As Ghana�s Petroleum Regulation on Local Content and Participation kicks in this month, foreign oil companies are understood to be eying the country�s oil sector, according to petroleum analysts based in the City of London, the UK�s financial capital.
They are expecting the regulations to come into force this month because when they were passed in November by parliament, it was stated that they would become operational three months after parliamentary approval.
The regulations are aimed at getting international oil companies operating in Ghana to have at least five per cent indigenous equity, and ensuring that the sector plays a major role in stimulating economic growth by using local expertise, goods and services provided by Ghanaian businesses that will eventually lead to job creation.
Ghanaian business organisations have welcomed the regulations. The Chairman of the Sekondi-Takoradi Chamber of Commerce and Industry, Mr.Ato Van-Ess, commended the government for passing the regulations.
The new President of the Association of Ghana Industries, Mr. James Asare-Adjei., said the regulations would guarantee some degree of equity for local business in the oil and gas sector.
�Energy Minister Kofi Buah was right when he told parliament that the regulations were good for Ghana,� noted one analyst in London.
�This is also really in line with the recommendations in the 2013 Africa Progress Report, which said African countries should use the global commodity boom to lift millions of Africans out of poverty.�
The report, presented by the Chairman of the African Progress Panel, Mr. Kofi Annan, set out an agenda for maximising Africa�s natural resource wealth and using it to improve well-being.
Specifically, the report called on foreign investors to play a critical role in facilitating change by partnering with governments to strengthen transparency, by supporting skills development, and by carefully assessing the social and environmental impacts of their operations,
The report acknowledges that many companies are providing leadership in theseareas.Sources familiar with the activities of oil companies registered on the London Stock Exchange say that these companies believe the regulations could be a game-changer for Ghana�s oil sector.
�It will mean that in partnering with Ghanaians and creating a major boost for the economy, their investments will be safe and they can focus on long-term programmes.�
They are equally assured by the fact that on the Revenue Watch Institute�s (RWI) 2013 Resource Governance Index (RG), which measures the quality of governance in the oil, gas and mining sector of 58 countries that the International Monetary Fund (IMF) defines as resource-rich, Ghana, at number 15, is the highest ranked African country.
Given that oil production began in 2011 the New York-based RWI said it was too soon to assess transparency in the oil sector.
However, Ghana scored a high 79 in the area that the oil companies are most interested: institutional and legal setting. In the case of safeguards and quality controls it was a high 73, while in the case of enabling environment it was 59, with reporting practices scoring 51.
�With oil revenues projected to overtake mining receipts in the near future, we believe that the investment climate in Ghana�s oil sector will get even better going by the country�s position on the RGI,� said one oil company source. .
The RGI is based on the premise that good governance of natural resources is necessary for the successful development of countries with abundant oil, gas and minerals. It provides a diagnostic tool to help identify good practices as well as governance shortcomings.
According to Professor KwakuAppiah-Adu, who was once Chairman of the Oil and Gas Technical Committee in the Office of the President, there has been heightened interest in oil exploration in Ghana�s offshore waters since oil was discovered in commercial quantities in 2007.
He noted in a new book on oil governance in Ghana: �As a result of the pioneering role Ghana plays in African politics, as well as social and economic emancipation, the events in Ghana have attracted attention from political, social and economic commentators.�
These are the signs that are apparently encouraging foreign oil companies to queue up to enter Ghana�s promising oil sector, notes one analyst in London.
�The smarter ones will be teaming up with the most capable local companies to make a real impact in the future development of the oil industry in Ghana,� the analyst adds.
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