Govt called out for delayed Local Content Policy

Oil and gas sector

…as PPP/C Presidential Candidate slams lax attitude to creating policy

Government’s failure to prioritise the implementation of a Local Content Policy (LCP) is being criticised by People’s Progressive Party/Civic (PPP/C) Presidential Candidate Irfaan Ali, who noted that owing to a lack of appropriate regulation, Guyana is vulnerable.

Ali on Sunday pointed out that around the world a local content policy is considered a necessary condition when countries are looking to become oil producers. This is to ensure that countries can benefit as much as possible from their oil and gas industries.
In Guyana, he said, the utterances and actions of senior officials of the caretaker A Partnership for National Unity/Alliance For Change (APNU/AFC) Government seem to suggest otherwise.
“The latest confirmation that the LCP is not a priority came from the caretaker Minister of Finance last Friday at a press conference at Congress Place. In the words of the Minister, “while legislation is important, we should not make it the be-all and end-all. Many companies that are coming aren’t waiting for local content and other legislation”. Unfortunately, this statement is coming from the Minister as we edge closer to ‘first oil’ as a country that is extremely vulnerable due to the weak legal and regulatory framework.”

The former Housing Minister noted that in the four years the APNU/AFC Administration has been in office and has known it had to prepare for an oil industry, the Government has failed to formalise policies that would safeguard Guyana while producing oil.
“It would take less than one year with the help of international organisations to develop such a policy at a cost that we can afford as a nation. The literature on LCP is very explicit on why it is essential for every country involved in the production of oil and gas that is technical and capital intensive,” Ali noted.
He added that consequently, the direct economic impact of the production of oil and gas was not as significant as the indirect contribution, especially in emerging oil-rich countries without an industrial base.

Opportunities
Ali explained that in the absence of direct opportunities from the sector, the LCP allowed for countries to create value-added economic activities related to the oil industry. Another important aspect of the policy is the creation of employment opportunities when investments and entrepreneurial activities are facilitated.

In addition, Ali noted that a well-designed LCP allows for opportunities for local companies to take advantage of the global economic network, as well as diversifying the economy and improving the competitiveness of non-oil and gas sectors, to protect the country from the “Dutch Disease” economic phenomenon.
Perhaps most importantly, Ali pointed to the potential for a LCP to ensure as many people as possible can benefit from the wealth generated from oil and gas production, and to ensure poverty reduction.
“Because of the foregoing, it can be argued that the developmental impact of the production of oil and gas can be diminished if the country proceeds without an LCP. As a matter of fact, the literature shows that countries which exploit oil and gas without an effective LCP experience less development when compared to those with sound regulatory policies.”

Warning
Ali warned that in the absence of the policy, everyone would be exposed to the negative consequences of oil and gas production, but with little to no chance of being compensated economically or socially.
The Presidential Candidate also noted that the PPP/C, should it win the elections inevitable in light of the No-Confidence Motion, would formulate an LCP that promotes the use of domestic material and services for oil companies, as well as setting out policies to equip locals with training, incentivising companies to retool their businesses to higher standards and also creating an enabling environment for investments.
“The PPP/C is conscious that development cannot occur by accident, but must be planned. In this regard, when the PPP/C is elected in three months’ time, it will move quickly to develop the LCP and the accompanying State bureaucracies to ensure that every Guyanese benefits equally from the positive developmental outcomes that are expected to accrue from the production of oil and gas.”
Government’s LCP has been a work in progress for some time, ever since a draft that was released came in for criticism for lacking specificity and concrete measures. Jordan made his comments downplaying the significance of the policy at a press conference held on Friday by the People’s National Congress Reform (PNCR).
Jordan pointed out that activities in the oil and gas sector were moving full steam ahead without that critical piece of legislation. Nevertheless, the Finance Minister explained that Director of the Department of Energy, Dr Mark Bynoe has indicated that the local content legislation was all but finished and would be available for public consumption fairly shortly.
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 US oil giant ExxonMobil is slated to commence production in the Stabroek Block offshore Guyana.

Importance of local content
Earlier this year British High Commissioner to Guyana, Gregory Quinn had said that it is imperative that Guyana has a finalised Local Content Policy with clear guidelines on how everyone will benefit. According to the British High Commissioner the sooner this is completed the better for everyone.
The High Commissioner was asked about local content on the sidelines of an event where he noted the urgency of having a policy. According to Quinn, it should be a prerequisite for Guyana doing business with the international community while ensuring ordinary Guyanese benefit.
“We’re still waiting to see what the Local Content Policy or legislation will look like. So we’re waiting and I think it’s actually important that that gets delivered and produced quite quickly so that everyone knows, both on the international business side but also on the local company side.”
“Because no good international company will want to come in here and not do stuff that will benefit the local economy and the local population. But they need to know exactly what the parameters which they have to work in are. So I think the sooner we have complete clarity on that, I think the better for everybody.”
However, Quinn noted that these companies need to know within what framework they can work. Asked about what forms of local content companies should employ, Quinn had this to say.
“I think it’s everything. I don’t think there’s any one way you can look at it. Obviously there’d be jobs, whether its people working in the office. Whether its people they sub contract to provide services, or employing more people,” Quinn said.
“So I think local content has to be very clear in demonstrating what local people are getting out of it. And it’s not just about providing the jobs. It’s about providing the education and the knowledge and passing on that, so that the people here who are working in the companies can also benefit and develop themselves, through the system.”