Following his perusal of Guyana’s draft Local Content Policy, Senior Analyst at Americas Market Intelligence (AMI), Arthur Deakin is of the firm conviction that the new oil-producing State is already heading in the wrong direction. In this regard, Deakin was quick to point out that Guyana is proposing to use high sliding scale targets for local content achievements. In one instance, the policy notes that oil companies should have a 10-year deadline to ensure front-end engineering and geophysical services have a 90 percent local content level.
Deakin was keen to note that this is rather high for a country with no oil and gas precedence while adding that these jobs are extremely complex and hard to fulfill with people from any nationality.
For Guyana to come close to reaching such thresholds, Deakin said it would need to heavily invest in developing an oil and gas technical training institute. But even then, the Senior Analyst said it is unlikely to reach those targets. He said that other areas that do not require extensive technical training, such as unskilled labor and catering, should keep the100 percent local content thresholds as proposed in the draft policy.
Pointing to another area of concern, Deakin said that the draft offers minimum requirements for joint venture ownership through equity participation. The US Analyst said that a similar rule is implemented in China, where foreign companies are prohibited from having majority control and are often subject to intellectual property theft. Although China’s economic prowess forces foreigners to comply with the requirements, Deakin stated that Guyana does not have the size to attract this type of compliance. In free, capitalist markets such as the United States, he said that these requirements do not exist.
Taking this into account, the analyst said, “It does appear that the draft was somewhat rushed, or perhaps overly optimistic, because it even included certain targets for the local provision of steel plates and pipes. Guyana does not manufacture any steel, and it does not have plans to do so, making it impossible for them to comply with the requirements.”
He reminded that Vice President, Dr. Bharrat Jagdeo recently consented that those targets should have not been set and pledged that unrealistic provisions would be amended.
Despite some of the local content shortfalls, Deakin said that Guyana should be applauded for its seriousness and attention towards developing a thriving local business environment. At the end of the consultation process, he advised that Guyana should ensure it emerges with a policy that strikes an optimal balance that allows the Guyanese people to prosper, while simultaneously growing the energy sector.
