Govt. banking on Local Content Act to recover losses from ‘lopsided’ Exxon deal

Jan 24, 2022 News

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Kaieteur News- The Government of Guyana (GOG) is banking on the recently passed Local Content Law, to recover losses from the ‘lopsided’ Production Sharing Agreement (PSA), which Guyana signed onto with American oil giant, ExxonMobil.
This is according to Guyana’s Vice President, Bharat Jagdeo. Jagdeo has repeatedly bashed the APNU+AFC administration regime for the poorly renegotiated Stabroek Block PSA. He has even been quoted in the media saying that the agreement which was signed with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), Hess Corporation and CNOOC Petroleum Limited, is a “contract that would harm us for decades into the future” and even accused the APNU+AFC of having “sold our patrimony” to Exxon. But Jagdeo and is government have resisted calls to renegotiate the contract. In fact, only recently he declared that his government’s policy is to keep the contract the way it is.
The PSA has faced heavy criticism, from both local and regional actors. Minister of Legal Affairs and Attorney General (AG), Anil Nandlall, is also on record calling the PSA, one of the most lopsided agreements signed in the country’s history.

In a historic challenge, Kaieteur News Publisher, Glenn Lall, via his lawyer, Mohamed Ali recently filed legal proceedings in the High Court, seeking to rebalance the agreement in favour of Guyanese. He is challenging some of the most repressive tax provisions in the PSA.
The court document outlines that many of the provisions listed under Article 15.1 of the Petroleum Agreement, dated June 27, 2016 between the Guyana Government and the oil companies, grants exemptions to persons other than licensees, violate the Petroleum Exploration and Production Act, the Financial Administration (and Audit) Act, the Prevention of Discrimination Act, and the Constitution.
Nevertheless, during a recent interview on the National Communications Network (NCN), Jagdeo stated that with the passage of the Local Content Law, the country will now be able to recover losses from the “lopsided” Exxon deal. In fact, Jagdeo highlighted that apart from the royalty and the share of profit oil, the country will be receiving from the oil companies – locals must be given more business opportunities in order to seek rebalance in the “lopsided agreement.”
Leron Brummell, who conducted the interview, stated that despite the Local Content Policy being put into law, there are still foreigners coming into the country daily. As such, he asked the Vice President what will be done to balance and establish the country.
Jagdeo first boasted that Guyana now has a law which demands that oil and gas companies and their sub-contractors only hire Guyanese or Guyanese companies, or at least up to a certain percentage.
While adding that Guyana has the capacity to supply the oil and gas industry in 40 areas, Jagdeo noted that he believes that locals can supply goods and services to the industry which, “could be US$400 million to US$600 million in a year in those areas that we have carved out for our people already.”
According to the Vice President, the government will be investing heavily into the training of locals to supply the sector. He noted that this will be done, “so they [Guyanese] can even go into other areas not just the 40 areas, but we can start expanding that list into more complex operations like fabrication, etc.”
While stating that Guyana is way ahead in the ‘game’, Jagdeo said that law will now force the companies to submit two plans, a five year local content development plan and an annual local content development plan. He explained that, “they [oil companies] would have to have three sub-components, employment sub-component; it shows us how they employ people. Secondly, a training capacity building sub-component, each of these companies would have to show how they are building local capacity and thirdly procurement.”
Jagdeo further noted that with the Local Content Law, Guyanese and Guyanese companies have automatically become more attractive to foreign companies and investors who seek to be registered in the industry. “They now have to go and form joint ventureships with our people because the laws says in order for the company to be registered, you have to have 51% Guyanese ownership, 75% management and 90% of your staff must be Guyanese,” the Vice President added.
“That is what I mean by transferring some of the wealth to our people. We can’t build the FPSO, so apart from the royalty and the share of profit oil; we have to get some of the business opportunities. That is how you seek to rebalance, the lopsided agreement, by forcing some of the business opportunities to come to our people,” Jagdeo said in closing.
THE LOCAL CONTENT BILL
The Local Content Bill was passed in the National Assembly on December 29, 2021. The Bill was tabled by Minister of Natural Resources, Vickram Bharat.
Kaieteur News had reported that 14 amendments were made to the Bill; 10 of which were taken from the political opposition while the government added four of its own. With respect to the government’s Amendments, the first was an expansion of the definition for a “Guyanese company.” It previously stated: any company incorporated under the Companies Act which is beneficially owned by Guyanese nationals who ultimately exercise, individually or jointly, voting rights representing at least fifty-one per cent of the total issued shares of the company; and that has Guyanese nationals holding at least seventy-five percent of executive and senior management positions and at least ninety percent of non-managerial and other positions.
The government has added a section to state: any partnership between Guyanese nationals and a company constituted in accordance with the Partnership Act is also a “Guyanese company.”
With respect to the minimum level of local content targets, the government has amended the accounting services category from 20 to 90% by December 2022 and insurance provision by Guyanese from 90 to 100 percent. Minister Bharrat had stated that this was done based on consultations with the private sector. He said too that the Bill will prevent the creation of monopolies while catering for the provision of capacity building programmes so that Guyanese would be able to provide high quality services and skills.
Further, the Minister had explained that that the Bill will also ensure Guyanese get equal payment or remuneration to that of expatriates once it is found that they both have similar qualifications and experience.

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