Local Content Bill Shows a Pragmatic Wisdom, Manufacturing Opportunities, Yet Key Areas Remain
12 January, 2022 – Georgetown, Guyana – At year end, a historic local content bill passed the National Assembly and was signed into law by President Dr. Irfan Ali. The bill recognizes both the urgency of applying Guyanese capacity in those areas where it is available, as well as the long term challenge of developing the capabilities necessary to deliver projects that are among the most technically challenging in the energy industry. The bill is described by the administration as a living document, a work in progress, recognizing the dynamic future of Guyana. For those with a long history of international experience in the industry, this is encouraging for a number of reasons.
The Starting Point
The bill sets out 40 sectors and sub-sectors for services and products to be procured from Guyanese companies by end 2022, at levels ranging from 5% to 100%. Those areas closer to 100% are where there is significant foundational business capacity, for example ‘offices, accommodation and related supporting services’ at 90%, ‘local legal and accounting’ at 90% and ‘Waste management (non-hazardous)’ at 75%.
Lower percentages - in the 5% to 30% range to be achieved by end 2022 - are in areas where rapid growth beyond 2022 are possible, for example ‘pipe welding onshore’ at 25%, ‘dredging’ at 10%, and ‘ICT - network installation, support services’ at 20%.
This combination of high percentages where capacity exists, and early wins where starting points exist, will both drive immediate action and accelerate building the foundation for local manufacturing opportunities, ones that exist in abundance today.
“It is true that much of the technology necessary for deepwater development offshore Guyana will never be manufactured locally”, said TOTALTEC CEO Lars Mangal, “However, there is a significant amount that can be, and that manufacturing capacity must be accelerated.” Mangal continued, “Key contractors are taking good initiatives to develop local content, for example SBM Offshore and TechnipFMC. However, there are foundational skills, for example engineering, machining, welding and structural fabrication, that must be made available locally at scale. This requires government action, in parallel with local content targets for international companies.”
The Next Phase
“A true assessment of our capabilities will have to be done overtime, and the implementation of this Act will aid in this… “ said Minister of Natural Resources, Vickram Bharrat, M.P. during a recent press conference. “We need a strong Local Content Bill in place to ensure that benefits trickle down to every single Guyanese, regardless of if you are a farmer, regardless if you are a welder, mechanic, the catering business or the waste disposal business – everyone should benefit from the oil and gas sector and the opportunities that arise from this sector.”
For Minister Bharrat’s comments on benefits to extend across all Guyana society, it is necessary that local capacity scale at an accelerated pace. The Guyana Manufacturing & Services Association (GMSA) now faces a new area of challenge and opportunity.
Among the 40 sectors and subsectors listed there are a number that are important to build manufacturing capacity which have initial low percent local content targets, for example machining at 30% and pipe welding at 25%.
“Based on the energy in the room at the GMSA annual dinner and awards ceremony late last year, “ said TOTALTEC CEO Lars Mangal, “the Association is ready to work to ensure the benefits of the new energy industry extend to all Guyana manufacturing.” Mangal continued, “Their membership has a unique opportunity to both grow existing capacity and develop new ones.”
President Dr. Irfan Ali shares a light moment with members of the Guyana Shore Base, inc. (GYSBI) and TOTALTEC CEO Lars Mangal at the 2021 Guyana Manufacturing & Services Association annual dinner and awards ceremony last December.
The Long Term
Capacity will be built steadily over time, with opportunities to adapt and expand into new areas of competence, driven by aggressive objectives setting and evolving legislation. The 40 sectors and sub-sectors are the right ones for this stage of energy industry development and the government is to be commended. The next phase must include new entrants, albeit at low percentages, in categories related to offshore services and their associated onshore support, and petrotechnical expertise.
Many Guyanese are working offshore in drilling and production operations, on rigs and Floating Production, Storage and Offloading (FPSO) facilities. Those positions and levels of greater responsibility, in management and technology, are targets for future local content metrics. This is the start of a generation of Guyanese leadership in manufacturing, led by the energy sector.
The next phase should also see the emergence of Guyanese oilfield service companies.
“There are a number of offshore services accessible to Guyanese companies today, for example in the areas of maintenance, equipment inspection and testing. This is a good starting point.” Mangal continued, “Next should come activities more directly involved in well construction and production operations, with categories and associated targets to be set.”
An area just starting for local content is petrotechnical expertise, for example geology, geophysics, and reservoir engineering - the University of Guyana now engaged. While university programs exist, and international companies have a number of Guyanese working in these areas, there has yet to be government guidance or involvement at the level seen in other resource rich countries.
Said Mangal, “It is critical that Guyana develop the petrotechnical skills, and have the technology and data to understand and manage its new resource, for the long term.” He continued, “While ExxonMobil and other international operators are highly professional companies, they are primarily responsible to their shareholders. Guyana must have control of its own ‘subsurface resource destiny’ - through geoscience expertise, subsurface data and the latest technology. This 50+ year journey is at a starting point.”
See recent government announcements related to the local content legislation.
… and visit the Guyana Manufacturing & Services Association https://gmsagy.org/
TOTALTEC is focused on the success of the energy industry in Guyana for the benefit of the country, its people, and partner companies. It does this through three areas: people, partnerships, and facilities. Qualified and motivated Guyanese develop through the International Petroleum & Maritime Academy, where more than 600 have been trained. Partnerships prioritize products and services that are starting points to grow from, creating new Guyanese led companies, for example Jaguar Oilfield Services. Facilities include Guyana Shore Base Inc (GYSBI, also a partnership) providing a complete range of services to offshore operations. The TOTALTEC 94% Guyanese workforce includes 6 nationalities with over 160 years of international oilfield experience. https://www.totaltec-os.com