Current petroleum regulations require oil companies to incorporate local content in their operations

Guyana’s oil discovery has attracted droves of foreigners, from near and far, even as the country grapples with concepts of local content – presumably for the current generation – and Sovereign Wealth Fund for succeeding generations of Guyanese. What is surprising is that we speak of local content as if the concept is new to Guyana and the sector. In fact, it is not and here is why.

The Petroleum (Exploration and Production) Regulations 1986 contains a requirement that the application for a petroleum prospecting licence and for a petroleum production licence must contain a statement giving particulars of the applicant’s proposals with respect to the employment and training of citizens of Guyana while in the case of the production licence there is the additional requirement that the application shall include a report of the goods and services required for the production and processing operations which can be obtained within Guyana and the applicant’s intention in relation thereto.

In the case of the prospecting licence, the Minister may attach such conditions as he determines. In the case of the production licence, the law is clear: it prohibits the Minister from granting a petroleum production licence unless the applicant’s proposals for the employment and training of citizens of Guyana, and for the procurement of goods and services obtainable within Guyana are satisfactory. In other words, the licence must include satisfactory proposals regarding the employment and training of citizens of Guyana and the purchase of goods and services locally.Local content requirement is a feature of every oil-producing country and our neighbours Trinidad and Tobago are very good at it as the following case study by the operator BG Group in relation to the Fabrication of a Production Platform Deck in Trinidad and Tobago demonstrates:

Phase 3c of the development of the North Coast Marine Area (NCMA), one of two off-shore blocks operated by the BG Group in Trinidad and Tobago included a drilling and production platform on the Poinsettia field. The 10,000 ton jacket for the platform was fabricated in the United States while the 4,200 ton deck (topside) was constructed in Trinidad by an entity called TOFCO Ltd.

TOFCO Ltd is a 50/50 joint venture between CMC of the US and Welfab Limited, a Trinidadian services company. The Poinsettia topside was constructed in the TOFCO fabrication yard in La Brea, on the west coast of Trinidad. The case study found that a whopping 99 percent of the 1.1 million hours work on the Poinsettia topsides were undertaken by Trinidadian nationals! It concluded that this demonstrated a particularly high level of local content in all management, technical, and administrative positions.

That is more than high: it is extreme.

Everyone in Guyana is excited about the attractive concept of the Sovereign Wealth Fund which deals with the future. But the case for dealing with the present must by definition be stronger, since it deals with immediate imperatives. The word is that Minister Raphael Trotman is working feverishly on such legislation. In that regard, we are already late, perhaps understandably so. But any delay in the introduction of formal legislation cannot constitute a waiver of the local content obligations of prospecting and production licencees.

Oil companies are required to incorporate local content in their operations. The duty of the Government is to enforce the requirement from day one. The Ministry should review all applications and licences to determine the extent to which operators are complying with the local content prescription in respect of employment of Guyanese citizens and the procurement of goods and services locally.

Let us get it right from the beginning.

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