TOO LITTLE, TOO LATE

Mar 05, 2020 Features / Columnists, Peeping Tom

A local content policy is toothless without local content legislation. Unless backed by local content laws which impose legal requirements and sanctions, it makes little sense having a local content policy.
The situation at present with the local content policy is akin to a school telling its students that they have to attend classes each day from 8 am, but not having any sanctions imposed on those who frequently turn up late.
In that instance, the policy does not act as a deterrent since students will know that there are no sanctions for late attendance.
While the administration of the local content policy is entrusted to the Minister with responsibility or Petroleum, it is also proposed in the plan that this may be bestowed to a regulatory body. Until such time as this body is established, the Minister shall establish a Local Content Oversight Body.
But what is the legal standing of this body? Why establish an oversight body which is toothless poodle? It has no bite and maybe, not even a proper bark. And to make matters worse, it is expected to be stacked by representatives from the government.
The oversight body should be a PUC-type body. It should be regulatory in nature, have powers to compel and penalise the oil companies and should be independent of the government. It should ideally be headed by a person at or above the rank of a judge.
It is for this reason that this column had taken the position that it makes no sense having a local content policy without a local content law. This law should have been passed months after oil was discovered so as to ensure that locals benefit. These laws should have specified that a certain percentage value of all contracts should be sourced from companies with local shareholding.
It makes little sense doing so now. The government failed to ensure local content requirements in its oil contract with ExxonMobil, relying instead on broad and general provisions within the Petroleum Act. As a result, it is the foreign firms, which are reaping the benefits of the opportunities in the local petroleum industry since the necessary legal mechanisms to enforce local content are not in place.
As I mentioned more than one year ago, there are a variety of ways in which the government could have promoted local content in the oil industry. A misconception is that local companies need to have capacity in order to benefit from local content. This is not necessarily so. Local content policies can be made flexible enough to allow for local firms to form partnerships with foreign firms.
This will assist them in overcoming the handicap of a lack of local capacity by allowing partnerships with foreign firms from which local firms benefit. At present, part from the shore base facilities provided by local companies, not many benefits are flowing into the hands of Guyanese businesses because of local content in the petroleum sector. And the government did not have the foresight to recognise this need early.
The foreigners are grabbing the greater portion of the spin-offs of the oil and gas industry.
Foreign firms are dominant in providing goods and services for exploration and production. And the trend will continue.
Foreigners are pouring into Guyana to do business. They are making hay while the sun shines. Guyana companies are much too small and much too poor to compete with these firms.
And this was all the more reason why local content legislation should have been put in place even before the Exxon Mobil contract was renegotiated. This would have allowed local firms more time to build partnerships and linkages to benefit from contracts in the petroleum industry.
The local content policy is too little, too late, especially coming after oil production commenced instead of before when there was sufficient time to put the necessary legislation in place. It has been one of many missed chances, for which the country has paid a US$55B price.

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