For the Guyanese people to truly gain from our oil resource, government and industry companies must work as a team, the former to build institutions that include aggressive local content guidance and objectives, and the latter to meet the challenges set out.
January 27, 2019 – Georgetown, Guyana – The 10 discovery wells to date by ExxonMobil have given confidence in production of over 750,000 bopd by 2025, and an industry that will last for decades. Guyana must take a similar ‘decades long view’ in how this industry will benefit its people and country. There are success stories of countries discovering oil wealth to the benefit of all. However, too often the result has been an industry that benefits a select few, both individuals and companies, and for the latter, often international ones. Here we present a view on oilfield services local content that gives priority to Guyana and its people.
The future for Guyana will depend on the political and economic institutions that are created to address the oil wealth, in particular for local content. Are they designed to engage local companies with ever-increasing participation and responsibilities, or are only a limited number of individuals and companies to gain? Guyana is at a ‘critical juncture’, a term used in the recent highly regarded book ‘Why nations fail’. It describes the different paths a country can take when a major event disrupts the existing political and economic order, and the discovery of oil is a big one.
The ‘critical juncture’ Why nations fail describes results in one of two directions for the country; development of inclusive institutions, or extractive ones. The actions of government will determine the direction. It must be ‘inclusive’ if the economic and social developments are to benefit Guyana and its people for generations to come.
The Guyanese government is taking the right steps towards creating these inclusive institutions. The newly created Department of Energy (DoE), headed by Mark Bynoe and empowered to regulate the oil & gas sector is one such move. The long-term vision of the DoE is to become a ministry with a wider remit, developing and furthering energy infrastructure for both hydrocarbons and renewable sources across the country, to the benefit of all people. This is a strong vision and the right one. Other critical steps being taken for inclusivity are financial transparency and creation of a sovereign wealth fund, although the fund would likely not see investment for a number of years until a number of development priorities are well under way.
Where TOTALTEC Oilfield Services is intent on playing a leading role is in driving a highly ‘inclusive’ oilfield services sector. TOTALTEC and its partner companies’ leadership teams have significant international experience in providing oilfield services in developing countries, where the discovery of oil has presented similar opportunities to those facing Guyana today. This leadership has lived and worked within both inclusive and extractive institutions. It is easy for the arrival of wealth to initially mask extractive institutions as working for the common good. Over time, these institutions become embedded, and reversing them without disrupting society is near impossible. ‘Inclusive’ must be the direction from the start.
“Oilfield services arguably offer the greatest opportunity for the Guyanese people to earn our share of the oil wealth”, says TOTALTEC CEO Lars Mangal. He continued, “The term ‘local content’ must encompass all services, products, and the people who provide them, with annual objectives set to ensure progress, shared by government, international, and local service companies. Guyana should have in place the institutions and policies that will place Guyanese people on paths to all positions in the industry, and Guyanese companies to provide the greatest possible scope of services and products technology allows.”
Defining oilfield services local content and objectives setting
The starting place for Guyanese in the service sector has understandably been people in entry level positions. The most visible initial metric of local content has been ‘percent Guyanese headcount’ in a given company. A number of international service companies have published these percentages and are to be commended. These percentages may look significant. However, they are most often filling positions requiring limited skills, with limited opportunity for advancement. It is easy for international companies to pause on an initial plateau, which may be 50% or more.
The next additions of people are more challenging, and more important for Guyana to grow ownership of the oilfield services sector. Said Mangal, “Consider a hotel, where at the start, the high percentage of people will be in housekeeping, kitchen, grounds roles, meaning general support staff. To be sure, these are important positions and the right starting point. However, the important steps are the next levels of leadership, ultimately running the hotel. Being at, say 60% is good. However, it is getting from 60 to 65 and beyond that really counts.”
The government and local oilfield service companies must work with international ones to have in place development plans and metrics for advancing Guyanese people. Many Guyanese have highly relevant skills and experience from other industries, for example mechanics, electricians, maritime, and equipment operators. They are ready to take on more senior roles after an initial cross-training and experience period. There are examples with international service companies.
Given the opportunity and training, engineers and other technical people can readily move into equivalent positions to the industry they come from. That training may come from spending time outside Guyana. Said Mangal, ‘Consider a policy where if a company has several professional staff working in Guyana operations, a similar number of Guyanese must be outside the country in those positions, training, with plans to return.’
A number of Guyanese are off to a good start following training given locally to international standards, for example at the International Petroleum & Maritime Academy (IPMA) and MATPAL Marine Institute. In the longer term, with the support of international companies, Guyanese schools, technical academies and universities will begin to produce graduates who will be the workforce of the future. ExxonMobil has taken a leading role in supporting these institutions, showing the way forward for other operating companies who will come into the country to also support.
The Guyanese and international oilfield service companies must be ready to put these new graduates to work, and on progressive career paths.
Providing services and products is the other area with potential for Guyanese companies to take on significant scope, and objectives must be set. Beyond the initial headcount advances, international service companies will need to be pushed through government guidance and metrics for this to happen. Consider the mining and timber industries; Guyanese dominate these industries, with only necessary technology coming from outside. For example, Guyana will likely never manufacture cranes and chainsaws, nor should it.
Following Guyanese people in the industry, the percent of total oilfield services and products spend with local Guyanese companies is next. This should become a metric, and the time to start is now. This metric is certainly very low today. Government institutions will be required to drive local content in oilfield service and product provision, working with international companies.
Much of the equipment used in the provision of oilfield services is commercially available. This is the essence of the American oil industry. Products and service equipment can be purchased and do not form a barrier to entry. True, the American example of local service companies is primarily for land activity. However, there are still a fair amount of offshore services that can be performed with commercially available equipment, and this happens. In the near term, 100% of onshore services in Guyana can be delivered by local companies. This is well underway with examples of Guyana Shore Base, Inc. (GYSBI) and Jaguar Oilfield Services.
Major international service companies often also sell equipment and have established career development programs for its application that can be directly applied in Guyana. These same companies should be motivated to increase local content of services and products, possibly through increased market participation.
There have been a number of international service companies that have made excellent initial steps in local content, for example Nabors, Saipem, SBM, Schlumberger, and TechnipFMC. They are to be commended and are the logical starting points for the next step of services and products provision.
Looking to the future
A healthy mix of local and international service companies are working together to put in place the necessary foundation for a Guyanese oilfield service industry. Government must put in place guidance and metrics to drive it. Things are off to a good start. When an updated version of ‘Why nations fail’ is published, Guyana must be in it as an exceptional example of how it took the right steps to form ‘inclusive institutions’ at its ‘critical juncture’.
1 - Critical Junctures and Path Dependency in “Why Nations Fail”: Implications for U.S. Foreign Aid Policy https://notesonliberty.com/2013/06/20/critical-junctures-and-path-dependency-in-why-nations-fail-implications-for-u-s-foreign-aid-policy/
About TOTALTEC
TOTALTEC Oilfield Services is focused on the success of the oil industry in Guyana for the benefit the country, its people, and partner companies. It does this through three areas: people, partnerships, and facilities. Qualified and motivated Guyanese develop through the Academy. Partnerships prioritize products and services that are starting points to grow from, in effectively introduce companies new to Guyana. The Guyana Shore Base facility is now supporting offshore operations.
The 94% Guyanese TOTALTEC workforce includes 8 nationalities with over 160 years of international oilfield experience. https://www.totaltec-os.com