Local Content And Local Participation In Ghana’s Petroleum Industry: An Overview Of The Petroleum (Local Content And Local Participation) Regulations, 2013 L.I.2204

Guest Author: Seyram W. Adabla, Legal Counsel, Ministry of Energy and Petroleum, Ghana

Oil and gas was discovered in commercial quantities in Ghana in 2007 specifically in two deep water blocks, West Cape Three Point and Deep Water Tano. These discoveries were unitised to form the Jubilee Field with estimated oil reserves of about 800 MMbbl of light crude oil with an upside potential of about 1.8Bbbl, as well as significant quantities of associated natural gas. In addition to the Jubilee Field, other discoveries have been made which are in various stages of development. These discoveries have intensified interest in Ghana's petroleum industry both locally and internationally leading to increased exploration activities in Ghana.

Though Ghanaians are happy about the discovery of oil in commercial quantities, it is important that the Government of Ghana ensures that the discovery of oil and gas contributes significantly to the growth of the economy and helps accelerate development and industrialisation. The high interest in Ghana's oil and gas industry has brought to the fore certain critical issues including local content which require the enactment of specific legislation to reinforce the legal and regulatory framework for the sector.

As an example of the need for an increased contribution of the petroleum industry to the Ghanaian economy, the 2010 Population and Housing Census estimated the population of Ghana to be around 26,658,823 and with an unemployment rate of 5.3 percent. These figures have increased tremendously over the years with a significant increase in graduate unemployment from 2.7 percent in 2000 to 9.1 percent in 2010. These high unemployment rates have resulted in an increased demand for the creation of opportunities within the petroleum industry for the benefit of citizens of Ghana and Indigenous Ghanaian Companies.

Organs of state and legislative background

The Ministry of Energy and Petroleum ("Ministry") through the Minister of Energy and Petroleum ("Minister") is responsible for formulating, implementing, monitoring and evaluating energy and petroleum sector policies in Ghana.

The Petroleum Commission Act, 2011 (Act 821) ("2011 Act") was passed in 2011 to establish the Petroleum Commission ("Commission") a governmental body tasked with regulating and managing the exploitation of petroleum resources as well as providing a framework for collecting, allocating and managing petroleum revenue in a responsible, transparent and accountable manner. As the upstream petroleum regulator, the Commission is mandated to regulate, manage and coordinate all activities in the upstream petroleum industry for the overall benefit and welfare of Ghanaians and ensure a sustainable development of Ghana's oil and gas resources.

Local Content Policy

On 3rd March 2011, the Government of Ghana through the Ministry, after extensive stakeholder consultations, developed the Local Content and Local Participation in Petroleum Activities Policy ("Local Content Policy"). The Local Content Policy outlines strategies on how the Government intends to develop the oil and gas industry with optimal local content and local participation by enhancing national development, creating jobs and effectively managing the potential revenue from oil and gas production and processing, in addition to ensuring security for oil and gas installations in the industry as a whole.

The Local Content Policy is geared towards a progressive and comprehensive integration of Ghanaian citizens into all aspects of the oil and gas industry to ensure the benefits of the industry are maximised for Ghanaians through education, skills and expertise development, the transfer of technology know-how and active research and development activities.

Though these interventions were laudable, the opportunities created in the petroleum industry for Ghanaian citizens and Indigenous Ghanaian Companies were still at extremely low levels. This situation heightened the demand for the Government to enact legislation to compel contractors, subcontractors, licensees and other related...