Local Content Law seeks to recoup losses from lopsided Exxon deal – VP Jagdeo

The 2016 Production Sharing Agreement (PSA) signed between the Government of Guyana and ExxonMobil has been widely criticised for its lopsidedness. But now with the passage of the local content legislation, Vice President Dr. Bharrat Jagdeo said the law now recoups the benefits lost from the Exxon deal.

“This has suddenly made Guyanese companies very attractive and Guyanese nationals who will be registered there,” the Vice President said, during an interview on the National Communications Network (NCN), Friday afternoon.

“There is more money to give to support our people more and to expand the opportunities. That is what I mean by transferring some of our wealth to people. We can’t build the FPSOs but apart from the royalty that we get, apart from the share of profit oil, we have to get some of the business opportunities. That is how you seek to rebalance the lopsided agreement, by forcing some of the business opportunities to come to our people.”

Dr. Jagdeo reminded that the Local Content Act demands oil and gas companies, their contractors and sub-contractors to hire/ procure goods, services and employment from Guyanese companies and Guyanese nationals. Outlined in the first schedule of the Act are 40 different services that the aforementioned parties must utilise by the end of 2022.

For instance, companies must procure from Guyanese companies, 90 per cent of office space rental and accommodation services; 90 per cent 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.

Importantly, the definition of a Guyanese and a Guyanese company is clearly defined to avoid foreign companies disguising as locals.

“We don’t have to build the capacity there,” the Vice President pointed out. “We believe that we can supply those goods and services now.  This could be US$400 million to US$600 million in a year in those areas that we have carved out for our people already. This is before we start any training, and now we are establishing a training institute from this budget, and we have set aside money to train welders and everyone else.”

He said as training continues and capacity is built, the list of services outlined in the first schedule of the Act will expand. Minister of Natural Resources Vickram Bharrat has aired similar sentiments, noting that though the Bill has been passed, the government will continue to hold consultations on how to further strengthen the Act for the country’s benefit.

“The local content law is very strong. We sat and we worked through this. This is a pledge that we made. I remember that when we were in opposition, we talked about this. We were pushing the then government to do this but they didn’t do any of this to protect our people. This is huge for our people now,” Dr. Jagdeo related.  

Importantly, no other country has been able to lead in the oil and gas industry as Guyana, the Vice President highlighted. He linked this to the fact that the government was able to enact a local content law in its first year in office.

Regarding the implementation of the local content legislation, work has already begun to create the two Local Content Registers that deal with the provision of goods and services.