Ghana’s local content fund has accumulated a total of US$3.7 million as proceeds from oil companies, the latest PIAC report reveals.
After operationalizing the local content fund in January last year, the Petroleum Commission of Ghana underscored the purpose of the Fund to inter alia provide financial assistance to indigenous Ghanaian companies operating in the oil and gas sector.
Due to the highly capital-intensive nature of oil exploration and production, gaining access to credit to participate is one of the challenges that local companies face.
Receipts into the fund are under the oversight of the Petroleum Commission, the country’s upstream regulatory agency. The Commission sees to the implementation of the deduction of 1% of the sum of any upstream contract. This is according to the Petroleum Exploration and Production Act, 2016 (Act 919).
However, the 1% contract sum deduction made into the Fund faced several implementation challenges during the period. These included delay in payment contributions as well as the total disregard or violation of payment by some oil companies. These companies point to Stability Clauses in their respective Petroleum Agreements, as basis for non-payment.
Per the local content and participation regulations (L.I 2204) promulgated in November 2013, “to inter alia promote maximisation of value-addition and job creation through the use of local expertise, goods and services, financing in the petroleum industry value chain and their retention in Ghana”.
Progress in the local content and participation Law
After a decade of producing oil in commercial quantities, the country can only boast of a few indigenous oil companies that can rub shoulders with foreign oil majors operating in the country. As a result, proceeds from this fund will bring onboard more local oil companies into the oil and gas sector. While also leveraging to meet the government’s local content target.
Progress made as of year-end 2020 include the establishment of a Local Content Fund Secretariat, resourced and situated at Commission.
Also, the Secretariat has appointed an Interim Coordinator of the Fund, after endorsement by the Minister of Energy. In addition, the Fund has effected a draft Local Content Fund Operational Guidelines for the administration of the Fund.
Specifically, the report highlights modest improvement so far with regards to localising various positions in major companies.
Per the various localisation plans, the Commission forecasted about forty roles for localisation in 2020. Accordingly, 37 positions previously held by expatriates including 11 in Yinson and 26 in MODEC have Ghanaians filling those now.
Furthermore, PIAC noted that the Government initially held true to its commitment to implement local content requirements. This was exhibited when it declined Tullow’s appointment of an expatriate as the Company’s new Managing Director. The Government insisted that Tullow’s action defeats the Government’s localisation agenda.
“[However,] the new MD was appointed in the middle of May to replace a Ghanaian who was due for retirement on June 30, 2020. Government did not pursue this objection further as the new MD remained Tullow’s MD as at December 31, 2020.”
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