with USA oil giant, ExxonMobil, provisions for financial support which would be assigned for the development of local products and services.
Specifically commenting on this matter recently was the GCCI President.
The businessman said that it will take more than just a mere policy paper to get oil giants to support local development. In this regard, he cited the case of Nigeria.
The GCCI President recalled that the Government of Nigeria did not depend on a policy paper to ensure ExxonMobil gave monetary support for the development and support of its local products and services.
In fact, the administration ensured that this was negotiated upfront and placed it into the contract it signed with the oil king.
It was this foresight that led to the country drawing down on millions of dollars recently for development purposes. In fact, ExxonMobil provided $975 million to support indigenous operators.
The funds are expected to enable indigenous companies that face many challenges; including limited funding finance different projects and programmes.
ExxonMobil is one of Nigeria’s highest producers of crude oil, accounting for almost 600,000 barrels per day of crude, condensate and natural gas liquids. The American company has been in that African country for over 40 years with a track record of operating a world class facility in the country. It also looks forward to boost crude oil production there.
Because of the contractual safety nets employed by Nigeria, ExxonMobil was even made to invest heavily on human development in Nigeria which was very significant in bringing about competition for national growth.
The company was also made to invest massively in community development in areas of education and infrastructural development, while ensuring sustainability on the long-time benefit.
Over 700 graduates benefitted from the company’s skilled training, and majority of them have been employed by various oil and gas companies in Nigeria.
With the aforementioned in mind, Indar said, “I cannot say if our government has negotiated on Guyana’s behalf in this regard because we have not seen the contract we have been asking for, for some time.
“These things have to be negotiated upfront so that when you get into production, you have something you can go back to and say to the oil company, ‘You are supposed to help with a university wing that is supposed to help with this or that…”
The GCCI President added, “But if you don’t, you won’t get it when the oil companies get into production. We are at a loss right now. We don’t know if the government did this for the nation.”
Strategic Advisor and former Minister for Energy in Trinidad and Tobago, Kevin Ramnarine, recently advocated that having a local content policy would not be enough. He too, insisted that it must be backed by legislation if one intends to really compel companies to utilise local goods and services for the oil and gas sector.
LOCAL CONTENT POLICY
Guyana’s draft Local Content Policy has been criticised in recent months for lacking provisions which would safeguard against exploitation by companies.
The draft speaks nothing of how to avoid procurement fraud, conflict of interest and favouritism, among other crucial areas.
Instead, the draft Local Content Policy framework seeks to address, the suite of 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 recognising 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 recognises 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, to enable more value retention, will be treated as an investment, rather than a cost, the policy outlines.

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