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Thursday, 3 July 2014

Ghana passes local content law

Ghana’s parliament has passed a petroleum regulation law (LI 2204) known as the local content law. This law is meant to put Ghanaians at the forefront of all petroleum activities ensuring that the country benefits from their new oil resources while the foreign oil companies also get fair returns on their investment.

The law they said will also help in developing local capacities in the petroleum industry value chain, achieving the maximum local employment level and in-country spending of oil revenue. It will increase the capability and international competitiveness of domestic businesses and related supportive industries to sustain Ghana’s economic development.

Another important aspect of the local content law is to ensure a transparent monitoring system to meet the objectives of the government’s economic development and to ensure that entities in the petroleum industry submit their local content plans for their compliance with local content standards regarding the provision of goods and services.

Under the law, indigenous Ghanaian companies will be given first preference in the grant of petroleum agreements and licences, while there shall be at least five per cent equity participation by an indigenous Ghanaian company other than the GNPC before an international oil company (IOC) is deemed qualified to enter into a petroleum agreement or licence, unless otherwise approved by the minister.

Before moving the motion, the Chairman of the Subsidiary Legislation Committee of Parliament, Mr O.B. Amoah, told the House that private companies in the upstream oil and gas sector operating in Ghana, represented by the Ghana Exploration and Production Forum, had reservations about certain aspects and provisions of the regulation, in spite of the fact that they appreciated the benefits of local content strategies to Ghana and IOCs.

Speaking to the press, the Minister of Energy and Petroleum, Mr Emmanuel Armah-Kofi Buah, expressed his appreciation to Parliament for the passage of the law and said Ghanaians had been moved from the back of the bus to the front.

According to him, it had been projected that the oil reserves would yield $20 billion revenue within the next five years and the law would ensure that most of that amount was spent in the country to ensure that Ghanaians had a fair share of the returns.

The minister indicated that all IOCs were to submit their local content plan to the Petroleum Commission and that should contain detailed provisions that would ensure that preference was given to the provision of goods and services within the country which met internationally accepted standards and specifications of the petroleum industry.

Mr Buah asserted that when it came to employment, qualified Ghanaians were to be given the first consideration, saying that the days when “oil companies took insurance policies from foreign insurance companies are over, as an aspect of the new law which deals with insurance states categorically that a contractor or sub-contractor, licensee or other allied entity engaged in a petroleum activity that requires insurance shall procure the services of a local insurance company”.

“The regulation also guarantees employment for Ghanaians in junior and middle-level positions, while requiring a succession plan for Ghanaians to take over positions currently occupied by non-Ghanaians,” he said.

The minister, however, warned that any Ghanaian harbouring the idea of fronting for any foreign company should think again, as anybody who would be found liable would be prosecuted.

Reacting to the law, Tallows oil the major oil extracting company in Ghana, has expressed their willingness to go by the local content law. “We have made a commitment to playing our part in ensuring that the success of the oil and gas industry brings transparent and tangible benefits to local people and national economies where we operate.”

“We believe that Foreign Direct Investment is a real benefit to the host countries where we operate and are committed to bringing the benefits of this investment to support our efforts in delivering sustainable local content.”

Tullow oil added that they were committed to regular engagement and communication with local suppliers to ensure they understand what they want, can easily navigate their contracting and procurement processes and be a part of their transparent supply chain.

Furthermore, “we are committed to working effectively with our suppliers to improve overall performance throughout our supply working closely with key stakeholders at all levels of the community, government and regulator to ensure the delivery of strong local content legislation to support the above commitments.”

“Our commitment, supported by ethical and responsible business practices, will help us to achieve a sustainable and competitive local supply chain for Tullow, building futures in the countries where we operate,” they concluded.

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