Local firms lack capacity for oil deals - Amewu

As the country’s oil exploration activities move to far deeper and challenging waters, local participation in the oil and gas sector is increasingly becoming challenging due to the lack of capacity in local firms, Energy Minister Peter Amewu has said.

He said in spite of the success chalked up in the push to encourage more local participation in the oil and gas sector, he foresees a time in the near-future when implementation of local content policies could become ‘very challenging’, as local firms struggle to make an impact because of their limited capacity.

“It is imperative, going forward, that we highlight the implementation challenges we face as a country. It is also important that we begin to take notice that the era of cheap oil is gone, and as International Oil Companies begin to migrate into challenging waters implementation challenges of local content will be visible for everybody to see,” Mr. Amewu said.

To make local firms competitive, he said: “There is a need for improved technology, there is a need to improve skills, and all the items and facilities that are necessary to lift the oil. On this basis, challenges are therefore open and become visible in our attempt to implement local content policies”.

Mr. Amewu, who spoke at opening of a two-day Annual Africa Oil Governance Summit in Accra – organised by African Centre for Energy Policy (ACEP), indicated that in spite of the increasing local participation in the sector, the local companies are faced with numerous challenges.

Key among them, he noted, are lack of finance, human and capital development, and technology among others. These challenges, he added, go a long way to adversely affect competitiveness in the industry.

He added: “These barriers to local participation, has resulted in overconcentration of local companies in the ‘low-hanging fruits’ and less participation in high-value capital and technological intensive services.

“Another challenge is the inability of indigenous companies to meet international standards, coupled with inadequate certifications.”

According to him, the aforementioned challenges are partly caused by factors such as higher cost of certifying employees and companies, and the small and poorly structured nature of most companies – hence their failing to meet competency requirements.

“The limited capacity of local companies to deliver services required, due to the absence of infrastructure to support development of the petroleum industry, limits the volume of work to be carried out in-country,” Mr. Amewu indicated.

He lamented that because the IOCs will always prefer to work with experienced service providers, information on tendering processes is often given to favour international service providers.

“It is therefore important to be conversant with the role of information asymmetry in the tendering process. Indigenous companies always receive information on tendering very late as against early notification for international service providers. This state of affairs clearly does not create a level playing field for indigenous companies,” he said.

On the successes chalked up in local content implementation so far, the Energy Minister revealed that as of September 2018 there were over 600 indigenous registered companies providing goods and services to the industry.

He said the Sankofa Gye Nyame Field, for instance, has so far awarded over 320 contracts worth US$1.8billion to indigenous Ghanaian companies, while the ENI project has awarded about US$6.2billion worth of deals – of which US$1.7billion representing 28 percent were awarded to local firms.