– says more benefits to come for Guyanese
Some US$350 million were earned by Guyanese from the burgeoning oil and gas sector, including in the 40 areas that are carved out in the Local Content Act (LCA) for citizens to benefit from. This was revealed by newly-appointed Director of the Local Content Secretariat (LCS), Michael Munroe, during an appearance in this week’s edition of the Starting Point podcast. According to Munroe, in excess of US$1.6 billion in revenues were generated over the last four years since the local content legislation was enacted in 2021, requiring foreign oil and gas companies and their subcontractors to procure goods and services in 40 areas from Guyanese individuals and Guyanese-owned companies. These include 90 per cent of office space rental and accommodation services; 90 per cent of janitorial services, laundry and catering services; 95 per cent pest control services; 100 per cent local insurance services; 75 per cent local supply of food; and 90 per cent local accounting services. Since the first year, Munroe, who previously served as the legal officer at the LCS, explained that there has been a year-on-year increase in earnings from the local content sectors. The first year saw Guyanese and/or Guyanese companies registered as local content certified earning more than US$440 million. This was increased to US$540 million in the second year and went up to US$704 million last year. “This year from January to June, I think we’re just about US$350 something million. And when you reconcile that with the year-to-date numbers for last year, it was around US$316 million. So, we’re seeing increases year on year,” the Secretariat Head noted.

He added that there is also a ramp up in the level of procurement activity, which could see figures exceeding last year’s numbers for these 40 carved out areas. “So, we will be north of US$704 million,” he said. Of this amount, United States (US) oil major, ExxonMobil, which operates the prolific Stabroek Block along with its co-venturers, has reported spending approximately US$419 million at mid-year. This, Munroe explained, is because the oil company is not confining its spending on the 40 areas but is reporting based on procurement beyond those identified areas. “If you see reporting from us and the numbers are a bit varied from the reporting from other companies, not Exxon only, but the reason for that might be that they’re not reporting solely on the 40 areas confined to the first schedule. But that is a good thing in my opinion, because it suggests that the companies are procuring beyond the first schedule. And that is the point I was trying to make…that since the enactment of the act, we have had a change in culture. These companies now want to be a part of Guyana’s local content story,” the Director stated.
More benefits
In fact, Munroe pointed out that with each Floating Production, Storage and Offloading (FPSO) vessel that comes onstream creates new opportunities for Guyanese to benefit under the LCA. Currently, there are four FPSOs operating in the oil-rich Stabroek Block – Liza Destiny, Liza Unity, Prosperity and more recently, the ONE GUYANA. In addition, the Guyana Government is gearing up to sign Production Sharing Agreements (PSAs) with four new companies from its first bidding round. These new oil operations offshore will also open up more local content opportunities for Guyanese to benefit from. “We were looking at the level of procurement activity that we would have had for the last four years, thereabout, on the basis of just one producing block and the other companies that existed within the other blocks. But now we are expanding the entrants or the participants in the Guyana Basin and they too now have to comply with this [Local Content] Act. So, they too have to do accommodation, they too have to do transportation. Every single sector that is listed in the first schedule, they too will now have to comply with the obligation. So, there is tremendous opportunity for local companies currently participating to expand and grow their businesses, but more so allow other Guyanese who might have an interest to explore the opportunities… And that is what the act was created for, to incentivise Guyanese to participate,” he stressed.
Revising the Local Content law
Meanwhile, the Guyana Government has plans to revise the LCA 2021 to expand the first schedule beyond just those 40 areas and even widen the laws to capture other economic sectors in the country. Additionally, the Government is also looking to review the local content legislation with the aim of tightening up on various loopholes and expanding the service areas through which Guyanese can benefit. One option being considering is adding a residency requirement for companies claiming to be Guyanese-owned. Currently, under the Act, a “Guyanese company” is defined as one incorporated under the Companies Act, beneficially owned by Guyanese nationals who hold at least 51 per cent of voting rights, and where Guyanese nationals hold at least 75 per cent of executive and senior management positions, and at least 90 per cent of non-managerial and other positions.
In order to participate in the oil and gas industry, companies must register with the LCS and receive a Local Content Certificate. A criterion for receiving such certificate is for the company to be Guyanese-owned.
However, many have found ways to bypass this requirement through what is known as “rent-a-citizen” schemes.
According to Munroe, this practice, also referred to as “fronting,” often results in Guyanese persons not receiving the benefits that were earmarked for them.
“So, some of the things we’re exploring is whether that person must be a tax resident in Guyana, and ensuring that these added layers of strengthening the intent of the Act will ensure that we kind of dis-incentivise these types of behaviour,” he noted. Moreover, the Director pointed out that there must be some level of practicality too in implementing this local content regime, which requires them recognising that Guyana may not necessarily have the skill sets to meet some of the requirements in the Act. Munroe believes a wavier system on a case-by-case basis could address this issue. “Something that we are considering is how do we accommodate these types of situations where the Guyanese might not have, or we might not be able to find the requisite amount of Guyanese to fill this managerial structure. If we could perhaps create an avenue for waivers in that regard, because we have a waiver mechanism in place… That is, while the companies have a requirement to procure in these 40 areas…if there doesn’t exist local capacity, then the companies could be waived from having to comply with this requirement.” “This is something that would be subject to consideration beyond me, but maybe there can be a mechanism where we could waive the managerial structure, providing that there is justifiable reasons to do so, that is to say, we don’t have enough local capacity, we don’t have the expertise, and therefore we could bring in expertise, which would perhaps work along with Guyanese to allow that knowledge transfer, and maybe within a predefined period, those persons could then take up the leadership mantle in these companies,” he added.
Discover more from Guyana Times
Subscribe to get the latest posts sent to your email.