Finance Minister downplays importance of local content legislation

Oil and gas sector

Finance Minister Winston Jordan

At a time when local stakeholders are actively pushing for a local content policy to be in place ahead of next year’s scheduled first oil, Finance Minister Winston Jordan said such legislation is not important.
Speaking at a weekly press conference held on Friday by the People’s National Congress Reform (PNCR) – the largest party in the APNU faction of the coalition Government – Jordan pointed out that activities in the oil and gas sector are moving full steam ahead without that critical piece of legislation.
“While legislation is important, we should not make it the be-all and end-all. Many companies that are coming here aren’t waiting for local content and other legislation – they are moving ahead. And if various pieces of legislation represented the level of development, Guyana would be a very developed country because [we have] got legislation virtually for everything,” he posited.
Nevertheless, the Finance Minister explained that Director of the Department of Energy, Dr Mark Bynoe has indicated that the local content legislation is all about finished and will be available for public consumption fairly shortly.
But Jordan went on to insist that, “The proof of the pudding is always in the eating and how we implement the legislation. Do we have the bodies to implement the legislation, the systems, and so forth, in place? So yes, local content [is] absolutely important, absolutely vital that we get it but don’t wait for local content legislation. Use existing legislation to ensure that we get parts of the pie while we putting in the local content legislation so that we could get a fair, level playing field about how we operate with nationals and foreigners as they come into our country”.
In recent years, however, pressure has been mounting from stakeholders, including the diplomatic community here, for the coalition Government to have a local content policy in place so that Guyanese can benefit from the budding oil and gas industry.
Local Private Sector bodies and other stakeholder agencies had expressed dissatisfaction with the slothfulness in which the local content laws are being developed. Calls are constantly being made for the policy to be finalised before first oil in the first quarter of 2020, when United States oil giant, ExxonMobil is slated to commence production in the Stabroek Block offshore Guyana.
Back in May, however, Dr Bynoe had told reporters at a press conference that the local content policy would be ready long before production commences.
The local content policy would guide the State in guarding against local companies being bypassed for contracts and services while foreign companies and workers are favoured.
But specialists in this field have opined that Guyana needs to place emphasis on having active and direct participation of local companies in the budding industry.
This is the belief of Executive Director of the Ghana Oil and Gas Services Association, Nuertey Adzeman, who told reporters here earlier this month that the best approach to achieve this is to make it mandatory for foreign companies to enter into a joint venture with a local company in order to operate in the country.
“In our part of the world, local participation requires that every foreign contractor coming to do business in the oil and gas field should have an indigenous partner, who should have a minimum of 10 per cent stake of equity in the business and have his role cut out well and, therefore, a JV [joint venture] needs come out of that…and the contract will be awarded to the JV company, and not the individual companies. That is the best way to go because the country spend would be maintained and you will see your numbers go up and that is where you need to put your priority at,” the oil consultant stated.
Moreover, Adzeman pointed out that Guyana should also focus on building capacity at the middle level of the oil value chain where technical and vocational skills are needed so that the country can have its own pool of petroleum technicians and experts.
This, according to his colleague, Business Development Manager Loveland White, will allow Guyana to eventually take over and have locals run the oil and gas industry down the line.
“Local content regulation goes beyond employing a number of Guyanese to work with the operators. They need to build capacity and they need to have knowledge transfer. There should be a succession plan… You should be able to transfer knowledge to Guyanese to take over. So you give yourself a number of years to hand over full operations to Guyanese to take over and they’ll manage their own resources,” White contended.
Against this backdrop, however, Adzeman posited that another area is that Guyana should consider supporting indigenous companies to get into oil production themselves instead of having to rely solely on the expertise and resources of foreign companies all the time to develop the oil and gas industry.
“You need to start thinking about that… putting indigenous Guyanese, as we have done. Identify a few Guyanese and give them block and when we find something, everything remains in house,” he noted.
Building on this, however, President of the Georgetown Chamber of Commerce and Industry (GCCI), Nicholas Boyer said he can foresee local companies taking advantage of the opportunities available in on-shore and near-shore explorations where the complexities and risks behind the engineering are low.