How to boost local participation in Ghana’s oil and gas sector

How to boost local participation in Ghana’s oil and gas sector

Ghana discovered oil in commercial quantities offshore along the Cape Three Points in the Western Region in 2007 after years of prospecting. Production in the Jubilee Field started with 80,000 barrels of crude oil per day and has currently reached a production level of 110.000 barrels per day. It is expected to peak at 120,000 barrels per day in the years ahead. A number of institutions sprung up at the time offering a number of oil related programmes in in a bid to position Ghanaians strategically to take up jobs in the sector. Several other companies and consultancy firms also cropped up providing varied services in the field.Though the resource is in Ghana, the countries stake in the sector is less than 20 percent.  The country is still prospecting for new oil fields with recent discoveries pointing to oil resource in parts of Keta in the Volta Region.

Experts believe the Volta Basin hold oil and gas reserves which government through the Ghana National Petroleum Corporation (GNPC) is seeking to fully explore. Government has also expanded the country’s oil resource with arrival of the Floating Production Storage Offloading (FPSO) John Evans Atta Mills for the Tweneboa, Enyenra and Ntomme (TEN) Fields which is expected to produce about 23, 000 barrels of crude a day. In a bid to ensure that Ghanaians are not sidelined however, Parliament passed the local content and local participation regulation (L.I. 2204) in 2013 to put indigenous Ghanaians at the forefront of all petroleum activities.

The L.I. sought to achieve the following:

(a) Promote the maximization of value-addition and job creation through the use of local expertise, goods and services, businesses and financing in the petroleum industry value chain and their retention in the country;

(b) Develop local capacities in the petroleum industry value chain through education, skills transfer and expertise development, transfer of technology and know-how and active research and development programmes;

(c) Achieve the minimum local employment level and in-country spend for the provision of the goods and services in the petroleum industry value chain as specified in the First Schedule;

(d) Increase the capability and international competitiveness of domestic businesses; (e) create petroleum and related supportive industries that will sustain economic development;

(f) Achieve and maintain a degree of control for Ghanaians over development initiatives for local stakeholders;

(g) Provide for a robust and transparent monitoring and reporting system to ensure delivery of local content policy objectives;

(h) Provide for the submission of the local content plan and related sub-plans by contractors, subcontractors, licensees and any other allied entity involved in the petroleum industry including

(i) The provision of goods and services;

(ii) The transfer to the Corporation or the Commission and Ghanaians of advanced technology and skills related to petroleum activities;

(iii) A recruitment and training programme; and

(iv) Supervision, coordination, implementation and monitoring of local content.

Despite the passage of the local content regulation analysts believe that the quantum of local participation, as well as the extent to which local people can participate in the oil and gas sector is limited with regards to technology, finance and human resources. The onus however lies on the government to invest massively in building the capacity of its citizens to enable them occupy vantage positions in order to ensure that the oil resource benefits Ghanaians and not only the foreign investors.

Negotiation of better oil deals

Going forward, government must negotiate new oil deals in a better way and must have a lot of components for Ghanaians. Unlike the Jubilee Fields, government is said to have negotiated for more Ghanaian components in the TEN project but much more is required to enable Ghanaians have more stake in the sector. Government must negotiate in a way that allow Ghanaians to increase their stake in the sector  as this will go a long way in improving the economy.

Better governance and full implementation of local content law

There is also the need for government to ensure that the local content law is implemented to the latter. For instance the regulation states that for any contract be awarded to any company, if foreign, “there shall be at least a five percent equity participation of an indigenous Ghanaian company other than the Corporation to be qualified to enter into a petroleum agreement or a petroleum license.” Per the regulation any petroleum agreement that forfeits the above will not be granted but I believe it will be in order for the indigenous participation to be further increased to 20 percent or more. This will enable Ghanaians to be at the forefront of the sector, they must be involved in every aspect in the sector –from fixing of pipelines to managerial positions. The regulation further states that “Where an indigenous Ghanaian company has the capacity to execute a job, that indigenous Ghanaian company shall not be disqualified exclusively on the basis that it is not the lowest financial bidder. “

“Where the total value of the bid of a qualified indigenous Ghanaian company does not exceed the lowest bid by more than ten percent, the contract shall be awarded to that indigenous Ghanaian company. Where during an evaluation of bids, the bids are adjudged to be equal; the bid containing the highest level of local content shall be selected.” Though captured by law, if the above regulation is not adhered to, Ghanaians will surely be ripped off in the sector. Government must immediately set up a taskforce to enforce the regulation at every point.

Training

Government must also create schemes to train locals to take advantage of opportunities in the downstream sector and if possible the upstream sector. For instance government can train more fuel tanker operators [or purchase fuel tankers for them on credit to help in the transportation of oil and gas or train more people to work in local refineries and in the extraction process. Others can be trained to market petroleum products either wholesale or retail.  This will generate more jobs to boost economic growth and also ensure a fair representation of Ghanaians in the sector.

Train students for jobs in oil & gas sector

Government must be able to capture data on citizens studying oil and gas related programmes in school and ensure that they are connected to companies in the sector after school. Others should also be encouraged to study such courses at the tertiary level. This will reduce the unemployment rate in the country which analysts say has reached frightening levels. Scholarship packages should be given to students to study oil and gas related courses and absorbed by the companies after their course of study. More IT experts must be encouraged to take up jobs in the sector as well.

Transparency on how oil cash is expended

There should also be transparency on how revenue generated from the sector is expended. For this to be successful, there is however the need for the passage of the Right to Information Bill. This would make access to information easy to bring to book corrupt companies who could either face sanctions or have their licenses revoked.

 

 

This article was funded by Ghana Oil and Gas for Inclusive Growth (GOGIG)

By: Godwin Akweiteh Allotey /ghanadecides.com/Ghana

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