Challenges Facing the Implementation of Local Content in Ghana Oil and Gas Industry By Gilbert Azaah
This article looks at the problems being faced by Ghana in implementing local content and local participation as a developing country with limited capacities and also dealing with IOCs and sub-contractors which are well established and are well connected globally. As a developing country with very little experience in the oil and gas industry, one of the main obstacles faced by the implementation of the local content policy in Ghana is the lack of local capacity and capabilities in virtually all sectors of the oil and gas industry. These short comings would obviously affect Ghana’s hopes of taking advantage of the numerous employment opportunities in the industry and also make it difficult for local businesses to be able to provide goods and services which are competitive in terms of “price, quality and timely availability” as stipulated in the policy framework.
One of these challenges is the fact that local businesses servicing the oil and gas industry require a sound capital base because of the capital intensive nature of the industry. However, many Ghanaian companies may not be in the position to afford this and the only way out is to source funding from banks which could affect the quality and efficiency of goods and services provided. Another option is to partner foreign companies to boost their financial capabilities but this will in a way defeat the purpose of the policy itself which seeks to encourage indigenous businesses to take up the challenge of providing goods and services for the oil and gas industry.
Another major obstacle in the realization of the local content policy in Ghana and many other countries is the fact that these IOCs have well established supply chain networks. They therefore prefer to deal with global suppliers or award major service contracts to specialist firms such as Worley Parsons, KBR Aker Solution, Amec and Schlumberger whose financial strength, reputation and technical capabilities can be guaranteed (Olsen, 2011). Also, most IOCs are reluctant to abandon these already established ties and deal with local companies for cost saving reasons. This makes it difficult for local companies to compete with such reputable names (Olsen, 2011)
In some cases, some oil companies and sub-contractors operating in Ghana’s Jubilee oil field, have acted in contravention of their contractual and legal obligations to adhere to the local content and local participation policy as highlighted by some recent incidents. In October 2010, oil riggers and offshore workers petitioned the Ghana National Petroleum Corporation (GNPC) against what it termed discrimination in the award of contracts for oil rig operations on the Jubilee oil field. According to the riggers, agencies like Menergy Oil, O & L Trinity and Sea World which had been registered by the GNPC to employ artisans such as motormen, floor men, caterers, crane drivers and badge masters for oil rigs operating in the oilfields were rather employing foreign nationals instead of local artisans who were equally qualified (General News Agency, 2011). This worrying development contravenes Section 5.4 of the local content and local participation policy which states that operators in the petroleum sub-sector should as much as possible avail opportunities for Ghanaians with requisite qualifications and expertise to be employed in various levels of operations.
Another issue has to do with the servicing offshore installations which require the acquisition and operation of vessels such as supply boats, tug boats, anchor handling vessels and air-crafts by Ghanaian owned companies, failure to do this will result in IOCs contracting foreign companies to take up this responsibility. This lack of capacity to provide services for offshore installations has impacted negatively on some Ghanaian companies. In Feb 2010 for instance, Tullow Oil, one of the...
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