Guyana’s exclusion from a local content policy seems to be growing

Sep 08, 2019 Features / Columnists, My Column, News

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Oil is coming and with it some serious questions. There are comments back and forth, and the truth often lies between these comments. Political considerations have also impacted some of what is being said about Guyana’s preparation for oil.
I have been following most of the comments. Sometimes I see responses and challenges then I see a repeat of the same accusations like a hamster on a treadmill–running and going nowhere.
But there are some issues of my own, and one of these pertains to local content. Indeed, if President David Granger had not made the oil contract with ExxonMobil known, we might never be having the queries and discussions.
Trinidad, which has been in the oil industry, still has its oil contract wrapped in secrecy. There was a time when Guyana was declining to release contracts, citing confidentiality clauses. That has changed with the stroke of a pen and the desire for transparency.
One of the things that became clear when the oil contracts were released was the fact that Guyana was not ready for oil, because of its lack of knowledge of things pertaining to oil. Some of these things were to ensure that Guyana got the best for the discovery.
I remember when Trinidadians began coming to invest in Guyana’s oil sector. They knew what was needed and they brought their skills. They set up facilities while Guyanese could only sit and look, getting angry at times that the Trinidadians were undertaking jobs that should have been undertaken by Guyanese.
There was therefore a rush by us to get involved, but for the greater part we did not know what we needed to do. ExxonMobil began training programmes, even as other foreign organisations began funding training programmes, some at the University of Guyana.
Local content dictates that the oil company should seek its needs from Guyana once these are available at competitive rates. For starters, the oil company needed accommodation. There was a search for such accommodation, but according to reports, people suddenly sought to make money by hiking the prices.
Investors are not fools. They have the money, so ExxonMobil sought land at Ogle and decided to build its headquarters. But even this move was not without controversy. The oil company secured ten acres of airstrip land.
Immediately it came to the fore that locals who also sought land were denied. This matter was examined and has led to a lawsuit filed by Ogle Airport Incorporated.
On Wednesday, Opposition Leader Bharrat Jagdeo said that Guyana should have provided the headquarters.
There have been three drafts of a local content policy. The first had gaps that were highlighted and exposed. It was the same with the second draft, both prepared by the local content expert, Anthony Paul.
The third draft was prepared by Oil Consultant, Dr. Michael Warner, who was hired to complete the policy. The cost of that was $22M. But it is not definitive on what Guyana could enjoy. Instead, it seems to give all the benefits to the foreign companies.
As reported by Kaieteur News there are vital shortcomings. The newspaper reported last week, “(it) makes no recommendation for local companies to enjoy the same tax breaks that are granted to the subcontractors and affiliated companies of the oil majors operating offshore Guyana.
“Secondly, the draft policy makes no demand for oil companies and their subcontractors to increase their use of local labour and services over time.
“Thirdly, foreign companies will not be mandated to partner with local firms, despite a report from the United Nations Development Programme (UNDP) calling for same.
“In fact, the draft policy states, “…it is the policy of the Government of Guyana to not mandate local-foreign joint ventures as a requirement for market access in the upstream petroleum sector, but instead to encourage such alliances…”
This seems patently unfair to Guyana. For example, if there is a joint partnership effort that demands imports, the Guyanese would not be entitled to the same tax breaks granted to the foreigner. If they both have to import a product, then the Guyanese could be asked to pay value added tax and other taxes. The foreign company is exempt from such taxes.
The argument could be made that if the local company is a sub-contractor then it would be exempt from the taxes, but the policy should make it pellucid.
The third draft demands precious little, and it is here that we have to consider the involvement of the foreign diplomats. Over in Venezuela, there are reports that Juan Guaido was approached by the Americans to drop the claim to Essequibo.
The report continued that Venezuela should hand over the claimed property to Exxon. That property is Guyana’s and Venezuela cannot hand it over to a foreign company.
“Any Local Content Policy Guyana pursues should ensure all international oil subcontractors are made to have a local partner…it is in Guyana’s best interest to have a policy which demands that such foreign companies collaborate with locals to get maximum local content impact.”
When the public pressed for a declaration of ExxonMobil’s efforts, it got a long list of treks to the marketplace, transportation systems, and even entertainment spots. Guyana deserves more. Employment must be guaranteed once the Guyanese are skilled, and over the years many have qualified themselves.
I have seen photographs and reports of some Guyanese working on the oil rig. Some Guyanese are scrambling to establish shore-based facilities. Will Exxon be compelled to use them or will the oil company seek to hide behind the draft local content policy which dictates no firm place for local companies?

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper)

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