Govt eliminating loopholes to strengthen Local Content Act – Bharrat

…calls for “comparable remuneration” for Guyanese in oil & gas sector

The Guyana Government is looking to widen opportunities for Guyanese within the burgeoning oil and gas industry, clamping down on loopholes in the Local Content Act that have been taken advantage of in the past.
Passed in December 2021, the National Assembly passed the Local Content Act, identifying 40 different service areas that oil and gas companies and their subcontractors must procure from Guyanese and Guyanese-owned businesses.
However, some persons have been taking advantage of loopholes in the legislation to illegally enjoy the benefits carved out for locals. One such practice is “fronting” or “rent-a-citizen”, whereby foreign companies employ Guyanese and/or Guyanese businesses in order to bypass the Act which stipulates only companies that are 51 per cent owned by a Guyanese can benefit from the 40 areas.
But according to Natural Resources Minister Vickram Bharrat on Wednesday, they have been working to address these loopholes and reduce such illegal practices.
The Natural Resources Minister made these remarks at a signing ceremony on Wednesday, where 40 major operators in Guyana’s oil and gas sector received their approved annual local content plans.
“We have worked really hard in the inception to eliminate the few loopholes… [such as] the ‘rent-a-citizen’ syndrome that we had going on in the first few years, where some of the very Guyanese who lobbied for local content in Guyana started to sell the value of their passport or their rights as Guyanese.”
“On paper, it shows that they own 51 per cent [of a company], but the reality is that some of them had owned only five per cent and 10 per cent. So, we really had to work hard on clamping down on that and sending a really strong message to those people who had intentions of doing it that they will face the penalty,” the Minister stated.
The local content legislation mandates penalties, such as fines ranging from $5 million to $50 million, for oil and gas companies and their subcontractors who fail to meet the minimum targets of the legislation, as well as for those who are in breach of the Act.

Shell companies
According to Bharrat, this “rent-a-citizen” practice is now almost eliminated, as are other arrangements that were being used to bypass the local content framework, including the use of shell companies.
“There were many companies coming in and setting up these, what we call ‘shell companies’, to hide assets and to get Guyanese involve and they wouldn’t have to contribute towards the business. So, we had to clamp down [and] we had to work through that too… And that has been successful. More and more Guyanese, because they’re being given the opportunities and they’re involved [in the sector], are realising that the right way is the way to go,” the Minister stated.
Another area that Government had to fix was the length of time oil companies take to pay local suppliers. Initially, oil and gas operators were taking as much as 90 days to pay for local goods and services – something which Guyanese companies had complained bitterly about. Government had intervened and reduced the timeline to 30 to 45 days upon receipt of the invoice.
But despite this, the Natural Resources Minister says there is still room for improvements, especially since many of these small local businesses depend on the payment to recapitalise their operations.
“So, the reduction in the processing time for payments has really helped Guyanese business to progress and to grow. Today, they’re in a much better position. But we are still looking to you, and we’ll still work with you to even further reduce the processing time,” Bharrat stated.
He went on to add, “If you’re satisfied. If they did [the work] based on the contract and the specifications, then pay them. It wouldn’t change anything whether you pay them now or next week or the other week. You still have to pay them… Please let us work on reducing the payment period for them once you’re satisfied.”

Comparable remuneration
Currently, there are more than 2000 local companies that are supporting the country’s oil and gas industry, while approximately 7000 Guyanese citizens are directly employed in the sector.
Over the years, more Guyanese have been building capacity and gaining experience – something which Minister Bharrat believes calls for attracting comparable remuneration.
“It is the right time; five years after is the right time for us to start advocating more strongly for this to ensure that Guyanese employed with comparable qualifications, comparable training, comparable certification, and also now experience, that they too can have comparable remuneration to expat workers with similar background,” Bharrat stressed.
The Minister acknowledged that this request could not have been made at the time when the local content legislation was enacted. However, he argued the fact that Guyanese have been upskilling themselves and gaining experience over the years, working in the local industry, offshore and even overseas; hence, they too must also enjoy the similar benefits.
“So, I believe now is the right time for us to look together as a sector as to how we can improve on the equality in terms of remuneration for workers with comparable skill sets, experience, etc. And I think it’s only fair, because we really have some young, energetic, enthusiastic, qualified Guyanese in the oil and gas sector now,” he added.
Under the Local Content Act, operators are required to set out their vision for local content for each calendar year. Among those whose annual local content plans were approved are ExxonMobil Guyana Ltd, MODEC Guyana Inc, CNOOC Petroleum Guyana Ltd, Guyana Deep Water Operations Inc and SLB.