Fronting in oil and gas industry stifles local experiences


The Petroleum Commission says Ghana needs an indigenous pool of experienced and highly skilled upstream service companies willing to prioritise, adapt and compete prudently in the oil and gas industry.

The Commission is therefore working together with other state actors including; the Registrar General’s Department and the Ghana Revenue Authority to begin the enforcement of the relevant laws.

Other measures such as tax assessments on the basis equity participation and profit sharing, revocation of operating permits and non-issuance of permits to Indigenous Ghanaian Companies (IGCs) and their partners engaged in fronting would be taken against such companies.

Mr. Egbert Faibille Junior, the Chief Executive Officer of the Commission, speaking at the 2019 Local Content Conference and Exhibition, organised by the Petroleum Commission therefore, advised all those engaged in fronting to put a stop to it immediately.

The theme for this year’s Conference is: “Maximising In-Country Value Addition; the Role of Indigenous Ghanaian Companies (IGCs) and Joint Ventures (JVs) in the Upstream Petroleum Sector”.

The Local Content Conference and Exhibition has grown to become the largest gathering of industry executives, finance, investment and insurance professionals, academia, International experts and relevant stakeholders in Ghana.

The CEO explained that the theme was chosen by the Petroleum Commission’s Board Local Content Committee, based on government policy agenda, periodic identification of challenges, compliance monitoring exercises and the Commission’s strategic goal to ensure value creation in-country through deepened indigenous participation in the upstream industry space.

Mr Faibille Jnr stated that the Commission had embarked an exercise to review relevant provisions of L.I. 2204 to make it more responsive to current industry trends and demands adding, “we would submit the proposed review to Parliament through our sector Minister in the course of next year after extensive stakeholder consultation”.

Other Policies and Guidelines developed for implementation in 2020 as part of efforts to deepen local content and local participation include;
Technology Transfer Policy and Guidelines Research and Development Guidelines, Bid Evaluation Guidelines,Guidelines for the Submission of Local Content Plans and Reports.

He said the Guidelines, would smoothen the implementation and enforcement of the various requirements of L.I. 2204.

He said the Commission was taking steps to ensure that in-country spending was maximised by supporting local companies through capacity building to be able to independently execute some of the scopes currently being performed by Joint Venture Companies.

“This will create a level playing field among indigenous companies and bolster the confidence of our indigenous entrepreneurs to make the necessary investments and also take advantage of the economies of scale resulting from the reservation of goods and services for local suppliers.”

Mr Faibille Jnr said the Commission was restructured to become more responsive and efficient in addressing the emerging challenges in the industry and be equipped to perform its regulatory and monitoring responsibilities.

He said as part of the restructuring, a number of departments and Units were created with primary focus on deepening three major components for local content and local participation.

They include; Business Advisory and Enterprise Development, Compliance & Contracts Administration Department, Costs Audit Department, Monitoring & Evaluation Department and the Petroleum Security Unit to improve upon operational efficiency and bring the Commission’s services to the door-step of stakeholders.

He said a total of 60 certificates and permits were issued to foreign companies, 553 to Fully Indigenous Companies, 27 to Indigenous companies and 75 to JV companies by the Commission, representing about a 16 per cent increase over that of 2018, where a total of 618 permits were issued in total.

A total value of US$ 420M was accrued, Out of which, about US$77M went to IGCs.
The figures however excluded contracts in respect of Jubilee and TEN Fields being operated by Tullow Ghana Limited

The CEO said the Commission would continue to monitor closely the procurement and bidding processes of the major operators in line with the requirements of L.I. 2204.

Mrs. Gifty Eugenia Kusi,the Western Regional Minister said Local content should really be local content indeed to promote indigenous growth and full participation in the sector.

She indicated that the Region was prepared to receive and host investors for economic growth of the country.

The Deputy Minister for Energy, Dr. Amin Adams said maximising the benefit of such a depleting natural resource was critical and called for continuous engagement on the best way out in the management and operations in the upstream sector.

He said the amendment of the Legislative Instrument was to broaden the areas of trade protection and warehousing policy and encouraged participants to deliberate on the new proposal.

The Deputy Minister also charged the conference and the Commission to study the Details of the Intercontinental Free Trade Policy and make recommendations for any policy change, update or total overhaul.

He added that the government was committed to the empowerment of local firms for active participation in the sector through various initiatives and programme.

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