Critical elements missing from draft Local Content Policy – IDB report

Oct 04, 2018 News

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By Kiana Wilburg

The second draft of Guyana’s Local Content Policy is missing critical elements. In fact, the document is more a statement of principles. This was noted by Mark Wenner, Elton Bollers, and Roger Hosein; the authors of a special report that was sponsored by the Inter-American Development Bank (IDB).
In the report, the authors recall that in April 2017, the Ministry of Natural Resources formulated a draft Local Content Policy that promoted the use of local goods and services in the oil sector, as well as training of Guyanese for the industry.
The authors of the IDB report noted however that the language in the draft policy is general and vague. The report says, “No concrete targets or performance metrics are provided. The draft calls for some regulatory body to be established to establish metrics and to ask ExxonMobil to give preference. (But) much more specificity and elaboration are needed in this area.”
It adds, “Other countries for example, require an increased percentage of local purchases of goods and services, the placement of nationals in training/shadowing technical positions, specific amounts to be devoted by the oil/gas operator to scholarships and job training programs, affirmative action employment programs, set-asides for local engineering, accounting, and surveying firms, and others.”
The IDB report stressed that none of these elements are included in the draft, which is more a statement of principles. It also notes that the state must ensure that there is an adequate local content policy and that it does not just import everything it needs, or every worker required.
AVOID MIMICKING
Quite often, local content policies are designed without sufficient consideration of the resources available nationally and the changing nature of these resources. They are also done without co-operation with partner companies.
It is in this vein that another international organization, Chatham House, has called on Guyana to be cautious in its design of a local content policy. It stressed that in the haste to have such a policy, Guyana’s authorities must avoid simply mimicking other countries’ local content policies.
It is urging Guyana and other emerging oil producers to first develop a “thorough understanding” of the local context. This would include the scale of discoveries, availability of skills and infrastructure, availability of oil/gas in country etc. The global organization said that governments should then assess what skills will be needed through the lifecycle of the project(s). It said that this can be done in collaboration with foreign oil companies. The organization stressed that this assessment should be the basis for defining local content policy and targets that would be realistic and achievable.
Once this is done, Chatham House said that the Government should focus next on capacity-building by requiring investors to develop the workforce and the supply base. It said, “For many emerging producers, the starting point in terms of demands on foreign oil companies should be local sourcing of simple on-site services – construction and consumables for workers, for instance. They should avoid the delivery of turnkey projects run by foreign staff.”
Further to this, Chatham House said that governments of emerging oil producing nations must facilitate foreign oil companies’ efforts to develop the local supply industry and workforce. Specifically, Chatham House said that the government should link local content policy in the oil sector to its broader education strategy and build the kind of workforce that is able to respond to the country’s future needs.
LOCAL CONTENT POLICY STATUS
Business Minister, Dominic Gaskin has acknowledged on several occasions that Guyana’s Local Content Policy should have been completed a long time ago. He noted however that there are certain challenges which are affecting the process to finalize the document.
The most significant he said relates to finding the funds to pay a consultant to complete the task.
Gaskin said, “When we took on the job of finishing this document, we did not budget for it. It was handed to us in early 2018, months after we had put together our budget. Plus, when we got it, the contract with Trinidadian Oil Expert, Anthony Paul came to an end. Paul fulfilled his terms. We are in need of a consultant. But we just don’t have the funds.”
The Business Minister said that he is now looking to the Ministry of Finance or international aid to help fund finalization process for the policy. He also emphasized that ExxonMobil would not be approached for funds.
In the meantime, Gaskin said that several stakeholders such as the Georgetown Chamber of Commerce and Industry (GCCI) were consulted on the second draft policy. He said that the Chamber is supposed to make a presentation to the Business Ministry on their amendments for the second draft.
The Minister said, “But in the absence of a Local Content Policy, I don’t think our businesses need to be scared or fearful that countries are going to come and hijack everything. I am not paranoid about it and they don’t have to be. Don’t think all foreigners are your enemies. People will go where there are opportunities and we need to start doing the same thing and be aggressive…”
Gaskin assured that the Local Content Policy will be ready in early 2019.

 

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