Govt. secure mediocre Local Content provisions in contract with ExxonMobil
-Chartered Accountant highlights numerous flaws
For several months, members of the private sector community and even various commentators have issued calls for there to be proper Local Content provisions in place. The Government had promised the citizenry that this would have been secured in the contract it renewed in 2016 with USA oil king, ExxonMobil.
But after a careful examination of the contract, critics have found that the local content provisions secured by the government are trivial or insignificant to say the least.
This was pointed out recently by Chartered Accountant and Attorney-at-Law, Christopher Ram.
Ram in his recent writings highlighted several aspects of the contract which speak to Local Content. He noted that Article 18 of the contract which deals with local content has been subject to a number of modifications when compared with the 1999 Agreement.
He said that one of the obvious changes is that the activities regarding local content will be carried out not by the Contractor but by an Operator appointed by the three companies making up the Contractor. The Three Companies that make up the Contractor ExxonMobil are Esso Exploration and Production Guyana Limited, CNOOC Nexen Petroleum Guyana Limited, and Hess Guyana Exploration Limited.
In respect of goods and services, Ram noted that Article 18 requires the Operator to give preference to Guyanese goods and materials of a quality and quantity, timely delivery and competitive prices. However, when it comes to Guyanese Sub-Contractors, Ram was careful to highlight that the contract says that preference is to be given “if they are commercially competitive and meet financial and technical requirements”.
Furthermore, the lawyer points out that Article 18.2 requiring the Contractor to establish tender procedures remains unchanged for the acquisition of goods, materials and services which shall ensure that Guyanese suppliers and Sub-Contractors are given adequate opportunity to compete for the supply of goods and services.
Ram said that there is also a requirement in the petroleum agreement for the Contractor to train Guyanese suppliers and Sub¬ contractors in the procedures for participating in tenders and competing for contracts to be offered in the Operations.
He said that under the 1999 Agreement, “The old Article 18.3 required the Contractor, within 90 days of the end of the year, to provide the Minister with a report outlining its achievements in utilizing Guyanese resources during that calendar year.
“That has now been replaced in 18.4 with a provision that requires the Contractor and the Minister (sic) to prepare a yearly plan for the utilization of qualified Guyanese resources for the upcoming year.”
“Further, the sub-Article requires the Contractor and the Minister to meet and consider the effectiveness of the plan (which they have prepared!). Within 30 days of each half-year, the Contractor is required to provide a report to the Minister outlining its achievements in utilizing qualified Guyanese resources during the previous half-year and to make appropriate adjustments to the yearly plan to better accomplish the local content goal.”
The attorney said that apart from the amateur drafting of this highly important Article, it seems that once again, Minister of Natural Resources Raphael Trotman, has gone outside of the legislation which requires proposals on local content to be part of the application for a prospecting and a production licence.
Ram stressed that these licences are usually issued on condition that such objectives are achieved.
EMPLOYMENT AND TRAINING
Ram pointed out that Article 19 of the contract which speaks to Employment and Training has been amended.
Ram said that at Article 19.2 of the 1999 Agreement, the Contractor was required to employ to the maximum extent possible, employ, and encourage Sub-Contractors to employ Guyanese citizens having appropriate qualifications and experience.
He said that the words “maximum extent possible” have, rather unfortunately, been deleted while instead of encourage, the Contractor is required to “contractually obligate” sub-Contractors to hire appropriately qualified Guyanese.
Additionally, Ram states that Article 19.3 of the 1999 Agreement required payments ranging from US$30,000 to US$45,000 during each of the two phases of the Initial, First and Second Renewals to be applied to designated purposes.
That sum has now been increased to US$300,000 annually to be paid “directly into bank accounts held and controlled by the Government.”
The use to which this money can be put as set out in the Agreement are: (a) to provide Guyanese personnel nominated by the Government with on-the-job training in Contractor’s operations in Guyana and overseas and/or practical training at institutions abroad; (b) to send qualified Guyanese personnel selected by the Government on courses not exceeding one year at universities, colleges or other training institutions; (c) to send Guyanese personnel selected by the Government to conferences and seminars related to the petroleum industry; and (d) to purchase for the Government advanced technical books, professional publications, scientific instruments or other equipment required by the Government.
The Chartered Accountant said, “It seems rather embarrassing for a Minister of the Guyana Government to repeat in the 2016 Agreement, the stipulation that the Contractor will provide funds to a sovereign Government to buy technical books for the Government.
“Clearly mendicancy is firmly planted in our emerging petroleum sector. It also seems a paltry sum to pay for courses in training at universities… on the job training abroad and to send officials to conferences and seminars.”
Furthermore, a new Article of the Contract, 19.4, requires the Contractor and the Minister to provide, within sixty days of a new year, a yearly plan for the utilization of qualified Guyanese personnel for the upcoming year.
Ram opined that in what appears to be a cut and paste job, the Minister and the Contractor will meet and consider the effectiveness of their plan, while the Contractor is required to submit half-yearly reports on how their plans are working out.