Government wants to reduce payment terms for companies in Guyana’s oil and gas sector to 21 days

Government wants to reduce payment terms for companies in Guyana’s oil and gas sector to 21 days

August 17, 2024
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…locals earn $314 million in the first half of 2024

Kaieteur News – The Government of Guyana (GoG) through the Local Content Secretariat (LCS) is working to reduce payment terms to 21 days to local companies operating in the petroleum industry.

Dr Martin Petab, Director of the Local Content Secretariat

Government has made a firm commitment to ensure that the benefits derived from foreign direct investment in Guyana’s petroleum sector are captured and retained domestically through the enactment of the Local Content Bill, 2021.

However, despite the implementation of the law, local companies have continued to experience some issues; one of which is the long time it takes to pay local suppliers. Guyanese businesses have expressed their concerns and in 2022, the government issued an ultimatum to contractors and subcontractors in the oil and gas industry to pay Guyanese suppliers within 30 to 45 days of receiving a correct invoice.

At a press conference held by the Ministry of Natural Resources on Wednesday, the Director of the Local Content Secretariat of the Ministry of Natural Resources, Dr. Martin Petab, disclosed that while the Secretariat had reduced the payment period to 35 to 45 days, they are now considering revising the period further.

“We are in discussions with some of the large tier-one companies, including contractors, to reduce payment terms to 21 days,” he said.

The shortening of payment terms is part of the Local Content Secretariat’s wider strategy to create a more favourable business environment for local companies.

Furthermore, Dr. Pertab revealed that local companies earned a total of $314 million from the oil and gas industry in the first six months of 2024. This figure accounts for more than half of the industry’s projected annual revenue.

“As of June 30, 2024, the relevant industries’ expenditures amounted to approximately $314 million, which represents 54% of the projected expenditures in 2024. Compared to mid-2023, we saw growth in some areas, such as construction machinery services, which increased by 238%, accommodation services, which increased by 39%, equipment rental, which increased by 48.5%, and catering, which increased by 18.8%, ”said the director.

Significantly, he attributed this to the increase in oil activities resulting from the arrival of the third floating production storage and offloading unit (FPSO).

Additionally, the Local Content Secretariat has been working closely with local businesses to identify and overcome other challenges under the Local Content Act. Dr. Pertab stressed the importance of working with the private sector, including the Georgetown Chamber of Commerce and Industry (GCCI), to develop policy directions and address obstacles faced by local companies.

“So far, we have received several recommendations from these stakeholders that we are now revising, and one of them is of course what we call (subsea) pipeline coatings,” Dr Pertab said.

“As of now, we are in talks with some of the first-tier companies that are directly offering this service. Our concern is the high cost of energy and we all know that with the advent of gas-to-energy projects, once we are able to reduce the cost of energy by 50%, pipe coating services are likely to be available in Guyana, which could increase local content activities in Guyana by about 10%,” he added.

Furthermore, Dr. Pertab noted that one notable success was the expansion of a local company that provides machinery and manufacturing services. Through the collaboration facilitated by the Secretariat, the company has moved from providing basic services to manufacturing high-quality parts, which has resulted in a large purchase order.

“In fact, just recently, we were working with contractors and subcontractors and they received a major purchase order…” he said.

The Secretariat also places strong emphasis on supporting small and medium-sized enterprises, particularly those owned by women.

According to Petab, 54 new women-owned companies have registered with the secretariat in the past six months, providing services such as catering, accommodation and cleaning. A standout achievement in this area is the recent award of a major contract to a woman-owned business, which has rapidly expanded its workforce to meet demand.

In addition, the Secretariat of Local Content is stepping up efforts to upskill the local workforce. Earlier this year, the Secretariat announced a plan to place 100 students in major frontline companies to gain practical experience. As of mid-2024, 53 students have been successfully placed, and the rest are expected to be placed by the end of the year, Dr. Pertab said.

Notably, he also gave an update on the mobile app, saying: “We have been developing the mobile app and hope to have it completed by the end of this year. Currently, we are developing the interface to ensure that it is user-friendly and can be widely used by the public.”

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