Page 5 - LatAmOil Week 14 2021

LatAmOil COMMENTARY LatAmOil

And with only 26 wells currently in place, there’s in the making. But from the start, ExxonMobil
no question why majors and independents are and its direct contractors prioritised local hiring.
drawn to the area. By the time production in the Stabroek block
But what makes drilling offshore Suriname began in December 2019, 1,700 Guyanese were
even more attractive is the favorable business among the company’s rank and file, comprising
environment being touted under the leader- more than half the total local workforce, in fact.
ship of President Chan Santokhi, who took Since first oil in 2015, ExxonMobil and its direct
office last year. Suriname has put in place a contractors have spent $180mn with more than
producer-friendly regime that the oil and gas 630 local suppliers, setting the economy ablaze.
industry has been quick to notice. Suriname’s Predictions by the International Monetary
30-year production-sharing agreements (PSAs) Fund (IMF) that Guyana’s economy would
are considerably longer than those offered by expand by 86% in 2020, compared to just 4.4%
neighbouring countries, giving oil companies a year earlier, are now being tested by the coro-
more time to ramp up activities and continue navirus outbreak. However, an eventual return
producing. to business as usual could still result in unpar-
Suriname also takes a smaller cut of the pro- alleled economic and gross domestic product
ceeds compared to its neighbors. Combined growth.
with a lower overall cost of production, oil com- Unfortunately, we can’t always rely on busi-
panies can achieve profitability even if oil trades nesses to do enough of the right thing without
in the $30-40 per barrel range. encouragement-and regulations that safeguard
This is all very good news indeed. This is against exploitation. Governments that cre-
just the kind of strategy that’s necessary today ate clear, reasonable local content regulations,
to attract international oil companies (IOCs), develop resource corridors and special eco-
and we encourage African countries to follow in nomic zones, provide tax relief, address skills Local content
Suriname’s example. gaps and create a strong framework for indus- development is
What remains unclear is how Suriname will try partnerships can help oil and gas companies
steward the potential opportunities and reve- move local content practices forward. essential, but it’s
nues arising from its hydrocarbon bounty. Will In a growing number of countries, local con-
it take its lead from Ghana, Norway, Guyana, tent isn’t being left to chance or the benevolence just part of what
Trinidad and Tobago and other nations that of Big Oil. For example, in 2010, Nigeria’s act-
are leveraging natural resource wealth to help ing President Goodluck Jonathan signed the Suriname must
the local population? And how can it avoid the Nigerian Oil and Gas Industry Local Content do to capitalise
mistakes of oil states that have seen their riches Development Bill 2010 into law. Designed to
primarily line the pockets of foreign companies? build the capacity of indigenous firms, the law on its new-found
We are advocating for Suriname to harness obligated upstream oil companies to provide
the transformative power of oil and gas. We want opportunities for participation by local compa- resource wealth
to see everyday people benefit from these major nies and workers. That included backward link-
oil discoveries. We envision oil-based wealth ages through procurement of locally produced
leading the country on a sustainable, profitable materials.
path. Other countries, including Kuwait, Iran,
Built upon best practices from around the Iraq, Bahrain, Oman, Qatar, Saudi Arabia
world – as reported in Ayuk’s book, Billions at and the UAE, have all incorporated local con-
Play: The Future of African Energy and Doing tent requirements into their legal frameworks
Deals – we would like Suriname’s leaders, civil through various avenues, including legislation,
society and business community to consider a regulations, guidelines, industry contracts and
plan incorporating local content, empowering bidding practices. As Billions at Play notes, Tan-
women, improved governance and more. zania requires a succession plan where foreign
workers will be replaced by nationals. The gov-
Local-level impacts ernment of Ghana will only permit a company
Let’s focus first on how the oil and gas industry to be labeled as “indigenous” when 80% of its
can support economic development through executives and senior managers are Ghanaian
local content, as that has far-ranging conse- citizens.
quences. As explained in Ayuk’s book, local Employment is just one area where local
content policies are derived from a simple phi- content is being legislated, however. To support
losophy: A nation’s natural resources belong to state-controlled training programs for indig-
the people, so the people should benefit from enous personnel, the government of Angola
their development. To a large extent, however, levies a tax on petroleum production, refining
indigenous workers and supply industries have and processing companies equal to $0.15 per
not historically reaped the kinds of economic barrel produced. Companies engaged in pros-
and social rewards one would expect. pecting must contribute an annual fixed amount
But increasingly, enlightened companies are of $100,000; for companies in the exploration
adopting stronger local content initiatives in stage, that number jumps to $300,000.
host companies. That includes ExxonMobil in
Guyana. Comprehensive strategy
In the oil and gas business, progress isn’t Local content development is essential, but it’s
made overnight. Including exploration, the dis- just part of what Suriname must do to capitalise
coveries off the waters of Guyana were 10 years on its new-found resource wealth.

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