Be wary of granting oil companies waivers on local content targets

Aug 31, 2022 News

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– implement stiff penalties against schemers – Expert

By Kiana Wilburg

Kaieteur News – Trinidadian Expert and Energy Strategist, Anthony Paul has lauded the Guyana Government for its strident efforts in protecting the interests of its people with the creation and subsequent implementation of the Local Content Legislation. He warned, however, that the Government must be mindful of granting waivers to companies that fail to meet their approved targets for training locals as well as purchasing their goods and services in accordance with the law.

Paul during an appearance on Kaieteur Radio’s Programme, ‘Guyana’s Oil and You’, said, “I think Government did the right thing in laying out the areas of priority in the law for local content. Companies now know where the country wants to focus and where they need to help build capacity. Life is about learning and Guyana has put down a market of 40 areas where it wants to see Guyanese participate. It is testing that and already, the Guyana Government is ready to review these.”

Paul said he is hopeful that the data from the first testing phase of the law will help Guyana better refine what it wants. During this process however, the Energy Strategist warned that the country will be told of difficulties companies face in implementing the law. Paul said the authorities of the day must be mindful in granting any waivers.

According to the Local Content Act, the Minister may waive the requirement for meeting local content targets, following consultation with the Secretariat if it is found that the minimum level cannot be achieved due to lack of current Guyanese capacity, and if the previous Master Service Agreement executed by the contractor, sub-contractor, or licensee which is still in force before the law, prevents it from complying with the minimum levels contained on the First Schedule.

“The danger with waivers is that it can open the door for other kinds of behaviours and the exception may become the rule so we have to ensure that the transition from what we aspire to have, really want does not last too long or becomes hindered. I would recommend that when exemptions are made, they are declared publicly so people know what decisions were made and why,” expressed the Trinidadian expert.

Paul also reminded that there will be persons or companies who will try to frustrate the Government’s effort to succeed with achieving true local content value by engaging in the practice of renting or fronting with citizens.

“The good thing about the legislation is that it ring fences 40 areas for Guyanese but each does not demand 100 percent participation. It still makes leeway for foreigners. But it is now on the Local Content Secretariat to audit and ensure no one is trying to beat the system. Importantly, robust penalties are needed to ensure those who are intent to not obey the spirit of the law are dealt with. And the sanctions need to be proportionate,” the Energy Strategist stated.

In closing, Paul noted that Guyana is on the right track of finding the right balance in using what it has while adding value to it through alliances. He stressed that vigilance will be key throughout the entire process.

ABOUT THE LEGISLATION

Guyana’s Local Content Act provides for the implementation of local content obligations on companies and persons engaged in petroleum operations or related activities in the petroleum sector.

It also prioritises Guyanese nationals and Guyanese companies in the procurement of goods and services for the enhancement of the value chain of the sector.

The Act also serves to enable local capacity development and provide for the investigation, supervision, co-ordination, monitoring and evaluation of, and participation in, local content in Guyana.

The Local Content Secretariat is mandated to ensure that the provisions of the Act are implemented and functions as the regulatory arm for the monitoring, evaluation, coordination and reporting of local content in the petroleum operations of Guyana.

In so far as the Act mandates every Contractor, Sub-Contractor, or Licensee to implement local content as an essential component of their petroleum operations, the Secretariat, through the issuance of industry guidelines, aims to provide detailed and specific guidance to Contractor, Sub-Contractors or Licensees with regards to their reporting obligations.

The Act obligates Contractors, Sub-Contractors or Licensees to incorporate local content as part of their bid evaluation process as well as meet minimum local content requirements with respect to the procurement of goods and services. As such, the guidelines serve to provide clarity relative to the bid evaluation requirements of the Act.

The First Schedule of the Act carves out 40 different services for Guyanese participation via the supply of goods and the provision of services which include: food supply, rental of office space, accommodation, insurance, accounting and legal services.

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