Exxon contractor seizes local company; cites inexperience in supplying safety hats, gloves and vests
By Kiana Wilburg
International Solicitor, J. Jay Park, QC
Kaieteur News – Almost a year ago, the international Energy Lawyer, Mr. J. Jay Park, had conducted a review of the provisions in the Guyana-ExxonMobil Production Sharing Agreement (PSA) for the Stabroek Block. Following his assessment, Park found that the clauses, which should make Guyanese the first choice for jobs and contracts in the oil sector, leave much to be desired. The terms were found to be so poor that it gave the said provisions a “Grade F”.
The renowned energy expert, who has practiced energy law for over 30 years, with a particular focus on creating the best possible petroleum regimes for States, explained that the reason for such a degree was based on the fact that the provisions would disadvantage Guyanese. , as they give Exxon and its contractors enough space to make excuses for not giving first priority to contracts to local businesses. Less than a year from making this pronunciation, Park’s words are passing.
Kaieteur News was recently informed that a local manufacturing company has submitted an Expression of Interest to supply Personal Protective Equipment (PPE) to SBM Offshore, one of ExxonMobil’s main contractors. Despite joining WW Grainger, an internationally recognized supplier of PPE, the local company was still told it was not eligible to apply. The Guyanese company, which was hopeful of gaining a foothold in the oil industry, was dismissed on the grounds that it had no experience of supplying PPE to the industry.
The best PPE products provided by WW Grainger Inc.
In an email viewed by Kaieteur News, SBM Offshore said, “Dear (withheld on request for anonymity) Thank you for your email. We had to run our technical pre-selection among a significant number of suppliers and based on the feedback provided by your company, your company has not been approved for bidding for this tender. The direct justification I received from the team was the lack of previous experience (s) in supplying PPE in the Oil and Gas industry and in Guyana. ”
Speaking to Kaieteur News, the medium-sized manufacturer said it was quite shocking that after partnering with WW Grainger, Inc., an American industrial Fortune 500 supplier founded in 1927, he thought he would have been able to pre-qualify. The local company said it was flabbergasted to learn it could not tender for the contract because it had no experience. “How do you expect the little guy to benefit from the sector when he can be excluded for not having experience in a sector that is new to the country? How do you expect the little guy to get experience in the first place? We are told to prepare ourselves and form partnerships and invest our money but when we do, we are shut out of inexperience. This needs to be addressed, ”the local company expressed.
SPECIALIST ASSESSMENT
In his analysis of Guyana’s PSA with ExxonMobil, Park – one of the world’s leading energy attorneys – placed Article 18 of the agreement (page 46) under the microscope which states, “In conducting petroleum operations in accordance with with this agreement, the contractor must require: (a) the purchase of Guyanese goods and materials, provided that such goods and materials are available in a timely manner of the quality and quantity required by the operator at a competitive price; and (b) employ Guyanese subcontractors to the extent that they are commercially competitive and meet the financial and technical requirements of the operator and meet the requirements of Article 18.1 (a)… ”
Park was quick to point out during last year’s webinar that he had a problem with the above provision. The international lawyer had said that the provision does not create any kind of favoritism for Guyanese goods and services.
Explaining further, Park said a local businessman can provide goods but the contractor, ExxonMobil, can simply say, “I can find it some other part of the world and get it for a lower price.”
The lawyer continued, “And let’s say you match or better all the prices in the solar system, the contractor can say, ‘Sorry, I’ve found better quality elsewhere. ‘ Then you could say you can also find equal quality and faster too. But even then, the contractor can say ‘Sorry, I need 10 times as much as you have and I can get that from another source’. “
That is, the Petroleum Systems Parks Advisory and Energy Law Management Partner said that Article 18 of the Stabroek Block agreement is not a local choice clause. He said, “It’s basically a clause that says’ Yes, we will buy Guyanese goods that are competitive with everything else in the world and with every possible factor that can be used …”
The lawyer referred to the fact that it would be almost impossible for Guyanese businessmen to compete with the rest of the world for contracts in their own backyard.
Taking everything into account, Park said the Stabroek Block deal gets an F, as it provides no environment to create a local alternative at all. The PPP / C Government is hopeful that, with a sound policy and law for local content, this situation could be improved.