Guyana’s Vice President Dr. Bharrat Jagdeo has given confirmation that the amendments to the Natural Resources Fund (NRF) and the local content Bill will be tabled in the National Assembly next week Thursday, December 16. The Vice President confirmed this as he delivered his keynote address to the Georgetown Chamber of Commerce and Industry’s (GCCI) 132nd awards ceremony and gala on Thursday evening.
Dr. Jagdeo highlighted the importance of these two safeguards for the oil and gas industry, which he pointed out will ensure the prudent, transparent, and accountable management of the sector while at the same time safeguarding benefits for Guyanese and local companies.
As it relates to the local content legislation, the Vice President shared this position that unless companies operating in Guyana are pushed by legislation and guided by “strong coercive means”, then these companies might never live up to their local content obligations. He was quick to note, however, that the government will ensure that this legislation does not act as a disincentive for investment in Guyana.
As stated in the local content legislation for companies with a Petroleum Agreement, oil companies and their subcontractors must have a management staff with ten per cent being Guyanese at startup, then moving to an increase of 25 per cent in five years and then 45 per cent in ten years.
For supervisory staff, it is being proposed that Guyanese account for 15 per cent of the oil companies’ staff at startup with a gradual ramp-up to 35 per cent in five years, then 50 per cent in seven years, and finally, 45 per cent in ten years. With respect to technical staff, the government is proposing to give oil companies up to ten years to have Guyanese account for 75 per cent of that section of their workforce.
With respect to health, safety, and environmental services, the draft legislation is proposing to have 95 per cent to 100 per cent of the security, firefighting, electrical, equipment brokerage, vessel tank cleaning, catering, laundry, offshore medical and support, and industrial cleaning services be done by Guyanese in ten years. These are just a meagre percentage of what is being put before the National Assembly by the government in its local content legislation.
As Opposition Leader, Dr. Jagdeo had heavily criticized the Natural Resources Fund in its current state and denounced the former administration for not enacting provisions to completely insulate the oil fund from political interference.
The amendments being proposed to the NRF legislation would validate four changes, the first one in the form of a simplified formula for spending and savings.
“We are replacing all of that with a clear formula. It is not going to be complex. It will say that below this sum on an annual basis, the money comes directly to the treasury, and beyond this sum, larger shares of it will be saved,” the Vice-President explained.
The amendments also look to correct the fund’s oversight committee which comprises 22 individuals representing 22 organisations; the instalment of a Board of Directors between the Minister of Finance and the governance of the fund and lastly, strict penalties for the non-disclosure of oil revenues within a three month period. For this amendment, the finance minister can face up to ten years’ imprisonment for failing to make this disclosure. This amendment can be seen as a direct link to the former Minister of Finance Winston Jordan, who, in 2016, failed to disclose the US$18 million signing bonus received for the Stabroek Block.
Against this Dr. Jagdeo recalled, “The former Finance Minister said we never received, nor did we request a signing bonus a year after they [the APNU+AFC government] had received the US$18 million and placed it in an account that is not reflected in the consolidated fund nor was part of the balance sheet of the central bank.”
The government has since launched a probe into this.
The NRF Act was passed in December 2019 by the previous government without the support of the then political opposition party which now forms the current administration. As of October 31, 2021, revenues in the NRF amounted to US$534 million. The government has been keen not to include any of the oil funds in its budgetary configurations since it believes that the laws governing the NRF are not robust enough to protect it from mismanagement.