AGI Advises Companies to Build Capacity for Oil Industry
21 May 2010
The President of the Association of Ghana Industries, Nana Owusu-Afari has said that taxes and royalties alone are insufficient to meet the expected income targets to support the nation's development efforts. What will make it adequate, he explained, is the effective development of the downstream activities, with active involvement of Ghanaians, through local content and participation.
Making a presentation at the First Domestic Content and Matchmaking Exhibition in the Oil and Gas Industry in Accra, he said the local content policy, which is the utilisation of Ghanaian human and material resources for the provision of goods and services to the petroleum industry, will remain a mirage if our companies do not prepare and develop their capacities to take advantage of the opportunities offered by the oil and gas industry.
"The oil and gas industry is a sophisticated business area; indeed the scale of operations of the Jubilee Fields is completely new in our economy hence doing business in the industry cannot be the business as usual. To achieve the objectives of the local content policy, government's role would have to go beyond the development of the policy. There is the need to strengthen the business environment in order to improve the efficiency and competitiveness of local businesses".
The Minister of Trade and Industry, Miss Hanna Tetteh, said that under the Industrial Policy which is being formulated, government is expected to initiate policies to increase local content in the manufacturing process by encouraging the production of local materials, value addition to local resources including the fabrication of plant and machinery locally.
She noted that the capital requirement for the exploitation of the natural resources is quite substantial. "I will then advice that we use our domestic financing resources and look within and in this regard, request the various local financial institutions to provide complementary funding through syndication as the expected foreign funding may not come in as expected. After mobilising the necessary funding, including complementary domestic funding, there would be the need to put in place a legal framework which will give an indication as to the mode of ownership".
She said there should be a clear indication as to the ownership; fully state or foreign owned or joint state and private ownership. "The legal framework should also clearly look at the management contract to be put in place. We should be able to clearly define the role to be played by government, the foreign investors, the people in the localities where the oil find was made, especially the traditional rulers and opinion leaders:.
The legal framework, she added, will also look at payment of relevant taxes, royalties, the provision of local amenities and the percentage of oil expected to be reserved for the domestic market.
Drawing lessons from other oil producing countries, Miss Tetteh said, there is the need to adopt the best practice, examine challenges that were faced and find ways of addressing them if they surface in Ghana.
"Some countries have used their oil revenue to effectively develop their infrastructure and tourism with multiplier effect earning them substantial revenue for further development. We should emulate the examples of these countries".
She said, some of the challenges in the trouble spots areas include conflicts, tampering of oil and gas pipes and the setting up of illegal refineries. She said Ghana needs to learn from their experience and promote local participation in the industry through the local content concept.
She said there are considerable business opportunities for Ghanaian busineses in the petroleum industry from Small and Medium Scale Enterprises (SMEs) to large corporations.
She disclosed that the Ministry of Trade and Industry through the World Bank Micro Small and Medium Enterprises (MSME) Project will also explore the possibility of training artisans to acquire the necessary entrepreneurial, technical and managerial skills to enable SMEs benefit from the industry.
The President and General Manager of Tullow Oil Limited, Mr Dai Jones, said Tullow Oil has 80 percent of its workforce being Ghanaians, with 50 percent in leadership positions.
He said Tullow Oil has already given 840 contracts totalling $65 million to Ghanaians. Mr Jones, however, cautioned Ghanaians to control their expectations; "One oil field is not an industry. It is, however, the commencement of an oil industry," he added.
Credit: Public Agenda (21st May, 2010)