Guyanese Companies must be reliable for local content to function efficiently - Consultant

Guyanese Companies must be reliable for local content to function efficiently – Consultant

Nov 29, 2022 News

Kaieteur News – One of the ways the Government has said it expects Guyanese to benefit from the nation’s lucrative oil sector is by allowing locals to participate in the provision of goods and services to industry operators such as ExxonMobil subsidiary, Exploration and Production Guyana Limited (EEPGL), the lead operator in the prolific Stabroek Block.

So much is the focus that the Government more recently put in place Local Content Legislation to protect Guyanese employment, making it legal for strong Guyanese participation in some 40 areas of the oil sector. While this move has been described as a step in the right direction, Consultant and Public Commentator Mark Weeks is adamant that much focus needs to be placed on the compliance of local companies to ensure efficiency and reliability in the delivery of services.

Weekes, who holds a Masters in Project Management has highlighted concerning possibilities should Guyanese companies fail to manage their affairs correctly. In particular, he has warned that inadequacies on the part of local companies could lead to increased cost in the oil-related bills coming to Guyana from the operators. He explained that activities stemming from operations or any resource management go into an accounting consideration, specifically in the oil and gas sector.

He continued that where equitable management of resources is concerned, the constant changing of employees, for example, could affect service delivery and ultimately cost. In this scenario, he said that, “if you are changing employees frequently then the training program and extension and in terms of applicable service will vary… in relation to changing employees it would be an additional cost…”

In another example, Weeks stated that if service is poor, cost is again incurred. He said that if a local Contractor were to deliver warm cookies to a client at a certain time and fails to do so, then it is likely that the Contractor will have to take back the cookies and return with what should have been delivered.

“What happens is that for me to return with the cookies from my previous place of dispatch, I thus incur a cost. So once you are not compliant you attract additional costing and once you attract this additional costing, if it’s not justified you can’t get paid for it and will be losing”. In that case, the Contractor may seek to inflate an accounting sheet to recover the cost it would have paid because of its inefficiency. “So their original budget that would have accounted for $70 dollars may now cost $100.” That extra cost is handed over to the oil operators, “which means their liability will be increased by $30 throughout the whole accounting phase.”

The Consultant charged therefore that if accounting costs are being passed upwards, “the more liability that somebody has is less on tax and other areas. Obviously all that will happen there ultimately is leakage and it’s a leakage that is not beneficial to the collective body.”

At this point, “It’s to bring into question and dispute the worthy function of Sub-Contractors, while holding Exxon accountable to timely payment.” “So all of the Contractors’ non-compliant practices might be spiking whatever is the overall billing that they are sending to Exxon for them to pay out and then it is still going on their resource sheet.”

Weeks submitted that there are a lot of considerations that people must take into account if the overall goal is to help Guyana manage her oil bills more efficiently. He said that while Exxon Mobil plays a pivotal role in ensuring compliance, “our local sectors and resource compliance needs to be simultaneously analyzed.”

With the country’s first review of the Local Content Legislation around the corner, Natural Resources Minister, Vickram Bharrat, recently cautioned stakeholders to improve their operating abilities before seeking more jobs with high Guyanese participation. He urged the private sector to temper their expectations for greater local content demands as there is still much to be done to equip the local sector for its efficient participation and delivery of service in the sector.

“We have to be honest with ourselves and accept our disadvantages and shortcomings and recognize what we need to strengthen. There is a capacity deficit in Guyana and we cannot run away from that. And no one is to be blamed for that because we are moving at such a speed that it is hard to keep up,” the Minister said.

He urged that, “In order to truly achieve local content, I would remind the private sector that it can only be achieved with capacity development. We can quarrel whole day about what aspects of the ring-fenced categories of work must be increased but do we have the capacity to meet the targets effectively, efficiently and cost effectively?”

Some of the areas of work where Guyanese have first jump includes logistics, security, immigration support, transportation, customs brokerage, and catering.