– not a sense of entitlement, says GOAG’s Nigel Hughes

DIRECTOR in the Guyana Oil and Gas Association Inc. (GOGA) Nigel Hughes has said that the conversation on local content for Guyana’s oil and gas industry should encourage efficiency and competitiveness, instead of encouraging a sense of entitlement to local businesses.

Hughes firmly expressed his view that Guyanese have approached the discussion on local content in the wake of the nascent oil and gas industry from the wrong perspective.

“We have started to look at how much it should [be] protected and guaranteed for locals as opposed to how we get our possible contribution and possible participation in the oil and gas industry efficient and competitive, so that we create a world-class industry for the provision of goods and services in the oil and gas industry,” he stated.

It might be a “tall order” to encourage this efficiency and competitiveness, according to Hughes, but he also stressed that anything else would be “state subsidy for inefficient practice.”

Hughes shared these sentiments as he delivered feature remarks at the Shipping Association of Guyana (SAG)’s Annual Gala and Dinner, held on Saturday evening. The central theme of the evening’s proceedings was: “The benefits of an efficient local content policy in value creation in Guyana’s oil and gas industry.”

Moreover, the director posited that there has been much debate surrounding local content since the discovery of oil in 2015, where the concept of local content has been defined differently for different people.

According to the World Bank, a local content policy– specifically in the extractive industries– aims to leverage the extractive value chain to generate sustained and inclusive growth through economic diversification and employment opportunities; its aim is to also generate opportunities for regional integration and international trade, which could gradually reduce countries’ dependence on external aid. The World Bank also states that local content depends on the early engagement and collaboration among government, extractive industry companies, and communities.

Hughes contended that in Guyana, local content is viewed with an emphasis on the very words: “Local” and “Content.”

“For some, all the jobs generated in the industry had to be first offered to Guyanese; for some, companies which were incorporated to provide goods and services for the oil and gas industry had to have local directorship; for some, ownership of the companies which operated within the industry had to have significant Guyanese equity, and for others, most of the goods and services supplied to the industry had to originate from Guyana,” he opined.

As such, he also highlighted that local stakeholders began debating local content with that fundamental flaw– that there was not a clear definition of what this entails.

“One had hoped that for a country which had no history in oil and gas production, that perhaps, we might have been driven to agree on a few baseline definitions and objectives before we started a national conversation on local content,” he said.

And this conversation is exacerbated by a prevailing sense of antagonism, according to the attorney-at-law.

“We ain’t getting it right and we ain’t going to get it right,” is a constant mantra, Hughes said. And for him, this situation places Guyana and Guyanese in a very precarious situation.

“Daily, various experts–whether self-proclaimed or otherwise–offered their analyses in the national newspapers of [how] dire conditions were because of the discovery of oil,” Hughes said and explained that these analyses stemmed from what persons believe were less than optimal results of negotiating with an oil-major on the production agreement and less than adequate preparation for potential disasters.

Resultantly, he further explained that: “The population– with no database or framework against which they could [navigate] the various dramatic headlines– were fed a diet of almost constant and certain corruption, exploitation, incompetence and greed which lay ahead of us.

“In the absence of a clearly defined national vision for the future with oil as a significant revenue generator, it was open season on why we collectively as a nation were doomed before we started as an oil and gas producing country.”

He added that the country has also become inundated by experts–both local and international– with the recommendations of what is needed to be done to avoid every curse known to oil and what is needed to “catch up” with the rest of the world.

But Hughes affirmed: “We don’t just want to catch up, we want to catch up and pass what currently exists in the world.” And in so doing, he contended that a change of mindset, a change of approach and in some instances, a change in some aspects of the culture are necessary– not only for development in the oil and gas sector– but to also guide the national development trajectory for the next quarter-century.

WAY FORWARD
Cognisant of the need for Guyana to efficiently manage this emerging industry, Hughes said that in the country’s endeavour to create efficient local content, the areas that will foster real capital growth and development should be identified first.

“The creation of jobs is very sexy to politicians, but in reality the scope for the generation of wealth through the initial stages of production in jobs is miniscule,” he stated.

Instead, concentrated efforts should be made on contributing to the lowering of the cost of production, less lead time and effecting more efficient operations, he said. Achieving this also requires good political stewardship.

“Instituting local content policies which drive the costs in the opposite direction will not inure to our benefit,” Hughes warned and said the country will pay for these shortcomings sooner or later.

There are some areas which should be concentrated on however, according to him. These include developing up and downstream industries, associated industries, insurance, maritime and engineering services, manufacturing and assembly of remote operating vehicles, project management, laboratories, research facilities etc.

And importantly, he stressed that developing a “world-class” human resource pool– at all levels of production– would only augur well for the country.

Earlier this month, oil giant ExxonMobil made its 10th discovery offshore Guyana and increased its estimate of the discovered recoverable resource for the Stabroek Block to more than five billion oil-equivalent barrels.

“[More than five] billion barrels will afford us the opportunity to not only transform Guyana, but create national development which is unprecedented in the world,” Hughes said.

Additionally, he noted: “The optimal exploitation of this gift requires not only an assessment of where the current gaps exist, but the creation of a long-term development plan which will take us to be the most efficient producer of goods and services in the industry globally.”

And since Guyana does not have a large working population, Hughes affirmed that the goal for employment in Guyana should be “highly skilled, well paid [and] competitive.”

“If we work towards becoming the preferred destination for investment with the best rates of return in the industry while creating the best environment, work and project management force in the world, Guyana will become a first world destination in under 12 years,” he opined.