Backpedaling on local content

Feb 23, 2020 Features / Columnists, Peeping Tom

The government seems to have an obsession with secrecy. It has drafted a Local Content Policy which allows for the withholding of information on the grounds of confidentiality.
This is a presumptuous act by the government, considering that it took almost 18 months for it to make public the contract it had signed with Exxon, Hess and CNOCC Nexen. And that only happened because of a huge public outcry.
As reported by another local news agency, the local watchdog, Transparency Institute of Guyana Inc. had called on the government to make full disclosure of its contract with Exxon. Transparency said that doing so would assure Guyanese that the country’s best interest was secured in the contract.
In response to demands for the details of the contract to be made public, one government official said that it was not to the government’s benefit or interest to make the contract public.
We now know just why the contract was not made public earlier, and why it took relentless public pressure for the government to do so. The country was flushed down the drain during the contract negotiations.
When the contract was eventually made public, it revealed that the country’s pockets had been picked by the oil companies. Global Witness, an independent non-governmental organization, assessed that Guyana had deprived itself of US$55B during the negotiations.
The contract was signed in June 2016. It was not made public until December 2017. Guyana knew that oil had been discovered since 2015. Yet, it is only now that the government is scrambling to put in place a Local Content Policy. And this is after the Trinidadians and other foreigners have gobbled up the contracts for the supply of goods and services to Exxon, Hess and CNOOC Nexen.
If the details of the contract had been known earlier, local companies would have had a better chance. I am suggesting that the horse has already bolted and the Local Content Policy is of no material significance at this time. In any event, a Local Content Policy is of no use without Local Content legislation.
The government, which is further out to sea than Exxon’s oil rig, does not have a clue as to how to systematically approach the development of the oil industry. It is learning as its goes along, at a huge price to the country’s interests.
The government did not need a Local Content policy to ensure that locals benefitted from the provision of goods and services to the petroleum sector. Provisions already exist within the contract which the government signed, with Exxon, to have greater local participation in the oil sector
The contract with Exxon provides that the oil companies have to give preference to the purchase of Guyanese goods and services, provided that such goods and services are available on a timely basis and in the quantity required, at competitive prices.
The contract also provides for the company to give preference to local companies as sub-contractors, insofar as they are commercially competitive and meet the technical requirements demanded by the contractor.
The government is yet to explain to the public what it has done to enforce these provisions of the contract. Perhaps, it is also not to the national benefit or interest to make that known.
The government has to get serious. It has to put the right personnel in place to oversee this industry. Otherwise the oil companies are not going to take any action to ensure greater jobs and business opportunities for local businesses. The foreigners will continue to gobble up the upstream activities of the oil and gas industry.
Secrecy, under the guise of protecting confidentiality, will only result in the oil companies not honouring their contractual obligations. Under the present contract, Exxon has certain obligations relating to local content, and it should be honouring those obligations.
No Local Content Policy should provide a leeway for the oil companies to hide this failure. The Petroleum Act makes it clear that the permission of the oil companies is not required to make disclosures “in connection with, any matter or purpose, specified in a petroleum agreement.”
The contract with Exxon specifies what is expected in relation to local content. The government is therefore free to make disclosures in relation to this matter which is specified in the contract. Any Local Content policy which backpedals on this is retrograde.

(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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