By: Anthony Sedzro
On July 6 last year, the President of Ghana, Nana Akufo-Addo, turned the valve to commission the country’s third oil field -Sankofa – off the Cape Three Points in the Western Region. The smiles on his face as he performed a seeming ordinary task foretold the promise that the US$7 billion ENI-operated field holds for his ambitions of transforming Ghana’s economy. How much is local expertise contributing to this ambition?
The country’s two other oil fields, Jubilee and TEN, although they have not met the 100,000 barrels per day target envisaged when commercial oil production began in 2010, they have helped to provide needed revenue for the country. The petro-carbons industry also attracts significant investment, helping to make Ghana the country with the highest GDP of 14 percent in the world in 2011 and also the second biggest economy in West Africa.
When oil was discovered in 2007, it led to so much optimism among Ghanaians who hoped for job opportunities and economic advancement. Because the oil industry was new, the country lacked the technical expertise to operate in the promising sector. Indeed, even when oil production started, the necessary laws to govern the sector were not enacted.
Looking to get more of its citizens to benefit from the industry, the country’s parliament passed the Petroleum Local Content and Participation Act, 2013 (L.I. 2204).
The then Minister for Information and Media Relations, Mahama Ayariga, outlined some of the highlights of the local content law when it was passed in 2013.
“The key highlights of the policy include: that priority should be given to Ghanaians in the granting of licensing and agreements in the petroleum sector in all operations, where foreigners want to be involved they must partner with Ghanaians who should carry, at least, a five percent equity interest and that is reviewable at the pleasure of the Minister given certain circumstances,” Ayariga explained.
“Also, there is an elaborate reporting procedure requiring companies to use local services and products manufactured by Ghanaian companies and that they must also make investments in research and carry out programs aimed at technology transfer to Ghanaians,” he further stated.
But, in all these, how has the local content policy benefited the Ghanaian? How many locals are employed in the sector? How large are the number of local SMEs whose products and services directly contribute to the country’s oil industry 10 years on?
What is Local Content in the first place?
Local content is defined as the development of skills, technology transfer, use of local manpower and local manufacturing. In other words, it involves the use of Ghanaian local expertise, goods and services, people and business in the operations of the oil and gas industry. These could refer to employing a certain percentage of Ghanaian citizens to work directly in the sector, to involving local businesses in areas such as drilling, aviation, transportation, catering, oil distribution, allocation of oil blocks, amongst others.
Many countries that are into oil and gas production are setting up requirements for ‘local content’ into their regulatory frameworks. These requirements aim to create jobs, promote enterprise development and accelerate the transfer of skills and technologies. Local content has, therefore, become a tactical issue for the oil and gas industry—presenting both challenges and opportunities.
In local content policy formulation, there is a phenomenon called Margin of Preference. This phenomenon, or term, refers to the extent to which a person or group is given favourable treatment over others with the rationale of making that person or group more competitive.
So is this laudable objective being achieved?
Initiatives so far
When oil was discovered, several Ghanaians were sponsored abroad to acquire the technical training needed to work in the oil and gas sector. It is good to note that some positive results are being achieved.
At the launch of the Sankofa project in July 2017, President Akufo-Addo gave the most optimistic note on local content yet, indicating that his government is determined to ensure the full participation of Ghanaians in the sector.
“…The Energy Minister mentioned initiatives being pursued by the Petroleum Commission to expand Ghanaian participation in the oil and gas industry. This is one of the key initiatives by Government, which outlines Government’s vision of full Ghanaian participation in all aspects of the upstream oil and gas value chain,” the President said.
Akufo-Addo commended the Italian operator of the Sankofa oil field and mentioned some things the company had done to effectuate local content.
“I understand that ENI has demonstrated significant commitment to Ghanaian participation, and, working with the Petroleum Commission, has increased in-country activity, spending and employment of Ghanaians. It is gratifying to see this morning our young Ghanaians on the FPSO, trained to manage the hydrocarbon production and processing from the Field as technicians and supervisors.
“I have been informed by the Petroleum Commission that over 100 Ghanaians (representing nearly 60 percent) are involved in the operation and maintenance of the FPSO John Agyekum Kufuor. This is in addition to the many that worked in the conversion of the facility in Singapore. I saw them on the vessel, and salute them for their energy, enthusiasm and commitment. They are excellent examples of Ghanaian youth,” the President commended with a clear note of satisfaction.
Small Ghanaian businesses were also beneficiaries of the nascent oil and gas industry, the second biggest contributor to the country’s GDP, according to the president.
“As has been stated earlier, more than US$1.8 billion worth of contracts have been awarded to indigenous Ghanaian companies under this project. I urge ENI and its partners to continue to work with the Petroleum Commission to move Ghanaian participation to even greater heights.”
The President went on: “Furthermore, the second phase of this project will rely on the support services of small and medium enterprises (SMEs) as part of the supply chain development.”
However, with a population of almost 28 million majority of whom are young people, regrettably, employment of a few hundreds is just a drop in the ocean. The loudest cry for jobs has come from the youths and elders in the Western Region, the home of Ghana’s oil industry.
Indeed, in the year oil was discovered, the chiefs in the Western Region, perhaps aware of how little Ghana’s gold – its major export earner – has not drastically transformed Obuasi and other mining towns where gold is mined, they called for 10 percent of the total oil revenue to be allocated to the region. Although this was no agreed to, it speaks to their lack of belief they would eventually benefit from the commodity when the oil starts flowing.
Aware of this fact, Nana Akufo-Addo promised to relocate the headquarters of the Ghana National Petroleum Corporation (GNPC), Ghana’s state oil company from Accra to the Western Region.
As a way of trickling the benefits to even more Ghanaians, in November last year, the Minister for Energy, Boakye Agyarko, launched a programme called the “Accelerated Oil and Gas Capacity (AOGC)” programme on behalf of President Akufo-Addo. Under the programme, a total of 1,000 Ghanaians will receive training annually.
With the support of the World Bank, the training will cover the four thematic areas, including: Technical, Vocational, Apprenticeship Development and Utilisation, Capacity Development of educational institutions, Capacity Building for Small & Medium Enterprises (SMEs), and Capacity Building for Public Institutions. A total of seven educational institutions will also benefit from the program to train first class welders and technicians to serve the needs of the oil industry, according to a report by the B&FT newspaper.
“Our universities continue to train geologists and petroleum engineers. However, we have not been able to train the technicians and middle-level personnel who are in high demand by the oil industry,” the President said in the speech read by Boakye Agyarko.
“The AOGC programme will thus guarantee that local service providers and personnel are given requisite skills and technical know-how, from entrepreneurship to engineering, to strengthen their effective participation in the oil and gas sector, as well as in other allied industries,” he said.
He went on to assure that the “Initiative signifies government’s commitment to ensuring that Ghanaians and Ghanaian companies find themselves at the forefront of our oil and gas industry. We are determined to expand opportunities in the industry, and to use it as a catalyst for the rapid transformation of our country.”
Egbert Faibille Jnr., the Acting Chief Executive of the Petroleum Commission, said that four years after the passage of the Local Content Regulations for the Petroleum sector, human resource capacity constraints has still been identified as a major challenge in the industry.
“What is pleasing is that Ghanaians are increasingly occupying senior management and core technical positions in the industry. We, however, concede that a lot more can be done and ought to be done. It is in this regard that the Commission considers the President’s Initiative of the Accelerated Oil and Gas Capacity Programme timely and apt,” Faibille said.
This year, the Ghanaian economy is projected to grow about 8.3 percent, mainly driven by the oil and gas sector. The renewed interest in the TEN oil fields due to Ghana’s win at the international court of arbitration will also contribute immensely to this.
It is the hope of many Ghanaians, especially the youth, that local content will see its pride of place so that many of them could enjoy the benefits the discovery of oil in 2007 promised them.