Local Content Legislation Assisting Enhanced Competitiveness Highlighted at Guyana Energy Expo
16 February 2023 – Georgetown, Guyana – This week's Guyana Energy Conference & Expo included a number of talks and panels on growing capacity while developing sustainably. These two themes critical to the future of Guyana were brought together in the context of local content legislation in a talk by TOTALTEC CEO Lars Mangal. An edited version follows.
How Local Content Legislation Has Assisted With Enhancing Competitiveness - Lars Mangal
When asked to speak to the topic ‘local content legislation enhancing competitiveness’ I reflected on just who is competing with who, in which area of business, and how does this affect the strategies for our country and its companies?
However, first, a topic that introduces all meetings in the energy industry, including this one - safety.
Safety is the highest priority for the energy industry. Perhaps most important for Guyana, there is a safety culture to be built, one that extends across all aspects of lives. I encourage all companies who support the industry to focus on building a safety culture across their workforce. And congratulations to Guyana Shore Base, which just celebrated passing 1,000 days without a Lost Time Accident. Truly exceptional.
So to our topic of enhanced competitiveness and local content.
A Highly Competitive Industry
The energy industry is extremely competitive on multiple levels. Upstream, the operators compete with each other in licensing rounds, one coming up for Guyana. And from there, on to refined products, and ultimately to the gas pumps.
The international service sector - led by Halliburton, SLB, Baker Hughes, TechnipFMC - is highly competitive as well, keeping a close eye on each other’s business wins, losses, and technology developments. Note they have strong safety cultures and any Guyanese who join them will gain this distinct advantage as they progress in their careers.
The high level of competition in the oilfield service sector is important to the operators. It ensures competitive pricing, and continuous technology development and innovation.
One thing I have learned in a long career in the oil industry - competition is the greatest driver of technology development and innovation, continuously advancing the industry. .
It is here I’ll make a connection to Guyana and local content legislation as a tool to enhance competitiveness.
Starting a Guyana Oilfield Service Industry
The first step of Guyana’s legislation ensured that products and services that are available locally come from local companies. These were what I’ll call supporting services - legal, accounting, hotels, administrative activities and the like. This is in place, serving us well, and helps show the way forward.
The next step is to identify the oilfield service industry scope that Guyana can develop in a 2-4 year time frame. These should include services and products that are used in field operations, revising the local content legislation with this new scope.
Countries that have a long history in oil and gas have multiple companies that form a local service industry. For example services in mud logging, inspection and testing of equipment, specialist machining, welding, and a number of supporting drilling and well services activities.
The foundations for these future Guyanese oilfield service companies are being put in place today, in part because the major international service companies have done this before, and understand it is good business to build this local capacity.
Here, local content legislation is critical. International companies provide the majority of these services today, and need to be ‘encouraged’ to work with local partners to take on that scope. Legislation must include measures such as percentages of spends, headcounts, ‘shadow positions in senior positions’, and technology development collaboration projects.
Guyana can and should develop companies to provide this next phase of local oilfield services.
This requires the government to access sound, independent, technical advice to understand what the marketplace requires, and gradually and aggressively expand the scope of products and services covered by the local content legislation.
It is equally important to understand what products and services will never be provided through local companies, and there is quite a bit in deepwater developments.
Compete Locally, Expand Globally
The Guyana companies that provide these services and products to oilfield operations should aspire to compete internationally .
Is there potential for this? I believe the answer is yes.
President Ali, in his speech last week on the occasion of the Guyana Shore Base (GYSBI) commissioning ceremony for its Heavy Lift Berths and "Commander-in-Chief" Crane, had a lot to say about local content.
At one point he spoke to the possibilities for Guyanese companies to take new found capabilities internationally.
President Ali remarked, “Local content is driving economic diversity in Guyana. The business landscape of Guyana is being transformed.”
The President continued: “Guyana now has a project management team that is the first to deliver a crane and berths of this capacity in the region. Do we understand what that means for the future?”
And then the President’s message: “What we should be discussing, as a country, is how we capitalize on this new experience and benefit... How do we bring these young people and managers together and say ‘this is not the end of the road’...”
“We must now bid for similar projects that take place in Singapore, in the UAE, around the world.”
The President then had a message for GYSBI. “You have now developed a new capacity that positions you to provide global service. That is what the depth of the local content policy is for.”
GYSBI has shown what is possible.
We want the operators and international service companies working in Guyana, when faced with a new project, to say ‘we have experience with a Guyanese company to perform this, and we want to bring them into the project.’
In my own international career I saw many services and products travel with rigs and operators to their next destination, crossing country borders.
We need to build such companies. We need more GYSBIs.
A Clean Sheet of Opportunities
I suggest there are many possibilities for enhanced competitiveness for a new generation of Guyanese companies on the global stage. Realizing those opportunities would require strategic support through local content legislation.
Our situation is unique. Guyana is starting from a clean sheet in developing its oil resource at a time when there is significant pressure to move away from hydrocarbons.
This clean sheet offers unique opportunities for innovation and technology introduction that focuses on sustainability, energy efficiency - features that would be unique to Guyana. These features would be measurable within countries’ and companies’ frameworks of Environmental, Social, and Governance - ESG.
Consider the upcoming gas to energy project, and our country’s priority of ‘low carbon development’, which we have heard quite a bit about at this conference.
This will be a world leading project - efficiently developed power, delivered to environmentally responsible end users, with performance metrics never seen before.
Guyanese experience would add value worldwide to any number of underperforming existing power generation installations or new ones. As to countries to collaborate and share experience with, the obvious first candidate is Suriname, well represented at this event. And of course, other CARICOM members.
Guyanese companies should aspire to be successful in the energy industry outside of Guyana. The significant pressures mounting around the world for responsible development, while moving away from hydrocarbons, creates a unique environment from which to establish leadership beyond our borders.
This is where the role of government is critical in crafting local content legislation. Compete locally, but with a vision to build capacity to compete globally.
Only the best companies who differentiate themselves will move outside of Guyana.
Tourism and Competing Globally
Allow me to move away from the energy industry for a moment. To expand on this idea of competing globally, consider tourism. Multiple local companies competing within Guyana in ecotourism have the potential to drive the country as a whole to become more successful as a global tourist destination.
Think beyond our borders.
There is strong competition for those international tourist dollars. While local tourism companies may see each other as competitors within Guyana, the real competition is from other countries, their attractions, and how well they are able to attract tourists.
Those Guyanese companies should have international engagement and competitive leadership as part of their business strategies.
Not only will they be more competitive internationally, they may well take their expertise internationally. There are likely countries with tourist destinations that have the potential to offer elements of ecotourism, promote sustainability - but they have neither the knowledge or critical mass to do so.
Guyanese companies could advise them on getting started, while at the same time gaining visibility with a new audience of tourists, attracting them to Guyana.
Compete Locally, Expand Globally
In closing, I’ll return to the energy industry. Local content legislation must be crafted to not only build capacity, but to create a competitive environment locally. The vision, as expressed by the President, is to develop companies to compete globally. This legislation must:
Build a safety culture across the country
Initiate and accelerate the building of capacity in areas of oilfield operations
Ensure multiple Guyanese companies are in competition as they build capacity
Guyanese companies must think big and long term in their vision and business strategy.
Compete locally, expand globally.
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 TOTALTEC Academy, where more than 1,200 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 onshore/offshore operations. The TOTALTEC 94% Guyanese workforce includes 6 nationalities with more than 160 years of international oilfield experience.
TOTALTEC CEO Lars Mangal addressing the Guyana Energy Conference and Expo on the subject of how local content legislation has assisted with enhancing competitiveness.