“Strategic consultations” being carried out on draft Local Content Policy

Mar 10, 2021 News

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– Submission of comments gets extended deadline

Kaieteur News – Following the inaugural opening of consultations on the draft local content policy at the Arthur Chung Convention Centre (ACCC) mid-February, the Ministry of Natural Resources (MNR) has disclosed that it is undertaking a series of “strategic stakeholders’ consultations” to advance the development of the document.

These strategic discussions commenced on March 3 and will conclude on March 19, 2021. During this extended period of discussions, the Ministry said that comments are welcomed regarding all matters addressed under the policy’s vision, mission, and objectives.

Kaieteur News understands that these strategic engagements are focused primarily on the parameters, principles, and pillars of the draft policy which are needed for the government to consider in defining the participatory measures of Guyanese workers and companies, and on identifying the capacity and competency that exist within the local markets to support oil and gas business development in Guyana.
The Ministry said that the series of consultations will allow it to engage public sector, private sector and civil society organizations involved in various sectors and linkages industries, with particular focus on workforce enhancement such as education agencies; manufacturing and fabrication services; business development and support; financing; audit and accounting; shipping, warehousing and onshore services; hospitality; housing and infrastructure; regional and international trade; and other economic sectors such as tourism, agriculture.
For those who have not perused the more than 50-page document that is on the website of the Ministry of Natural Resources, Kaieteur News has compiled a list of some of the key objectives and provisions of the document which seeks to ensure Guyanese are placed in the driver’s seat of the oil and gas industry.
The draft document proposes to have an implementation policy, which will identify specific initiatives and measures to deliver each objective.
Importantly, the document proposes to have companies achieve certain targets for local content. These will be progressive to reflect the changing state of the domestic supply base and the forward demand. It was noted that implementation will be undertaken in a collaborative manner with stakeholders and will include regular reporting in a manner that is easily accessible and comprehensible to all parties.
As regard the targets, the policy proposes to ensure that there is a minimum growth rate over the years in the use of Guyanese in the areas of employment and the provision of contracts to locals for goods and services.
From the date of effectiveness of the licence or petroleum agreement, the draft document proposes that companies should have up to five to seven years to ensure supervisory staff, technical core staff, professional support staff, and semi and unskilled workers, are more than 50 to 60 percent Guyanese and 10 years to ensure that management staff is at least 45 percent local. This is for upstream oil businesses such as those involved in exploration, drilling, and extraction of the petroleum resources.
Targets are also set for companies in the midstream and downstream aspects of the oil industry. Midstream companies are those involved in the transportation, storage, and wholesale marketing of crude or refined petroleum products. Downstream businesses are involved in converting oil and gas into the finished product. These include refining crude oil into gasoline, natural gas liquids, diesel, and a variety of other energy sources.
The draft policy proposes that these companies have up to seven years to ensure that the employment of locals for their supervisory staff, technical core staff, professional support staff, and semi and unskilled workforce is above 60 to 80 percent. They have up to 10 years to get beyond that.

The draft policy notes too that Guyanese must be given opportunities to provide services in the areas of:
1) Front End Engineering Design (FEED)
2) Fabrication, Construction and Storage
3) Procurement of Materials
4) Research and development relating to in-country services
5) Transportation, supply, and disposal services
6) Well drilling services
7) Health, safety, and environmental services
8) Information systems, information technology, and communication services
9) Marine operations and logistics services
10) Financial and insurance activities.
For further benefits to Guyanese businesses, the draft policy recommends that there be unbundling of contracts to reflect the state and growth potential of the local market; market conditioning, including early notification of intended activities; preferential treatment of locals; contract management with supplier performance improvement strategies.
It also recommends facilitating partnerships between Guyanese and international suppliers; providing contract terms that facilitate access to competitive financing; opportunities to learn and grow transparency and accountability for decision making in procurement; measuring and reporting on local content policy implementation and achievements; along with benchmarking, best practice sharing and continuous improvement.

FUNDING FOR GUYANESE TO BE EXPLORED
Further to the foregoing, the draft document suggests that there must be access to affordable and competitive funding for locals. It notes that multiple approaches have been used in different jurisdictions, including the provision of specially capitalised and managed funds and innovative contracting and lending mechanisms.

ALL FOREIGN AGENTS/ CONTRACTORS MUST PAY
The draft policy is also proposing a key provision, which will see an increase of public revenues (royalties and taxes) generated from the oil and gas industry which can be used by government to provide infrastructure and social services, to counter commodity price volatility and/or saved in a sovereign wealth funds for intergenerational wealth transfer.
In this regard, it notes that local participation will allow for more locals to be employed and more local companies to make profits, hence, enhancing the tax base of the country. The document notes however that locals alone must not be expected to pay their fair share of taxes. It categorically states that foreign suppliers must be required to pay up too. To the extent that the administrative effort of the local tax authority is reasonable, the drafty policy proposes that foreign companies doing business as agents, contractors, or sub-contractors to operators in Guyana must be required to register a local company and/or be licensed and pay taxes in Guyana.

LAYERS OF REGULATION
During the implementation of the foregoing, the sector will be regulated via different layers, starting with the Sector Regulator.
Under the legislation that is envisioned to give life to the Petroleum Commission of Guyana (PCG), it is being proposed that this body will be the Regulator to ensure reports are submitted to the Parliament and to mandate that oil companies and their contractors manage their procurement through local content policies and strategies that align with the national policy.
It is envisioned that the PCG will undertake these tasks through a dedicated Local Content Secretariat or Unit, which will be responsible for the implementation of this Policy and the pertinent regulations.
The Local Content Unit will also measure and report on the local content performance by Operators and Contractors, in a transparent and consistent manner.
The government, this newspaper understands, intends to have the Local Content Unit be overseen by the “Inter-Agency Coordinating Committee,” made up of senior officials of the various government ministries and agencies that will be charged by the Minister to oversee the implementation of this Local Content Policy. It is also expected to identify those goods and services to be reserved for Guyanese and set targets for local content and participation in the provision of key goods and services and review same from time to time.
A “Multi-Stakeholder Working Group on Local Content” will also be set up and chaired by Government, involving representatives of key stakeholders’ groups, including the major Operators, international services companies, local private sector including the financial sector, education and training institutions, non-governmental organisations, labour and civil society. The Working Group is expected to advise the Inter-Agency Coordinating Committee and support collaboration and coordination among and between stakeholder groups and allow for early action on critical items required for operationalising of the Local Content Policy.

 

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