Minister given power to Waive oil companies' compliance with targets in local content bill

Minister given power to Waive oil companies’ compliance with targets in local content bill

Dec 17, 2021 News

By Kiana Wilburg

Kaieteur News – In less than two years of being in office, the PPP/C Government, specifically its Minister of Natural Resources, Vickram Bharrat, was able to table the Local Content Bill 2021 yesterday in the National Assembly which features several provisions that seek to ensure Guyanese have an equal participatory chance as well as an advantage in the oil and gas sector.

Natural Resources Minister, Vickram Bharrat

The Bill proposes the creation of a Secretariat that would be responsible for a Local Content Register which will have approved companies and citizens to be used by oil companies. It also provides 40 categories of work as opposed to the previous 153 in the draft schedule of targets. Those 40 categories in the Bill contain various levels of local content to be achieved by oil companies. These areas that have been put aside for Guyanese participation include medical, legal, dredging, environmental, sanitation, lay down yard, cargo management, pest control, transportation, catering and borehole testing services.
Of significance is the fact that while companies are expected to meet the foregoing requirements least they be slapped with a $50M dollar penalty, the Bill reposes in the Minister, the power to waive an oil company’s need for compliance with the minimum local content targets to be achieved.
The Bill specifically states, “The Minister may waive the requirement set out in subsection (1) where –the Minister, after consultation with the Secretariat, deems any petroleum operation to be of national interest; a Contractor, Sub-contractor or Licensee is unable to comply with the minimum local content level in the performance of any petroleum operation due to the lack of current Guyanese capacity; or compliance with a Master Service Agreement executed by a Contractor, Sub-Contractor or Licensee which is still in force immediately before the coming into operation of this Act prevents the Contractor, Sub-Contractor or Licensee from complying with the minimum local content levels set out in the First Schedule.”
Importantly, this provision is not in keeping with any of the policies previously done for Guyana. It is also not part of the recommendations made by the Local Content Committee that was constituted by President, Irfaan Ali.Be that as it may, the explanatory memorandum for the Bill states that it represents the principal vehicle through which Guyana seeks to negotiate a tradeoff between investors engaged in the petroleum sector and Guyanese nationals and Guyanese companies involved the petroleum sector.

Chart shows the proposed areas for Guyanese participation and the targets for companies by the end of 2022

The Bill endeavours to do so by striving for economic diversification through prioritizing Guyanese nationals and Guyanese companies in the procurement of goods and services for the enhancement of the petroleum sector value chain.
The Bill says this prioritization will guarantee that there is an increased retention of the economic benefits in Guyana while simultaneously allowing for there to be an upsurge in the number, competencies, and capabilities of Guyanese nationals and Guyanese companies participating in the petroleum sector.
To deliver on its legislative target, the Bill puts in place regulatory mechanisms to implement, investigate, supervise, co-ordinate, monitor, and evaluate participation in local content in Guyana.
Altogether, the Bill provides for the promotion of competitiveness, and the encouragement of the creation of related industries that will sustain the social and economic development of Guyana as well as other related matters.

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