Local Content in the Upstream Petroleum Sector of Ghana. How Well Is Ghana Doing So Far?

Abstract

Following the discovery of Oil and Gas resources in commercial quantities in the year 2007, Ghana sought foreign expertise with the much needed technical and financial resources to exploit the newly found resources. Seeing that the upstream Oil and Gas industry is a hugely technical and capital intensive area, the Government of Ghana through the Ministry of Energy and the Petroleum Commission adopted a local content policy in the year 2011, and subsequently passed a Legislative Instrument through the Parliament of Ghana in the year 2013 to enforce the policy. The motive of this move was clear. It was and is to ensure that the upstream Oil and Gas industry of Ghana provided non-fiscal benefits such as employment opportunities, avenues to allow Ghanaian businesses supply goods and services to the industry and also ensure that there is proper technology transfer to give the Ghanaian technocrat the ability to have the necessary skills and technical know-how to run the upstream Oil and Gas sector in the nearest future. The question this research seeks to answer is how well Ghana has done so far in its quest to ensure local content in the upstream Oil and Gas sector since the year 2013. Using mostly qualitative techniques and methods, this research extensively employs content analysis to organize, summarize and categorize data from which patterns and links were drawn from literature reviewed. Data is analyzed along these themes: employment opportunities allowed Ghanaians, supply chain advantages to Ghanaian businesses, technology transfer and the institutional effectiveness in enforcing local content laws in the industry. Findings suggested that Ghana had made some good strides in terms of ensuring employment for Ghanaians in the upstream Oil and Gas sector though targets with regards to ensuring that Ghanaians held almost all core technician positions in 10 years are overly ambitious. This is because of the apparent lack of the necessary technical and professional skills. On the supply of goods and services to the industry, the capital intensive nature of the industry coupled with high cost of borrowing for Ghanaian businesses makes it nearest impossible to compete fairly with foreign competitors. However, to ensure some advantage in terms of the supply of goods and services in the industry, the local content laws have earmarked some areas in the industry like transport and aviation services, financial and insurance services etc. for only Ghanaian players. It is worth noting however that foreign companies which are not obliged to comply with local content laws because Ghanaian laws do not take retroactive effect, on their own have commendable local content policies to help Ghanaians derive the necessary benefits from the Oil and Gas resource. The companies view this gesture as part of the Corporate Social Responsibility (CSR) strategy. This study further finds that the Petroleum Commission and other enforcing institutions will need to further enhance their capacities to enforce local content laws. Overall, Ghana’s local content laws are good ones with clearly stated objectives and goals and would help citizens derive the needed benefits from the upstream Oil and Gas industry if strict enforcement is prioritized and done.