Local Content and CSR

IN GUYANA BY GUYANESE – GUYANA’S LOCAL CONTENT POLICY

Creating and Retaining Value for the Guyanese economy

Highlights of the Third Draft of the LCP Framework

 

LCP Objectives

The Local Content Policy (LCP) for Guyana is now in its third iteration and set for implementation. This version of the policy has interpreted Local Content to mean “The active participation and development of Guyanese labour and suppliers in the petroleum sector and the benefits that arise from expenditure in the sector on labour, goods and services for Guyanese industry, the economy and wider society.”

 

“The primary goal of this policy is to facilitate the active participation and development of Guyanese labour and suppliers in the petroleum sector and to give rise to benefits from expenditure in the sector on labour, goods and services for Guyanese industry, the economy and wider society. In an effort to maximise benefits and retain long-term value from Guyana’s petroleum resources, considerable focus shall be given towards local capacity development in addition to local participation.”

 

The Guyana Government has determined that the LCP “will be implemented over time and in tandem with the growth of the industry. At present, Regulations will not be promulgated, but may become necessary as the industry unfolds and expands, and impetus is needed to steer the process or to solidify gains.”

 

The revised policy framework acknowledges “the need for continuous review, so as to update the position of the Government of Guyana in all aspects of managing our petroleum resources for national development. Even though aimed at our petroleum resources, this policy framework may be replicated in other industrial sectors so as to bring about similar benefits, and to protect the viability of these sectors from the outward movement of human and capital resources into the petroleum sector.”

 

Policy Statement

“This policy recognises that the petroleum resources of Guyana belong to all its people, and represent an asset of significant intrinsic value, which, once removed, diminishes the wealth of the nation, unless there is transformation in value from resources below the ground to improved quality of life above it, for current and future generations of Guyanese

persons. This shall involve utilization of revenues from hydro- carbons to transform the contribution to our economy and country from agriculture, finance, tourism, mining and other non-hydrocarbon sectors…”

 

“Guyana shall approach the development of its petroleum resources, people and businesses in a pragmatic, collaborative, transparent, flexible and accountable manner, but with clarity of purpose. This will be conditioned by existing circumstances and an analytical approach to understanding the resource, the activities it engenders and our input capabilities. We shall aggressively pursue strategic opportunities for local capacity development and participation that give us the maximum possible benefit now and, in the future, and we shall ensure that effective government oversight, instruments and administrative institutions are in place, properly resourced and functioning adequately, such that stakeholders are held accountable…”

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“To maximise the benefits of the petroleum sector for local employment and local businesses, investors, Operators and their Primary Contractors shall participate in a manner that gives Guyanese persons and Guyanese Suppliers fair and adequate opportunity and first consideration where capable and competitive to provide labour, goods and services and improve and enhance their capabilities, and in so doing become internationally competitive and progressively provide a greater share of future labour and services to the sector…”

 

“In our desire to enable more value retention for the Guyanese economy from expenditures in the petroleum sector, costs related to local content participation and capacity development for Guyanese labour and suppliers, including those which are costs recovered by investors and therefore paid for by the people of Guyana, shall be seen by Guyana as our investment in our people…”

 

“Because of the size and speed of discoveries in the upstream petroleum sector, realising the best chance for Guyanese persons and suppliers to access the opportunities requires the matter of local content and value retention to receive special attention now. This policy framework therefore precedes the overall petroleum sector policy of the Government, and shall be updated from time to time to be aligned with sector and national development strategies and policies. A subsequent overarching national policy for the petroleum sector is being developed and shall provide the broader framework within which Local Content in mid and downstream petroleum activities shall be applied, and the risks of the sector for resource movement effects and other aspects of the resource curse, ameliorated. Further, the government may expand the scope of this local content policy to other industrial sectors to mitigate the risk of resource movement effects.”

 

Policy Objectives

The goal of this policy is to achieve the active participation and development of Guyanese persons and suppliers in the petroleum sector and maximise benefits and retain value for Guyanese industry, the economy and wider society from expenditure in the sector on labour, goods and services. In support of the goal, the objectives of this policy are to:

  • be fit-for-purpose…
  • ensure the education, inclusion and advancement of Guyanese persons with the expertise and experience required to participate in the petroleum industry;
  • achieve participation of Guyanese persons in employment opportunities and Guyanese suppliers in procurement opportunities within the petroleum sector, within and outside of Guyana;
  • localise supply chains in procuring goods and services that serve the petroleum industry to bring efficiency and cost benefits to the sector in Guyana…
  • enhance the capacity of Guyanese persons and suppliers, and Guyanese public and private education and regulatory institutions, to align with good industry standards in the petroleum sector…
  • use the opportunities presented by international companies operating in Guyana to grow the competencies of Guyanese oil and gas professionals and goods and services companies down multiple supply chains, becoming world-class and internationally-competitive, with local suppliers developing export potential;
  • retain value in the Guyanese economy through investments in the petroleum sector and in particular expenditures on local labour, goods and services…
  • build Guyanese persons and supplier competencies, enhance other sectors of the Guyanese economy (i.e. achieve lateral economic linkages) …
  • build and enhance institutional capacity in national education, training and research organisations, and in our utilities, infrastructure and facilities to support the petroleum sector, through collaboration of the Government of Guyana and private sector …
  • invite partnering between firms for effective capacity building, transfer of knowledge and technology and to enhance the capabilities of Guyanese persons and Guyanese suppliers to participate as fully as possible in the petroleum sector. …

 

The goal of this policy is to achieve the active participation and development of Guyanese persons and suppliers in the petroleum sector and maximise benefits and retain value for Guyanese industry, the economy and wider society.

 

  • world class capacity in key state institutions and high-quality governance to implement this local content policy, which can act as a model to raise the standards of government services across the country, through collaboration of the Government of Guyana and private sector.

 

Core Principles

Guyana’s petroleum discoveries and this policy framework come at a time when several other developing economies have made similar, potentially transformative, discoveries of petroleum resources. These countries have begun to implement local content policies and legislation, with varying degrees of success. At the same time, a number of mature oil and gas producing countries have also made new discoveries or are deploying new technologies to extend production, and these governments too have implemented or evolved new local content policies and regulation. In the process of implementing policy, we shall continue to learn from both the successes and mistakes of others, especially those governments who have been successful in developing fit-for-purpose policy and regulation, and where local content is positioned as a catalyst for sustainable national development. (6:1)

 

The principle of fit-for-purpose includes:-

  • Operator Local Content Plans shall be updated annually, informed by recent performance and current market information, including from Primary Contractors, describing estimated levels and activities and programmes for the utilisation of local content for the upcoming year;
  • holding Operators to account for delivery of their yearly Local Content Plans through half-year and end-year Local Content Reports…
  • use of yearly Local Content Plans and half-year and end-year Local Content Reports to review, learn and collaborate between industry and government to explore what is working in delivering local content and what can be improved…
  • appropriate procurement procedures for the acquisition of goods and services that ensure that capable and competitive parts of the Guyanese supplier market are able to meet the necessary industry standards and thereby access opportunities…
  • incentivising innovation by Operators and Primary Contractors to find ways to give first consideration to capable and competitive Guyanese persons and suppliers… (6:2)

 

First consideration

In making decisions concerning recruitment and procurement to execute petroleum activities, Operators and their contractors shall give first consideration to Guyanese persons having appropriate qualifications and experience, and to Guyanese Suppliers where capable and competitive. Acknowledging that the use of new or unfamiliar labour and suppliers introduces an element of risk, the Government shall work with industry partners to minimize the risks, rather than completely avoiding them. We are confident that given the industry’s hallmarks of innovation and risk management, Operators and their Primary Contractors can come up with mutually-beneficial risk-based solutions that give first consideration to Guyanese persons having appropriate qualifications and experience, and to Guyanese Suppliers that are commercially competitive and able to provide goods and services on a timely basis and that meet the quality, quantity, financial and other technical requirements of the petroleum industry. (6:9)

  • In exercising the principle of first consideration to Guyanese persons and suppliers, Operators and their Primary Contractors, shall:
  • explore creative solutions to providing on-the- job training…
  • identify categories of goods and services required for petroleum operations for which there is evidence of Guyanese suppliers having the required capability, capacity and price competitiveness to be considered for inclusion…
  • identify categories of goods and services for which there is evidence that there is no current capable and competitive local supplier market…
  • the government will look to the petroleum industry to demonstrate innovation in applying this policy of first consideration to help develop the Guyanese supply base…(6:9)

 

In making decisions concerning recruitment and procurement to execute petroleum activities, Operators and their contractors shall give first consideration to Guyanese persons having appropriate qualifications and experience, and to Guyanese Suppliers where capable and competitive.

 

Fair and Adequate

  • Guyanese persons and Guyanese suppliers shall be afforded fair and adequate access to employment and supplier opportunities founded on the principle of being competitive against industry standards …(6.10)

 

Local Content Measurement and Reporting

  • Delivery of this policy shall be measured through standardized half-year and end-year reporting of local content performance to the Minister. Common metrics and definitions shall be applied across the petroleum industry in Guyana. The Ministry will use the standardized half-year and end-year reports to measure each Operator’s performance against the estimated levels and activities and programmes for local content utilisation in their Local Content Plan. (6.11)
  • Reporting will inform the extent of flexibility needed to increase or decrease expectations for utilisation of Guyanese resources and personnel in future Local Content Plans, so as to ensure effective delivery of Government policy, take account of changes in the business environment, and consider any emerging unintended consequences, for example, levels of utilisation leading to the movement of capital and labour out of other sectors of the Guyanese economy and into the petroleum sector. (6.11)
  • The half-year and end-year reports will be used to continuously review and refine the opportunities and constraints in developing local content in Guyana and to inform how government and industry collaborate to drive local content development…(6.11)

 

Local Content Implementation

  • It is the policy of the Government of Guyana for Operators to prepare and execute yearly Local Content Plans updated annually that operationalize the objectives and principles of this policy. Operator’s yearly Local Content Plans, and the information they contain, shall form the principal instrument of Government policy on Local Content in the petroleum sector. The objective here is that the Operator’s yearly Local Content Plan provides a forward- looking, efficient, focused and flexible mechanism for government and Operators to identify, plan, implement and assure delivery of local content…(7.1)
  • Local Procurement Opportunities – The Operator’s yearly Local Content Plan shall describe in general the process and evidence of efforts that the Operator, the Operator’s Primary Contractors, the wider petroleum industry in Guyana and the government have made to assess the supply of skilled, qualified and experienced Guyanese persons and capable and competitive Guyanese suppliers in meeting the demand of the Operator and its Primary Contractors for labour, goods and services in the upcoming year…(7.1.6)
  • Local Content Utilisation Activities and Programmes – Operators shall describe in their yearly Local Content Plan activities and programmes that address employment and training of Guyanese persons and capacity and development of Guyanese suppliers, as well as other capacity development initiatives such as environmental programmes, support for local education and training institutions, local research and development and investments in productive assets in Guyana…(7.1.8)

 

Guyanese persons and Guyanese suppliers shall be afforded fair and adequate access to employment and supplier opportunities founded on the principle of being competitive against industry standards …(6.10)

  • Acquisition of Guyanese Resources – In relation to each of the discrete work activities described in the yearly Local Content Plan, the Operator shall provide a list of goods and services anticipated to be acquired directly, through partnerships or indirectly by the Operator or by Primary Contractors over the period of the Operator’s Local Content Plan, and provide an estimate of the utilization of Guyanese Resources… (7.1.8b) 
  • Supplier Development Programmes – In relation to work activities described in the Operator’s yearly Local Content Plan, the Operator shall describe in their Plan programs of support and development to Guyanese Suppliers involving the Operator and its Primary Contractors…(7.1.8b) 
  • Other Capacity Building Activities and Programmes – In relation to the work activities described in the Operator’s yearly Local Content Plan, Operator shall include in their Plan other activities and programmes, unilaterally or in collaboration with other parts of the industry, that support capacity development of Guyanese labour and business for participation in petroleum sector…(7.1.8c) 
  • Procurement Procedures – Operator shall describe in their yearly Local Content Plan the tender procedures of the Operator and its Primary Contractors that assure consistency with the principle of Government policy for fair and adequate opportunity to Guyanese Suppliers and sub-contractors in the supply of goods and services and with the principle of Government policy and first consideration…(7.1.8c) 
  • Local Content Measurement and Reporting – The Operator shall gather information on progress in achieving the objectives, utilisation levels, activities and programmes described in their yearly Local Content Plan, sufficient to inform half-year and end-year Local Content Reports to the Minister…(7.1.2)
  • Governance of Policy Implementation – The principle instruments of implementation for this policy are the Operator’s yearly Local Content Plans and half-year and end-year Local Content Reports. The Ministry has the sole authority to administer this policy including the review of the local content plans and the results of the Operators. The Operator shall permit an agent designated by the Minister to access the records of the operator and Primary Contractors for the explicit and sole purposes of assessment and verification of the local content information reported by an operator or Primary Contractors under this policy…(7.4)

These highlights are excerpted from the Guyana Petroleum Sector Local Content Policy – Making the Most of Our Oil and Natural Gas (A Local Content Policy Framework for Benefits Maximization and Value Retention from Guyana’s Petroleum Resources) of April 23rd 2019. 

To view the current policy framework visit the Ministry’s website at https://www.business.gov.gy