Dear Editor,
I have been following with interest the development and the debate over local content for Guyana’s nascent energy sector.
Having read the draft policy document on local content recently published by the Ministry of Natural Resources, the Government of Guyana should be pleased that well-qualified staff are preparing such a comprehensive document as part of what is an active and engaging response to how to incorporate this industry into an existing economy, with the aim of getting the full benefits for the population.
Here are a few light-hearted observations to consider:
Using targets and measures to evaluate and regulate local content, whether at employment or supply chain levels, can be counterproductive.
The targets as set out in the draft paper highlight 100 per cent local employment for many levels running up to ten years after project approval. This may not be realistic as many of the skilled jobs in oil and gas require at least ten years’ experience. This is because of the need for high performance and safety standards for the industry.
Secondly, the requirement for 100 per cent of supplies and services in certain categories for exploration and production can be difficult to meet given the highly specialized nature of the sector. The other danger of enforcing local suppliers 100 percent is that it could lead to limited competition and have the effect of increasing project costs to the point where the Government is taking a standstill or worse the operators are beginning to question viability. A study of how this might play out would be helpful, which leads me to another point.
Availability of skills: In an economy like Brazil, there is a large pool of skilled workers who can be attracted to the energy sector. Guyana’s small population and the exodus of skilled labor since the 1960s have created a shortage of engineers, managers and other senior staff to the point where, according to some companies, they are unable to find the workforce to fully develop their own businesses . The danger is that workers will migrate to the sector at the expense of manufacturing or other industries.
Anecdotally, this is said to be happening even as some companies divert capital away from their core activities and into oil and gas. The irony would be that, in pursuit of so many benefits from oil and gas, other sectors could be shrinked due to lack of human, capital and entrepreneurial resources. This would work against the goal of building a diversified economy that can withstand the fluctuations and deadlines of notorious oil. One way to address that would be to require the same employment targets for other sectors such as mining, construction and manufacturing, as recommended by the Local Content Advisory Panel.
As such, I would suggest as a first step that a comprehensive survey be undertaken to quantify the supply of skills that may be relevant to the new sector, as well as to evaluate the long-term anticipated demand from operators and contractors. This would also be informative and very useful for training purposes as part of capacity building.
Enforcing and legislating for local content would likely create higher costs for Government in terms of regulatory agencies, and for operators and contractors seeking to comply. Working out how these are balanced by the benefits of such a mandatory approach, and how it might affect the growth of the oil sector as well as the long-term shape and vision for the Guyana economy, is an important argument.
Yours faithfully,
Lynn Nicholas
