Guyanese must benefit from oil wealth or ‘we might as well shut down the sector’- Jagdeo

Vice President Bharrat Jagdeo on Thursday evening said the Government will ensure that every Guyanese benefit directly or indirectly from the country’s oil wealth.

“If we don’t, we might as well shut down the sector,” he said during an interview on Kaieteur Radio.

Jagdeo said works are ongoing to have a draft Local Content Legislation laid in the National Assembly before the end of the year.

“We’re moving swiftly, we’re hoping that before the end of the year that we have draft legislation that we can put before the Parliament to deal with local content and driving more business and jobs for our people,” he noted.

The Vice President said US oil giant Exxon Mobil –the major player in Guyana’s offshore oil industry –has been told that the legislation will be passed forcing them and future operators to address pressing issues for the business community and ordinary citizens.

ExxonMobil and its partners working offshore have 16 successful oil discoveries since May 2015 on the Stabroek block followed by the start of oil production in December 2019.

But Jagdeo said, “enough has not been done to allow Guyanese to benefit from the developments taking place.”

The Government has since engaged Trinidadian Local Content expert Anthony Paul and is looking to set up a working group to deal with existing matters.

The Vice President pointed out that too many contracts are being given to foreign contractors and Guyanese are at a disadvantage due to the unfair playing field.

“If you are a sub-contractor, let’s say a Trinidadian sub-contractor for ExxonMobil, you get duty free concessions on everything, tax concessions, and they can then use the duty free concessions and they bid on other projects, so they have an unfair advantage over Guyanese who may want to build a warehouse but never got duty-free concessions,” he explained.

Further, he stated that Guyanese are doing the same job and getting less pay but “that can’t happen in the future.”

In its half-year release on local content, Exxon Mobil Guyana said it has spent over $14B locally and more than 55% of the workforce supporting its local operations are Guyanese.

In addition to local content efforts, the company said it continued to support activities across the country, contributing more than GYD$80 million to education, women and community empowerment, and environmental sustainability programmes in the first half of 2020.

But there has been no audit of these costs to ensure they are not inflated.

Jagdeo said auditing of the local content will be done and the legislation and further enforcement will take care of this problem.

“That is why we need capability in Government, to ensure that every provision of the contract going forward, that those are observed by the companies involved, this includes auditing of local content cost and to see whether the components of those costs are properly classified,” he noted.

The Vice President said from his briefing, $460M is currently under audit which covers from exploration to 2017. As such, the cost from 2017 to 2020 is yet to be audited.

If it is detected that costs were inflated, he noted that there must be remedies. “You can’t get off scot-free if you inflate the cost and expect the next partner to accept it,” he said.

In the current Production Sharing Agreement (PSA) with ExxonMobil, the path to deal with such matters lead to arbitration.

However, Jagdeo said these are things which will be addressed in a model PSA which will be used for future oil contracts.

He admitted that the past two contracts including one which was negotiated by his Government include “huge areas of deficiency.”

The initial contract signed with Exxon and the following negotiated by the APNU+AFC Government was criticised for the 2% royalty and other measures included.