When oil was discovered off the coast of Ghana in 2007, it sparked hope, ambition, and a collective vision for prosperity. By 2010, Ghana began harnessing these resources, entering an era many believed would be transformative for the country’s socio-economic development.
But the paradox is hard to ignore—despite the promising start, the oil and gas sector has struggled to fuel the local economic development as envisioned.
Ghana, as it appears, is not one to surrender its aspirations. The Government has been steadily developing strategies to maximize the oil boom’s benefits, aiming to turn the tide toward sustainable socio-economic growth.
A key part of this strategy lies in the robust legislative framework surrounding local content, which emphasizes Ghanaian participation in every layer of the oil and gas sector.
The Legal Backbone of Local Content
To ensure that Ghanaians have a substantial stake in their country’s resources, policies such as the Petroleum (Exploration and Production) Act, 2016 (Act 919) and the Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) were introduced. These laws ensure that the people of Ghana, not just international corporations, benefit from the country’s oil wealth.
These laws are not just ink on paper. They are powerful instruments aimed at promoting Ghanaian ownership of businesses in the sector. From employment opportunities to the awarding of oil licenses and contracts, the framework is designed to ensure that local companies and individuals are prioritized. This is no small feat; as it represents a monumental shift towards inclusivity, a move that sees Ghanaians not only as spectators but as key players in the country’s energy narrative.
What Does Local Content Really Mean?
Local content isn’t just about putting Ghanaian names on contracts – it goes deeper. It refers to employing local expertise, utilizing goods and services produced in Ghana, and fostering the growth of indigenous businesses.
For the people on the ground, this could mean oil companies building infrastructure like schools or clinics – projects that might not directly relate to oil extraction but are vital to community development.
International Oil Companies (IOCs), under Ghana’s petroleum agreements, are mandated to ensure that local content is not overlooked. This means more than just compliance. It’s about uplifting local capacities and ensuring that the oil and gas sector has long-lasting benefits for Ghanaians.
Employment and Training: Laying the Foundation
Section 60 of Ghana’s Petroleum law makes it clear: IOCs are required to employ qualified Ghanaians across the board. This isn’t just an employment quota; it’s about building a local workforce that can contribute at every stage of petroleum production.
In collaboration with the Petroleum Commission, companies must implement training programs, offer scholarships, and provide industrial experience for students. It’s a comprehensive approach, designed to equip Ghanaians with the skills needed to thrive in a highly technical industry.
Prioritizing Local Goods and Services
Section 61 of Act 919 doesn’t just stop at employment. It extends to the procurement of goods and services. Operators in the oil and gas sector are mandated to source materials and services from local companies, as long as they meet specific standards.
The law stipulates that local products must be of comparable quality to imported ones, and priced within a 10% margin. This incentivizes international companies to look inward and invest in Ghanaian businesses while driving economic growth through local production.
Building Strategic Partnerships
The transfer of technology and expertise is another critical piece of the puzzle. The Petroleum Commission actively fosters partnerships between IOCs and indigenous Ghanaian companies, creating opportunities for knowledge transfer and capacity building. These partnerships are not only a means to strengthen local companies but also a way to ensure that Ghana remains competitive in the global oil and gas market.
Local Content Plans and Transparency
L.I. 2204 demands transparency from petroleum operators. Before they can embark on any activity, companies must submit a detailed local content plan for approval by the Petroleum Commission. This plan outlines how they will meet local content requirements, from supplying goods and services to transferring critical technology.
Each year, operators must report on their progress, ensuring accountability and allowing the Commission to monitor compliance effectively.
Financing Local Participation
A key challenge for many Ghanaian companies has been accessing the capital needed to compete in the oil and gas sector. Act 919 addresses this through the establishment of a Local Content Fund, which provides financial assistance for citizens and local businesses involved in the industry.
This Fund is critical, as it helps ensure that Ghanaians are not only employed in the sector but can also invest and build their businesses within it. The Fund is sustained through contributions from petroleum operators, parliamentary appropriations, and donor grants, providing a robust financial foundation for local participation.
The Road Ahead: Challenges and Opportunities
While these policies have paved the way for greater local involvement, the journey hasn’t been without its challenges. International oil companies often express concerns over the ability of local companies to meet global standards, particularly in terms of quality and technical expertise. As a result, despite their commitment to local content, many IOCs still rely on international suppliers, fearing that local alternatives may not be able to meet their needs.
Yet, despite these hurdles, progress is evident. Local content policies have led to the creation of jobs, increased use of Ghanaian goods, and opened doors for many small and medium-sized enterprises (SMEs) to engage directly with IOCs. More Ghanaian companies are forming partnerships with international players, gaining valuable insights into new technologies and processes.
Moving Forward
To fully realize the potential of local content policies, continuous improvement is essential. The Petroleum Commission needs to enhance its monitoring efforts, ensuring that companies follow through on their local content obligations.
Specialized skills training and technology transfer must be prioritized to close the gap between local and international standards. Moreover, amending the regulations to address wage disparities between expatriates and local workers could minimize labor unrest and promote a more equitable working environment.
By tackling these challenges head-on, Ghana can ensure that its oil and gas sector not only fuels economic growth but also serves as a catalyst for sustainable development.
Alhassan Aboagye on behalf of OSD & Partners
