Local Content is a sham

Dec 23, 2021 Features / Columnists, Peeping Tom

Kaieteur News – The proposed Local Content Law is too little too late. It has come years too late and will not derive any substantial benefits for local firms, since most of the major contracts have already been negotiated and awarded by the oil companies.
The government therefore is deluding itself into believing that local firms stand to benefit substantively from this piece of redundant legislation. And all the local excitement over local content fails to acknowledge that the Bill itself changes very little about how the oil companies do business.
Yet, this barren Bill seems to have received a warm reception in some quarters. One private sector representative was so excited that he deemed the local content legislation as a Christmas gift.
The fact is, the major contracts have already been awarded by the oil companies. All that is left for locals are the crumbs. And it is these crumbs which any local content legislation will govern, not the major works in the field development plans of Exxon and her partners.
One month ago, it was announced that a French-American conglomerate had won a large contract – estimated between US$500M to US$1B – to supply the subsea production system for Exxon’s Yellowtail Development Project. According to OILNOW, the conglomerate is expected to provide project management, engineering, manufacturing and testing capabilities to deliver the overall subsea production system. The same foreign firm had been awarded a large contract to provide a subsea system for the Payara Field Development. So that one is locked away from local content.
Around the same time the foreign conglomerate had snared the contract for the subsea system for Yellowtail, it was announced that a Dutch firm, SBM, had been awarded contracts to perform Front End Engineering and Design (FEED) for a Floating Production Storage and Offloading (FPSO) vessel. And this particular contract was the fourth FPSO the company would be building for Exxon’s operations in Guyana. The same Dutch firm had been awarded contracts to construct, install, lease and operate a FPSO for the Payara Field Development Project. This too remains insulated from local content participation.
One month earlier, in October 2021, a French company, VALLOUREC, announced a 10-year agreement with Exxon to supply line pipe products for Exxon’s local operations. The company indicated that it would serve its customer from its Brazilian base. So much, for local content until 2031 at the earliest!
While the government of Guyana was busy with its cosmetic consultations on local content legislation, Exxon was hard at work sealing contracts for its local operations. In June of this year, the Norwegian-based Petroleum GeoServices announced it had secured a 4D Acquisition Contract from Exxon.
In August of this year, Oceaneering International was awarded a contract by Exxon to provide offshore surveys. And another foreign firm, Ocean Infinity, had long sewn up a contract for geophysical and geotechnical data acquisition.
SAIPEM, another foreign firm, had also sealed an agreement to perform engineering, procurement, construction and installation of risers, flowlines and associated structures and jumpers.
And some of these foreign contracts involve long term commitments. For example, Noble Corporation did work on Liza 1 and its contract is now extended to 2030, Bye, bye local content!
When you consider all these contracts which have already been awarded to foreign firms, not much is left for Guyanese companies. All that will be left for Guyana are the crumbs. Sure enough, two local companies have gotten a contract to supply 2,000 construction uniforms. Another local firm is in joint venture to dispose of waste produced by the oil operations.
Meantime, the Marriott Hotel is fully booked for the next year by the oil companies and guess who is paying for that luxurious accommodation?
Local Content legislation is now meaningless to Exxon. They can take that legislation and dump it in the waste paper basket. The oil companies have a Stability Clause in their Production Sharing Agreement which provides that no new law or agreement can materially, adversely, affect them. And if it is their contention that local content legislation can result in an adverse effect, then the government will have to take steps to correct this.
The oil companies, in an act of utter contempt for local content laws, have announced that they are building their own shore base for Yellow tail. Good riddance to those local firms which are investing billions in such a facility!
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)