In our editorial in yesterday’s edition, “Local Content and Citizen Participation”, we outlined the commitment of the new People’s Progressive Party/Civic (PPP/C) regime to proceed with enacting legislation that would ensure Guyanese obtained a larger share of the opportunities created by the nascent oil industry. Today, we would like to explore what some of those opportunities might be and exactly what the Government ought to be doing with its proposed legislation. Since it was announced that President Irfaan Ali would be conducting a series of countrywide consultations under the ambit of “Citizen Participation”, it would be helpful if the citizenry were better informed on the issues flowing out of a “Local Content Policy”.
While it might seem obvious, the first requirement is that there must be a clear articulation of what Guyana considers to be “local content”, since there is wide variation across the globe on this issue. For instance, Tanzania defines Local Content as, “The added value brought to the country in the activities of the oil and gas industry in the (country) through the participation and development of local (citizens) and local businesses through national labour, technology, goods, services, capital and research capability.” On the other hand, in his second draft to the A Partnership for National Unity/Alliance For Change (APNU/AFC) Government in 2018, Trinidadian expert Anthony Paul had defined the term as “the sum of inputs of local goods and services including employment across the oil and gas value chain”.
We should note, first of all, that “Local Content” does not refer to the revenues that will be accruing to Guyana from the 2% royalty plus the 12.5% profit (in oil) that Raphael Trotman accepted from the Overseas Oil Companies (OICs) for the oil from the Stabroek Block. These revenues are being deposited in the US financial institution the NY Fed, and will be acceptable for specified uses determined by the Government after it revisits the Natural Resource Fund (NRF) Act that was hurriedly passed in the wake of the No-Confidence Motion (NCM), without the participation of the PPP/C.
Local Content seeks to have Guyanese directly “get a piece of the action” from the activities that actually extract the crude oil out 120 miles off our shores from under the Atlantic Ocean and ship it directly from that point. Citizens should be aware that at this point, not a drop of this oil will enter Guyana. Today, we look at employment of Guyanese. The Liza 1 oil field phase one development involves 17 wells, comprising eight production wells, six water injection wells and three gas injection wells, and a Floating Production, Storage and Offloading (FPSO) vessel with the capacity to produce up to 120,000 barrels of oil equivalent per day (boed).
The drilling of those wells by a specialised ship, Stena Carron and processing and shipping from the FPSO “Liza Destiny” at best would have employed several hundred workers. According to ExxonMobil, however, “around 1700 of ExxonMobil’s employees and other workers supporting its activities in Guyana are Guyanese – more than 50 per cent of the total workforce”. ExxonMobil expects that by 2025 at least five FPSOs will be producing more than 750,000 boed from the Stabroek Block. Some of those workers are ancillary staff that would be based on shore.
It has been revealed, however, that most of these workers are actually being paid abysmal wages much lower than foreign workers doing the same jobs, which shocked even the APNU/AFC Administration. The PPP/C Administration has committed itself to addressing this problem. Another source of employment would be individuals who are employed at some of the shore-based companies that service the operations at sea, such as, for instance, the company Schlumberger that purchased the Gafson’s facility at Houston to facilitate a “mud plant” that services the oil extraction process. There are at least a dozen of these foreign companies plus a number of local ones such as Muneshwers’ “Guyana Shore Base Inc”.
Overall, however, it must be recognised that direct employment in the off-shore oil extraction business will not solve Guyana’s massive unemployment problem since even by the most optimistic projections, even when the entire Stabroek Block is serviced to produce its targeted 750,000 barrels per day (bpd), the 7000 jobs lost in the APNU/AFC sugar closure would not be covered.
