Govt. wants payment period to Guyanese companies operating in oil and gas sector reduced to 21 days

Aug 17, 2024 News

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…Locals earned US$314M within first half of 2024

Kaieteur News – The Government of Guyana (GoG) through the Local Content Secretariat (LCS) is working to have the payment period to local companies operating in the petroleum industry reduced to 21 days.

The Government had solidified its commitment to ensuring that the benefits derived from the foreign direct investments into Guyana’s petroleum sector are captured and retained in-country, through the enactment of the Local Content Act of 2021.

However, despite the law being implemented, there were still several issues local companies encountered; one being the prolonged issuing of payments to local suppliers. Guyanese businesses had voiced their concerns and in 2022, the government issued an ultimatum to contractors and sub-contractors operating in the oil and gas sector to issue payments to Guyanese suppliers within 30 to 45 days following the receipt of a correct invoice.

At the Ministry of Natural Resources press conference on Wednesday, Dr. Martin Pertab, the Director of the Local Content Secretariat within the Ministry of Natural Resources, disclosed that while the Secretariat had reduced the payment period to 35 to 45 days, they are now looking to further revise that period.

“We’re in discussion with some of the major tier-one companies, including the contractor, to have that payment period revised downward to 21 days,” he said.

The shortened payment period is part of a broader strategy by the Local Content Secretariat to create a more favorable business environment for local companies.

Additionally, Dr. Pertab revealed that local companies have earned a total of US$314 million from the oil and gas sector within the first six months of 2024. This figure represents more than half of the projected annual earnings for the sector.

“As of June 30, 2024 expenditure among the related sector is somewhere around US$314 million of 54% of the 2024 projected estimate, when compare to mid-year of 2023, we are seeing growth in some areas such as engineering machine services by 238%, we have seen growth in accommodation services by 39%, we have seen growth in equipment rental by 48.5% and catering by 18.8%,” the Director stated.

Notably, he attributed this to the increase in petroleum activities due to the arrival of the third Floating Production Storage and Offloading (FPSO).

In addition, the Local Content Secretariat has been working closely with local businesses to identify and overcome other challenges under the local content law. Dr. Pertab underscored the importance of collaboration with the private sector, including the Georgetown Chamber of Commerce and Industry (GCCI), in shaping policy directions and addressing obstacles faced by local companies.

“So far, we have received several recommendations from these stakeholders, and we are in the process now of revising those recommendations and one of course is what we are referring to as [subsea] pipe-coating,” Dr. Pertab said.

“As of now, we are in discussion with some of the tier-one companies that deals directly with this particular service and the concern is the high energy cost and we all know the advent of the gas to energy project, once we can bring down that energy cost by 50%, pipe coating services is something that is highly possible would likely be done in Guyana which will likely boost local content activities in Guyana somewhere around 10%,” he added.

Moreover, Dr. Pertab noted that one of the notable successes was the expansion of a local company providing machine and fabrication services. Through engagements facilitated by the Secretariat, this company has moved from offering basic services to manufacturing premium accessories, securing a major purchase order as a result.

He said, “In fact, just recently, they have received a major purchase order following our engagement with the contractor and sub-contractors…”

The Secretariat is also placing a strong emphasis on supporting small and medium-sized enterprises, with a particular focus on women-owned businesses.

According to Pertab, over the past six months, 54 new women-owned companies have registered with the Secretariat, providing services such as catering, accommodation, and janitorial work. A standout achievement in this area is the recent award of a major contract to a female-owned business, which rapidly expanded its workforce in response to the demand.

Furthermore, the Local Content Secretariat is advancing its efforts to upskill the local workforce. Earlier this year, the Secretariat announced an initiative to place 100 students with major tier-one companies for hands-on experience. Dr. Pertab stated that as of mid-2024, 53 students have been successfully placed, with the remainder expected to join by year’s end.

Notably, he also gave an update on the mobile app stating, “We have been working on the mobile app and we are hoping to have that finalised by the end of this year as of now, we are working on the interface to ensure that it is user friendly and could be used by the public in general.”

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• Commitment, companies, Dr. Martin Pertab, the Director of the Local Content Secretariat, ultimatum

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