Understanding Energy…

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Long-term outlook for local content

MANY Guyanese are understandably curious about future local content and how Guyana will develop the capacity to deliver that content. Groups such as the Georgetown Chamber of Commerce and Industry (GCCI) are aggressively pushing for policies to mandate specific levels of local content in the emerging oil-and-gas industry.

While it’s impossible to say with certainty what shape Guyana’s future industries will take, we can look to international examples of oil development for guidance.
It’s important to note that Guyana is unique because our early oil development will be happening exclusively offshore. Offshore development is an especially technology-intensive and high-skilled form of oil-and- gas extraction, compared to onshore drilling, requiring a variety of very specialied services.

Aberdeen, Scotland, which has come up before in this column, is a similar and interesting example. It was a small city that was traditionally reliant on one industry–fishing– in this case, which then saw incredible development as a result of major offshore oil discoveries.
Aberdeen became an international centre for companies that provide the kinds of hyper-specialised services that are important to offshore drilling, such as underwater seismic studies, helicopter transport, and commercial diving.

But local content is important long before an oil region starts dealing with that kind of specialisation. Scotland had a long history of advanced engineering and technology, which Guyana lacks. At the beginning of oil development, the first step towards developing in the Aberdeen model is focusing on local content that is focused on the basic services a country can provide.

Businesses such as caterers, bakeries, transport services and other industries are already seeing positive impacts in the form of contracts and subcontracts to provide needed supplies and logistical support to the oil-and-gas industry and related industries.
The list of Exxon contractors released by the Department of Public Information is full of just this type of basic non-technical enterprise that is nonetheless employed by a major multinational company and its top contractors.

The next tier of local content involves specialisation and development directly related to oil extraction. Guyana’s engineering, machining, and marine logistics companies are jumping on this opportunity; they are led by companies such as Guysons Oil and Gas, which recently obtained the prestigious ISO:9001 certification, an international measure for quality management. These firms have existing technical capacity and many are seeing oil as a huge opportunity for the future, even if they are not yet ready to meet many of the industry’s needs.

Joint ventures with international companies are a good example of this stage of capacity-building; combining foreign capital and sector expertise with local knowledge and manpower.
By working with the oil companies and training to meet specialised industry needs, companies can try to position themselves to be major players in an emerging industry and to build capacity organically.

Already, at least four other companies are pursuing ISO:9001 certification with the help of the Centre for Local Business Development.
These companies hope they can follow the same course as many other developing oil regions have; orienting existing industrial skills towards oil and gas development and gaining key sector-specific skills with an eye to the future.

Many of the international oil field services companies in Aberdeen got their start as smaller local players in engineering, aviation, or building.
They gained specialised experience and a reputation in the industry through their work in oil and gas; and that eventually allowed them to be globally significant players, whose skills were applicable anywhere there was significant offshore drilling. Their skills also enabled them to play significant roles in newer industries as well,such as offshore wind that demand many of the same capabilities.

Achieving an outcome such as this is a balancing act. Governments must be careful to not stifle investment by requiring local content that Guyana doesn’t yet have the ability to provide, but still invests in building that kind of capacity for the future.
Thankfully, Guyana’s local companies are showing signs of steady progress towards that goal, even without a local content policy in place.