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Parliament passes Local Content Bill for oil sector


Minister of Ernergy, Emmanuel Armah Kofi Buah

Parliament on Tuesday passed the much-awaited Petroleum (Local Content and Local Participation) Regulation, 2013 (LI 2204) to put Ghanaians at the forefront of all petroleum activities and ensure that they benefit from the country’s new resource.







The implementation of this new law is expected to ensure that the oil find benefits Ghanaians, while the foreign oil companies also get fair returns on their investment.
The instrument was laid before Parliament on Friday, July 12, 2013 and referred to the Subsidiary Legislation Committee for consideration and report.
Purpose and Provisions of the Instrument
The purposes of the regulation include the promotion of value addition and job creation through the use of local expertise, goods and services, businesses and financing in the petroleum industry value chain and their retention in Ghana.
It will also develop local capacities in the petroleum industry value chain, achieve the maximum local employment level and in-country spending of oil revenue and increase the capability and international competitiveness of domestic businesses and related supportive industries to sustain Ghana’s economic development.
The regulation will also ensure a transparent monitoring system to meet the objectives of the government’s economic development.
It also provides that entities in the petroleum industry must submit their local content plans for their compliance with local content standards regarding the provision of goods and services, the transfer to the Ghana National Petroleum Corporation (GNPC) or the Petroleum Commission and Ghanaians of advanced technology and skills related to petroleum activities and their recruitment and training programme as stipulated in the regulation.
Under the law, indigenous Ghanaian companies will be given first preference in the grant of petroleum agreements and licences, while there shall be at least five per cent equity participation by an indigenous Ghanaian company other than the GNPC before an international oil company (IOC) is deemed qualified to enter into a petroleum agreement or licence, unless otherwise approved by the minister.
Motion
The Chairman of the Subsidiary Legislation Committee of Parliament, Mr O.B. Amoah, moved the motion for the approval of the committee’s report.
He told the House that private companies in the upstream oil and gas sector operating in Ghana, represented by the Ghana Exploration and Production Forum, had reservations about certain aspects and provisions of the regulation, in spite of the fact that they appreciated the benefits of local content strategies to Ghana and IOCs.
The forum, according to him, was particularly opposed to Regulation Four, which gives excessive discretionary powers to the Minister of Energy and Petroleum and the Petroleum Commission to determine the persons qualified to enter into petroleum agreements or obtain a petroleum licences.
Mr Amoah said the committee observed that for the local content policy to be successful, the government should invest in the training of technical and managerial personnel.
It should also provide incentives for research and development within Ghana, while the local sector should be adequately resourced to enhance funding.
Mr Amoah’s motion was seconded by the Ranking Member of the committee, Mr Cletus Apul Avoka, who stated that the implementation of the regulation would be a win-win situation for both the country and foreign companies participating in the country’s oil industry.
Minister of Energy and Petroleum
Speaking to the Daily Graphic, the Minister of Energy and Petroleum, Mr Emmanuel Armah-Kofi Buah, expressed his appreciation to Parliament for the passage of the law and said Ghanaians had been moved from the back of the bus to the front.
He said the law was a major step towards ensuring that the local content objective intended to help Ghanaians benefit from the country’s new resource was realised.
According to him, it had been projected that the oil reserves would yield $20 billion revenue within the next five years and the law would ensure that most of that amount was spent in the country to ensure that Ghanaians had a fair share of the returns.
The minister indicated that all IOCs were to submit their local content plan to the Petroleum Commission and that should contain detailed provisions that would ensure that preference was given to the provision of goods and services within the country which met internationally accepted standards and specifications of the petroleum industry.
Mr Buah asserted that when it came to employment, qualified Ghanaians were to be given the first consideration, saying that the days when “oil companies took insurance policies from foreign insurance companies are over, as an aspect of the new law which deals with insurance states categorically that a contractor or sub-contractor, licensee or other allied entity engaged in a petroleum activity that requires insurance shall procure the services of a local insurance company”.
He said the law also made provision for the National Insurance Commission to grant approval for acquiring offshore insurance services only when local capacity had been exhausted.
He said additionally the law stipulated that the services of a Ghanaian legal practitioner or the firm of a Ghanaian legal practitioner whose principal office was located in Ghana shall be given preference, as well as the services of a Ghanaian financial institution.
“The regulation also guarantees employment for Ghanaians in junior and middle-level positions, while requiring a succession plan for Ghanaians to take over positions currently occupied by non-Ghanaians,” he said.
The minister, however, warned that any Ghanaian harbouring the idea of fronting for any foreign company should think again, as anybody who would be found liable would be prosecuted.
He urged Ghanaians to take advantage of the new law but not to break it.

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