Govt must guard against complacency – TIGI

Oil sector

… when negotiating, securing best local content concessions

Even as Guyana readies itself for a new oil sector, anti-corruption advocate group Transparency Institute of Guyana Inc (TIGI) is warning the Government against becoming complacent and relaxed in its negotiations.
According to TIGI President, Dr Trevor Thomas, the Government’s attitude towards local content has been more relaxed than might be expected. This comes after the Government shared a draft local content plan, which was criticised by the Georgetown Chamber of Commerce and Industry (GCCI).
“It does seem, from everything that I’ve heard, that the attitude of the Government is more relaxed than Guyanese expect,” Thomas said. “And from that perspective I urge them to look at the matter keenly and ensure that we get the best deal.”
“At the end of the day, what we want is for Guyana to develop multidimensionally, given its oil resources. It is therefore important that the Government takes whatever steps are necessary to ensure that that happens.”
According to the information released by Government, we do know that Guyana will receive a two per cent royalty on gross earnings from the oil on a barrel to barrel basis. In addition, Guyana will receive 50 per cent of the profits from ExxonMobil’s sale of petroleum on the world market.
In the past, Government has sought to justify the two per cent royalty by contrasting it with the 50/50 share of the profits; an arrangement that the Ggovernment has said is a reasonable one, arrived at through the advice of experts.
Oil is currently at US$50 a barrel. But with the world market price for oil a volatile rollercoaster at times and Exxon having to clear its initial investment cost, some have opined that a revenue sharing arrangement would be a better option than a profit sharing one.
But local content and what it will do for Guyana has been a burning question since the announcement of oil in the Stabroek block. 

After Exxon first tempered expectations by saying that few job opportunities will be created by oil, it has since said that it will help with local content delivery.
Since the oil giant was granted a production licence in June of this year, Natural Resources Minister Raphael Trotman had given Exxon a six-month deadline in order to supply its local content plan to Government.
ExxonMobil’s newly appointed Country Manager in Guyana, Rod Henson, had recently announced that the company would be relocating its onshore operations, which were used for support services, from neighbouring Trinidad and Tobago to Guyana.
He had told participants at a meeting that it was not a case whereby ExxonMobil would be looking to build a facility for its support services, but would rather put out tenders, and anyone interested in providing the shore base services could present a proposal.
Trotman had, in 2016, announced that Cabinet had given its ‘no objection’ to the establishment of the onshore industrial site on Crab Island, in the mouth of the Berbice River. He had said it would be forged through the joint efforts of the ministries of Natural Resources, Public Infrastructure and Business.
Construction was announced for early this year, and the investments from the Private Sector and Government’s infrastructural work and support were to be equivalent to US$500 million; but the Crab Island facility is yet to materialise.
According to information released this March by the Government’s Department of Public Information (DPI), the construction of an onshore oil-and-gas facility seeks to cater to the expansion of exploration and subsequent production of oil in Guyana.
That report had said Government would be investing US$500 million to construct the onshore facility during the course of this year, and that the facility would serve as a logistics and supply base to the offshore production, crucial areas of opportunity for local content.
What is happening now is that an onshore facility to service Exxon is being constructed by Guyana Shore Base Incorporated (GYSBI) at Houston, Greater Georgetown.
GYSBI is acting in partnership with Muneshwar’s Limited, Pacific Rim Constructors, Total Tech Oil Field Services and LED Offshore.