Alicia Elias-Roberts Attorney-at-law and Lecturer University of the West Indies (UWI) 06/16/2017

1. The Development and Implementation of Local Content in the Energy SectorPublic Lecture: Guyana Oil and Gas Association Pegasus, Georgetown, Guyana Alicia Elias-Roberts Attorney-at-law and Lecturer University of the West Indies (UWI) 06/16/2017

2. Disclaimer • The views, interpretations and conclusions expressed in this presentation are those of the presenter and do not necessarily reflect the views of the University of the West Indies (UWI), or those of the senior management of the UWI. • The UWI does not guarantee the accuracy of the data included in this work.

3. Introduction/ Outline of the lecture • What is meant by Local Content (LC) • Relevance of LC to the development of Guyana’s Oil and Gas economy • Examples of Local Content in different oil producing countries • Norway, Trinidad and Tobago, Angola, Nigeriaand Brazil • Challenges to LC • Case Studies on Corruption from Brazil and Equatorial Guinea • Conclusion

4. What is meant by Local Content (LC) Part 1

5. What is meant by Local Content • What qualifies as local content depends on how one chooses to define it. • Definition from World Bank Report (2013) • “The extent to which the output of the extractive industry sector generates further benefits to the economy beyond the direct contribution of its value-added, as through links to other sectors.” (Tordo, Warner, Manzano, Anouti) • Many resource-rich countries make efforts to improve the local economy by leveraging linkages to extractive projects, beyond the revenues these generate. The value brought to the local, regional or national economy from an extraction project is referred to as the local content.

6. Local Content: 2 Factors • A push towards local content strives to ensure that a company is hiring local labor and procuring local goods and services from the host country. • Increasing the participation of nationals in the oil and gas industry (labour). • Increasing the participation of local businesses in the supply chain of the oil and gas industry (goods and services).

7. Relevance of LC to the development of Guyana’s Oil and Gas economy Part 2

8. Relevance of Local Content • Development • The development of a clear and comprehensive local content policy, law, regulations, etc., will promote and enhance the government’s ability to focus and implement local content. • A clear definition of LC helps in avoiding common pitfalls

10. Local Content Implementation • Implementation • Implementation of Local Content varies from country to country • A variety of tools can be used to incorporate local content, including: • Quotas • Training programs • Public education • Incentives for small businesses • Processing and production of derivative products

11. Effective Stakeholder involvement Government and Regulatory Agencies Private Operators LC Committee Universities Schools SME’s Business Associations Trade Unions Civil Society Media Professional Bodies

12. Mapping Local Content Progress Optimal Local Content Policy • Adaptability • & • National economic • development Early integration of procurement strategy • Value creation beyond the oil & gas sector

13. Local Content in Guyana • Mining Act, Cap. 65:01 (1989) • Grant of prospecting licence. • 30 (2)(c) his proposals for the employment and training of citizens of Guyana are satisfactory,…. • See 46(1) (d) with respect to mining licences • Forest Act, Cap 67:01 repealed by Forest Act no. 6 of 2009 s.83 • Exploratory Permits • 6(2)(c) proposals for the employment and training of Guyanese are satisfactory…

14. UK/Guyana Bilateral Investment Treaty (2000) ARTICLE 3 National Treatment and Most-favoured-nation Provisions (1) Neither Contracting Party shall in its territory subject investments or returns of nationals or companies of the other Contracting Party to treatment less favourable than that which it accords to investments or returns of its own nationals or companies or to investments or returns of nationals or companies of any third State. (2) Neither Contracting Party shall in its territory subject nationals or companies of the other Contracting Party, as regards their management, maintenance, use, enjoyment or disposal of their investments, to treatment less favourable than that which it accords to its own nationals or companies or to nationals or companies of any third State. (3) The provisions of this Article relative to the grant of treatment not less favourable than that accorded to nationals Of companies of either Contracting Party shall not prevent either Contracting Party from according special incentives to its own nationals or companies in order to stimulate the creation of local industries, provided those incentives are considered carefully on each occasion by the Contracting Party concerned, which shall in particular, ensure that they do not significantly affect the activities or investments of nationals or companies of the other Contracting Party.

15. Examples of Local Content in different oil producing countries: • Norway • Trinidad and Tobago • Angola • Nigeria and • Brazil Part 3

16. Norway • Statoil (Norwegian State Oil Company) • JOAs required Norwegian companies to be included in all requests to bid and that Norwegian service be used if competitive; • Statoil held 51% in each committee and actively used its voting power to influence the appointment of Norwegian suppliers; • Goods and service office was created by law • Norwegian companies to be chosen if competitive; • License awards was influenced by prior practice • Detailed legal provisions in relation to Research & Development • 50% to be conducted in Norway

17. Trinidad and Tobago • Petroleum Act & Reg: Local Content • Reg 42 (2) (f) minimise the employment of foreign personnel, ensure that such employees are engaged only in positions for which the operator cannot, after reasonable advertisement in at least one daily newspaper circulating in Trinidad and Tobago, find available nationals of Trinidad and Tobago having the necessary qualifications and experience; determine the rules of employment including salary scales in such manner as to ensure that all employees in the same category enjoy equal conditions irrespective of nationality;

18. Trinidad and Tobago • Production Sharing Contract 2010: Local Content • PSC Article 39Local Content • 39.1 Contractor shall comply with the Government’s Local Content Policy in force and as modified from time to time. • 39.2 Contractor shall maximize to the satisfaction of the Minister the level of usage of Local Goods and Local Services, businesses, financing and the employment of nationals of the Republic of Trinidad and Tobago. • 39.3 – 39.12 and Annex C 

19. T&T: Permanent Local Content Committee Established in 2004 with the following roles: • Updating the local content and participation policy, as required; • Developing specific subsidiary policies and strategies, to ensure the transfer of technology and know-how to improve local skills, businesses and the capital market; • Ensuring compliance with these policies; and • Reporting to the Minister of Energy and Energy Industries and the Cabinet, as /appropriate. Composition – multi-stakeholder Industry – Energy Chamber, Local Content Chamber, NGC, Petrotrin Government – THA, Ministries of Energy, Finance, Trade Private sector - TTCIC, TTMA Finance – Bankers’ Association, Credit Union Movement Labour – OWTU Subject Matter Specialists – Procurement, Geoscience

20. T&T: Training and Skills Development Programmes and Institutions

21. Angola • Executive Decree #13/10 of February 2010: no clear definition of LC but focuses on recruitment, integration and training of Angolan personnel. • Indigenisation is the overall goal to increase the participation of the local workforce in the oil and gas industry. • Indigenisation policies are part of Local Content policies and vary from country to country. • Indigenisation policies need to be aligned with the Competent Authority in the sector (Independent Agency, Ministry or NOC).

23. Nigeria • The Nigerian Content Development and Monitoring Board (NCDMB) was created in 2010 to foster the building of local capabilities in Nigeria following the Nigerian Oil and Gas Industry Content Development Act 2010. • Relevant Provisions in the Nigerian Act • Defines LC as “the quantum of composite value added to, or created in, the Nigerian economy by systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the extractives industry.”

24. Nigeria Nigerian Oil and Gas Industry Content Development Act 2010provides: • 65 percent of divers in offshore energy projects must be Nigerian; • 60 percent of steel ropes used in projects must be made locally; • all contracts awarded in excess of $100 million must include a “labor clause,” mandating the use of minimum percentage of Nigerian labor or the use of indigenous companies of a minimum size. • Nigerians should be given preference in employment or contract by operator or promoter (s28). • Operators need to submit an employment and training plan for Nigerians (s29) and • succession plan for every position not held by Nigerians (s31).

25. Brazil • There is no clear definition of LC but it is clearly provided for in law, regulations and contracts. There is a heavy focus on local goods and services procured from locally established service providers. • The National Petroleum Agency (ANP) is the Competent Authority in the Oil and Gas industry and Petrobras is the NOC. • Since 1999 that ANP requires companies to abide by local content requirements (particularly in terms of goods ad services) in the bidding rounds and in the concession agreements. • A certifying entity accredited by ANP will verify the local content percentage used by the operators.

26. Challenges to LC • Case Studies on Corruption from Brazil and Equatorial Guinea Part 4

27. Corruption in Extractive Industries • Paradox of plenty, Dutch disease, resource curse • Oil and Gas Industry - highest incidence of bribery and corruption of all sectors • Tax Evasion • Money Laundering • High oil revenues associated with poor governance, lack of economic and social development, lack of respect for basic human rights and poverty amidst plenty. • Benefits accrue to a small group of ruling elite and the general public deprived of opportunities for economic and social advancement.

28. What is grand corruption? • Grand corruption is the abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society. It often goes unpunished. • From Transparency International https://www.transparency.org/news/feature/what_is_grand_corruption_and_how_can_we_stop_it

29. Brazil and Petrobas • Allegations of bribery and corruption at the highest level of government – from Operation Car Wash • Allegation that executives from Petrobas and some of the nation’s largest construction firms colluded to inflate the price of contracts, kicking back a portion of the ill-gotten gains to lawmakers and other officials to fund political campaigns. • Scandal at Odebrecht – US Justice Department called this the largest foreign bribery case in history • The Brazilian senate impeached Brazilian President Dilma Rousseff for illegally manipulating government accounts.

30. Equatorial Guinea and Ill Gotten Gains

31. Solution? • Strengthening transparency and accountability in governance by empowering citizens and by moving public decision making closer to people. • Transparency means shedding light on shady deals, weak enforcement of rules and other illicit practices that undermine good governments, ethical businesses and society at large.

32. Conclusion Part 5

33. Conclusion Proceeding with LC in Guyana: • a clear definition; • a link to core development goals of the country; • effective communication and stakeholder engagement; • an understanding of the necessary technical and financial requirements associated with the local content policy; and • create a body that can actively promote and monitor LC. • Questions and Comments

34. Contact Details • Alicia Elias-Roberts • PhD (Candidate) Queen’s University • LLB (UG); BCL (Oxford); LLM (UH) • Attorney-at-law (NY, TT and Guyana) • Law Lecturer, The University of the West Indies • alicia.elias-roberts@sta.uwi.edu • aeliasroberts@gmail.com • Office: 868 662 2002, ext. 85252