ExxonMobil working with local suppliers to ensure early payments, access to finance – Routledge

…says company exploring invoice factoring to allow for quick payments

While oil companies are required to pay locals within 45 days of receiving an invoice, concerns have been expressed that this time period is still too long and according to ExxonMobil Guyana itself, the oil company is committed to working with local suppliers to ensure early payments.
During a recent press conference, ExxonMobil Guyana President Alistair Routledge was asked about the 45-day payment period for local suppliers. The oil executive acknowledged that access to finance is a challenge. According to him, Exxon is committed to finding ways around this problem.
“We’re very aware that access to finance is a challenge for local businesses and we work very hard with the local businesses, with the local content secretariat, to find ways to enhance that access to finance. We’re always looking at the payment terms with the companies. We work closely with them,” Routledge said.
Routledge went into specifics about arrangements Exxon is making. For instance, if its local suppliers require payments as soon as a valid invoice is submitted, Exxon is working on factoring these invoices.
Invoice factoring is when suppliers turn over their outstanding invoices to a financial firm, in exchange for immediate cash. That financial firm is subsequently compensated by the contracting company, with an additional fee attached.
“The first thing is the duration of that payment obligation. But more importantly, we work with companies to ensure that the point from the delivery of service or goods, to the point where they have an invoice they can submit, that timeframe is short too. All of that goes into, can companies realise the revenues as quickly as possible? We are working today also on an initiative around factoring of invoices,” the executive said.
“So, working with some other financial institutions on supporting that, so it gives companies another way. So even if they have 30 days payments, but they would like the money as soon as a valid invoice is submitted, they can do that with this additional step. So, we do see it as important that companies have that cash flow. It keeps them running today, paying the bills today, but also gives them the opportunity to have the finance needed to continue to invest and grow.”
In light of delayed payments to locals servicing the oil and gas industry, it was mandated in 2022 that major operators make payments to Guyanese suppliers within 30 to 45 days. Last month during the Local Content Summit, President Dr. Irfaan Ali had expressed that even 45 days is too long and that this would have to be reviewed.
The President had gone on to explain that the First Schedule of the Local Content Act is currently being reviewed, with the view of setting new benchmarks. While the First Schedule currently lists 40 categories of services that oil companies are mandated to give Guyanese first preference for, the government is eyeing the possible increase of these categories.
In fact, Attorney General Anil Nandlall, SC, had assured last month that, the Local Content Act could be put through revisions later this year to expand the carved-out areas of opportunity for Guyanese, following consultations with relevant stakeholders and further data from the Local Content Secretariat.
Nandlall, who had also been speaking at the Local Content Summit, had informed attendees that the government is currently waiting on the Local Content Secretariat to complete its review of the sector’s performance.
Once a report is forthcoming and consultations completed, he noted that the government can go ahead with revising the Act later this year… since expanding the services, Guyanese are guaranteed first preference for in the oil and gas sector falls under the remit of the subject Minister and does not rely on parliament.
In December 2021, the National Assembly passed the Local Content Act which outlines 40 different service areas that oil and gas companies and their subcontractors must procure from Guyanese and Guyanese-owned companies.
These include 90 per cent of office space rental and accommodation services; 90 per cent of janitorial services, laundry and catering services; 95 per cent pest control services; 100 per cent local insurance services; 75 per cent local supply of food; and 90 per cent local accounting services.
The Local Content Act mandates penalties such as fines ranging from $5 million to $50 million for oil and gas companies and their sub-contractors who fail to meet the minimum targets of the legislation, as well as those who are in breach of the Act. (G3)