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Opinion: Ghana’s oil discovery, the lost opportunities

It was the expectation of all Ghanaians after the discovery of oil and gas in 2007 that there would be more jobs, transformation of the local and national economy, and transfer of skills to indigenous companies to take over the new oil industry.

But almost six years after the oil find, the only thing people can readily remember is high rent, skyrocketing land prices and other high prices of goods and services in the twin-city of Sekondi-Takoradi.

In their public forums to educate the people on the benefits of the oil industry during development stages before the first oil lift, the state’s representative, Ghana National Petroleum Corporation (GNPC), warned that that employment in the oilfields were extremely limited.

They did, however, gay that there would be many opportunities for plumbers, carpenters, welders, painters, electricians, haulage handlers, caterers and other forms of services that Ghanaians should get ready for.

But, all the jobs have gone to the expatriate companies and the GNPC, the then regulator, failed to stamp its authority to ensure that locals control the service sector.

Interestingly, at the peak of the development stages of the oil operation in 2009 and 2010, foreign companies were given contracts to do catering, and haulage, giving serious competition to the local companies.

Some of the assurances of the international oil companies (IOC’s) gave were the inclusion of local participant% at every level and the transfer of skills and technology.

Sadly, to date, no skill has been transferred, and the local economy is left more stressed than before.

Since 2007, our oil find has actually attracted to Ghana’s offshore world-class rigs and very experienced skills, which should have transferred skills to locals. Rather it is very sad to note that six years on, no Ghanaian has been able to boast of a trained derrickman, or drill engineer or even to have assumed the position of assistant drill engineer.

Contracts of services to support the industry were awarded to foreign companies under, the pretext that Ghanaians were not ready for the industry.

The expatriate companies were left on the loose as we forgot that the golden era of easy oil in Nigeria, Equatorial Guinean and other countries were over, so therefore, any investor in the oil and gas industry in any country had to ensure that the locals were not left out of the capital they were bringing in to invest.

The IOCs must realise that the rules of the game have changed, and they have the responsibility to ensure the development of local economies, stimulate industrial development, increase local capability, build a skilled workforce and create a competitive supplier base for local content.

In some countries the minimum requirements for doing business aside the capital invested is to partner an indigenous company from the host countries and this is enshrined in the local content policies.

But the story in Ghana is different. Under the watch of the GNPC, foreign companies were providing everything from catering service, crew service, and haulage to hardware supplies.

It is important that if one is entering into a new field, he/she researches and knows about the existing practices in the industry.

At the time of the oil find, instead of shopping for local expertise dotted across the globe or training local people, the GNPC turned itself into a contract broker and decided who should pick which contract, who take what rig and which crew it would be providing. Thus the GNPC itself was seriously involved in providing services to the offshore operations.

According to Mr. Nuetey Adzeman, Executive Secretary of the Ghana Oil and Gas Service Providers Association (GOGSPA), they complained to GNPC about lack of information on contracts, bids, etc. and were told it was privileged information, hence confirming that GNPC is competing with the very companies it registered.

Again since the regulatory role was taken from GNPC and handed to Petroleum Commission (PC), local service providers are at the verge of losing their contracts with international oil companies (IOC’s) if they fail to regularise by paying high dollar rated re-registration fees.

Ghanaian service companies in category Al with annual turnover of more than $5million; have to pay registration fee of $30,000 and annual renewal of $20,000.

Categories B1, C1, D, with annual turnover from Si million to S5million have to pay a registration fee of $25,000, $15,000. $5,000 respectively to the commission or forfeit their businesses.

These local companies should also be ready to pay annual renewal of $15,000, $10,000 and $3,000 respectively.

In the area of foreign companies, a letter from the Petroleum Commission to the OICs and local companies indicated that foreign companies in categories A2, B2, C2, with annual turnover of more than $20mil lion plus, $10-$20 million and $10 million has to pay in registration fee of $150,000, $100,000 and $70,000 respectively

The Foreign Service companies are also to pay renewal fees equivalent to the registration fees annually to the Petroleum Commission.

Aside the service providers, foreign and local oil exploration and production companies have a flat rate of $150,000 fee for registration and $30,000 for renewal.

Payment of these high registration fees unfortunately does not guarantee the service companies contract.

That aside, the local and foreign companies do not source funding from the same financial market with the same interest rates.

What it means is that, when the oil market gets bullish again later this year,  most of the contracts will go to international service providers.

Dr Ngozi Okonjo-lweala, Finance Minister of oil-rich Nigeria, cautioned Ghana to illustrate greater transparency and accountability in managing the fledgling oil industry to avoid the challenges associated with the harnessing of the natural resource at the second John A. Kufuor’s Global Development Series 2013 in Accra recently.

That indeed was a timely sister’s advice from Dr Okonjo-Iweala. What is gone since 2007 is gone, but we must protect what is there now.

In Nigeria, after years of oil and gas production, the Nigeria Petroleum Exchange (Nipex) has been established. With Nipex all contracts and requisition from the companies for their daily operations are posted on the Nipex web site.

The web site is currently an e- one­stop transaction centre developed to improve on value procurement in the Oil and Gas industry and institutionalise world class contracting processes in Nigeria.

Nipex has also become a virtual community linking buyers and suppliers by establishing industry ­wide standards for transacting business.

It has a comprehensive suite of capabilities, which includes a platform for showcasing contract opportunities, as well as executing, monitoring and measuring all contracting activities within the Nigerian Oil and Gas industry.

Interestingly when Ghana discovered oil, foreigners grabbing contracts from catering to huge technical requirement flooded the market with the chunk of the monies and invested before the first spill of oil found its way out of the country again.

GOGSPA has taken the initiative and is in talks with the Petroleum Commission to develop an advanced form of an electronic platform (market place), which will be more effective and efficient than the Nipex.

Interestingly in Ghana, some foreign service provider in the Western Region are into all services such as plumbing, electrical, haulage, generator servicing and sale, domestic cleaning services, catering services and other forms which were supposed to be made public and reserved for Ghanaians.

If Ghana had adopted the JQS database like Nigeria, all contracts and services needed would have been made public and would not be privileged information as stated by GNPC.

To promote efficiency and greater transparency in industry procurement activities and ensure integrity in the contracting process, the JQS database by Norwegian and Danish oil arid gas operators and management contractors will ensure local companies in Ghana were well positioned.

Ultimately the software would ensure that the country’s local content agenda would have been achieved without any difficulty.

Source: Daily Graphic

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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Reporting Oil and Gas project was launched on 4th June 2009 at Takoradi, Western Region, Ghana by Penplusbytes (www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector read more
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