Calls made for legislation to command local content contribution from oil companies

Jan 12, 2018 News

President of the Georgetown Chamber of Commerce and Industry (GCCI), Deodat Indar recently pointed out that Guyana is in serious need of legislation which would not merely encourage but command that there be local content contribution from oil companies.
Sharma said that this feeling is shared by various members within the Chamber and the private sector body as a whole.
In fact, the Government has been promising local content policy in the last two years and a strong final document is yet to be produced. Several members of the private sector have expressed disappointment with Government’s overall attitude towards the matter of strong local content policy and legislation.
Indar related to this newspaper that Private Sector Commission members, and even those of GCCI, believe that legislation as well as a policy is necessary, given the eye-opening experiences of countries which paid a significant price for having poor local content provisions in place.
In this regard, members pointed to the fact that Trinidad and Tobago, a sister CARICOM nation, was very strict about what oil companies must do when it comes to local content.
One Private Sector Member told Kaieteur News, “Trinidad and Tobago has years of experience in the oil sector and it has seen significant development of its oil services industry which today, is world class, owned by Trinidadians, and contributes significantly to its economy.”
The member continued, “But what we should also pay attention to is the Trinidadian Government’s enactment of legislation on what oil companies can and cannot do. The Aliens Act and the more recent Foreign Investment Act restrict foreign oil companies from owning land and building offices thereby requiring them to rent offices built by Trinidadian Companies.”
He added, “The result was that Trinidadian entrepreneurs built millions of square footage of first world office space thereby creating thousands of jobs, bringing in local taxes and a sustainable stream of income that is continually reinvested in the local economy. The thinking of that Government then was that if they allow Oil and Gas Companies, as powerful and important as they are, to build their own offices, there would be no trickle down benefits to Trinidadians.”
The Private Sector Member insisted that in Guyana’s case, local content legislation ought to include unambiguous deliverables from such companies.
Strategic Advisor and former Minister for Energy in Trinidad and Tobago, Kevin Ramnarine had expressed similar sentiments. He too asserted that a mere local content policy would not be enough. He insisted that it must be backed by legislation if one intends to really compel companies to utilize local goods and services for the oil and gas sector.
He shared that Trinidad only woke up to Local Content around 2004. He said that this was pretty late for the twin island republic. In spite of the late start, Ramnarine said that the country made the decision to fabricate offshore platforms which were previously manufactured by other nations.

GCCI President, Deodat Indar

The Strategic Advisor said, “So from 2003 to 2017, we fabricated eight offshore platforms in Trinidad. These used to be fabricated in the United States of America or Mexico before we started it…There is a local content policy in Trinidad. But now, having the benefit of hindsight, it should be legislated.”
Ramnarine added, “The sooner you get there the better, or it will take a lot longer to get there. You have to have the power of law to compel the companies to use local goods and services.”
Minister of Natural Resources, Raphael Trotman had indicated that by the end of 2017, Guyana would have in place, a robust Local Content Policy for the oil and gas sector. But this did not materialize.
Trotman had said that the Government retained the services of world-renowned expert, Mr. Anthony Paul. The Leader of the Alliance For Change (AFC) noted that Paul was keen on completing and having distributed for consultation, the first draft policy.
Trotman expressed, “The idea for this is that we could not move to legislation without first having a policy. Legislation should follow policy rather than the reverse and so it was thought that we should craft the policy before 2020”.
LOCAL CONTENT POLICY
Guyana’s draft Local Content Policy has been criticized 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 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.