On Refining The Trajectory Of Guyana’s Local Content Requirements

By Dr. Terrence Richard Blackman

News Americas, NEW YORK, NY, Mon. April 11, 2022: On February 15th – 18th, 2022, an International Energy Conference & Expo: Charting a Sustainable Energy Future was held at Guyana’s Marriott Hotel. One highlight of the meeting was the panel discussion on Guyana’s Local Content Requirements. The local content bill was passed in the Guyanese parliament on December 29, 2021, and signed into law by President Ali on December 31, 2021.

The Local Content Act outlines forty different services that oil and gas companies and their subcontractors must procure from Guyanese companies by 2022. For example, companies must procure, from Guyanese companies, 90 percent of office space rental and accommodation services; 90 percent of their janitorial services, laundry, and catering services; 95 percent of their pest control services; 100 percent of their local insurance services; 75 percent of their local food supply; and 90 percent of their local accounting services. These are just a few of the areas highlighted in the first schedule of the Local Content Act. By this mechanism, Guyana intends to develop its local economies, stimulate industrial development, increase local business capability, build a skilled workforce, create a competitive supplier base, and transfer the economic benefits of the oil and gas bonanza to the Guyanese population.

The panel, moderated by Christopher Chapwanya, OilNow, traced the evolution of the Local Content Bill and identified some of the challenges and opportunities attendant with its implementation. Panelists included The Honorable Deodat Indar, Minister within the Ministry of Public Works, representatives of the local private sector, and significant oil and gas service companies operating in Guyana.

In this article, I will focus on the contributions of the business representatives Nicholas Sicard, Francesco Prazzo, and Brent Patterson to the panel. I will discuss some of their implications for Guyana’s ongoing local content regime.

Nicholas Sicard, Area Director for TechnipFMC, which installs and operates subsea equipment offshore in Stabroek Block, began by noting that to deliver, effectively, that company’s services required an investment in the team, an investment in local partners, and an investment in the supply chain. As evidence of his company’s commitment to this mission and Guyana, he noted that TechnipFMC successfully migrated all the operations for two projects from Trinidad to Guyana. He also pointed to ongoing TechnipFMC employment onboarding programs likely to increase the number of Guyanese nationals engaged with TechnipFMC initiatives and opined the share of the Guyanese nationals would continue to grow as the spectrum of TechnipFMC endeavors grew.

Francesco Prazzo, General Manager, SBM Offshore, Guyana, shared that SBM Offshore is engaged in designing and constructing FPSOs. As evidence of SBM’s commitment to Guyana, he offered the speed of the construction of the FPSOs and the use of cutting-edge emissions reduction technology in their construction, which has meant more revenues for Guyana earlier than was previously envisioned. SBM’s local content philosophy, he opined, prioritizes integration. He referred the audience to the example of SBM’s operations in Brazil, where they currently operate a fleet of seven FPSOs which is expected to increase to ten (10) by 2025.

He observed that Brazilians are the highest nationality represented in SBM’s Brazilian entities, an illustration that, for SBM, local content was not a mere contract obligation but made perfect business sense. Furthermore, he observed that whenever the appropriate competencies were available locally that SBM was committed to utilizing them. In this regard, he pointed to Guyanese holding the senior management positions, for example, in SBM’s HR functions, and that their finance entities are 100% Guyanese.

He noted that SBM had recently hired eight gravity engineers for whom they organized an 18-month International Program, which brought the participants to the Netherlands, Singapore, and other SBM locations to understand the business and acquire critical competencies. He also noted SBM’s completion of the training of twenty-four offshore operators who are now integrated into the crews of the Liza Basin. He also pointed to a series of 2018 meetings and training sessions hosted by the Center for Local Business Development to prepare local companies to become SBM suppliers.

GM Prazzo defined SBM’s investments in corporate social projects to cultivate and nurture local industries and initiatives as a mechanism for creating shared value in Guyana, not simply as a Corporate Social Responsibility project. In this regard, he spoke to SBM’s efforts to develop sustainable and local food and vegetables and fish locally to feed the FPSO crews and intentionally give employment to disadvantaged communities. Finally, GM Prazzo concluded his remarks by announcing that as of March 01, he would be replaced in his role as general manager of Guyana by Guyanese professional Martin Chang.

The final corporate speaker was Brent Patterson, Regional Director, Americas, Energy, and Projects, Blue Water Shipping, a privately held U.S. Steamship Agency specializing in coordinating Port Calls of Oceangoing Vessels and timely execution of import and export shipments of bulk Grain, Oilseeds, Fertilizers, Steel, Ores, Coal, Petroleum Coke, Minerals, Biomass, LNG, and Oils.

Director Patterson began by sharing with the audience that Blue Water Shipping’s Guyanese initiatives are based on their work in Azerbaijan which started in 1996. He noted that today Blue Water Shipping is the largest locally owned broker freight forwarder transportation company in Baku. He shared that they did so with joint ventures, partnerships, and consortiums and that they followed this model when they came into the Guyanese market. Finally, he pointed to the launching of the Blue Water Academy globally later this year and the fact that the first inductees will be from Guyana.

The inductees will go to Denmark every two weeks per quarter for training. In addition, they will be stationed abroad in Singapore, Dubai, Aberdeen, Amsterdam, Denmark, Houston, Brazil, Rio, or Sao Paulo during the second year in one of Blue Water’s major oil and gas hubs. In keeping with their local content development template, Blue Water recently transferred 51% of the shares of Bluewater Guyana limited to Mr. Richard Vinoba, now the de-facto owner and majority owner of Blue Water shipping in Guyana.

The Guyanese legislature intends for the Act “to provide for the implementation of local content obligations on persons engaged in petroleum operations or related activities in the petroleum sector, to prioritize Guyanese nationals and Guyanese companies in the procurement of goods and services for the enhancement of the value chain of the petroleum sector; to enable local capacity development; to provide for the investigation, supervision, coordination, monitoring and evaluation of, and participation in, local content in Guyana; to promote competitiveness and encourage the creation of related industries that will sustain the social and economic development of Guyana; and for other related matters.”

One of the abiding concerns around local content regimes is that while they help governments achieve specific short-term objectives, they undermine long-term competitiveness, contrary to the express intent of Guyana’s Local Content Act. Moreover, they can have detrimental long-term effects on the country’s economy if they make development more costly or shift too many resources away from other industries. Even before the passage of the local content legislation, active corporate participation in local content initiatives suggests an opportunity for businesses, Government, and Civil Society to harmonize their collective efforts to ensure Guyana’s local content trajectory meaningfully meets the goals set out in the Act and mitigates the diminishing competitiveness concerns. The contours of a locally resonant framework for the Act’s implementation, one that moves us closer to this end, are already evident in the existing business initiatives and local content philosophies described by the panelists. Namely, the amplification of efforts aimed at:

The basing of oil and gas support operations in Guyana;

The continued development and the broadening of training programs designed to move Guyanese nationals into employment opportunities in the oil and gas value chain;

Supporting the robust participation of Guyanese businesses in the CLBD to facilitate capacity and competence building for local companies;

Ensuring that whenever the appropriate competencies are available in Guyana, companies are committed to utilizing them;

Intentionally engaging Guyana’s disadvantaged communities;

Facilitating the creation of joint ventures, partnerships, and consortia involving local companies and Oil Majors aimed at seeding local business owners in the oil and gas sector; and

Reframing corporate social responsibility as a mechanism for creating shared value in Guyana.

These seven areas should serve as the focal points of the LCR framework for both the Guyanese Government and global corporate entities operating in Guyana. Since the corporate entities are already intimately involved in these efforts, they provide us with a mutually agreed-upon platform to work together to integrate better, refine, amplify, and codify the already existing, locally evolved local content development pathways.

EDITOR’S NOTE: Dr. Terrence Richard Blackman, associate professor of mathematics and a founding member of the Undergraduate Program in Mathematics at Medgar Evers College, is a member of the Guyanese diaspora. He is a former Dr. Martin Luther King Jr. Visiting Professor at MIT and Visitor to The School of Mathematics at The Institute for Advanced Study. Dr. Blackman has previously served as Chair of the Mathematics Department and Dean of the School of Science Health and Technology at Medgar Evers College, where he has worked for almost thirty years. He’s a graduate of Queen’s College, Guyana, Brooklyn College, CUNY, and the City University of New York Graduate School.