TOGY talks to
Ghana steps upOctober 12, 2018
Kwabena Ankamah, solicitor at Ankamah Legal Consulting in Accra, talks to TOGY about local content requirements in Ghana in relation to downstream development strategies and the local investment climate in the industry. Ankamah Legal Consultancy provides legal and consulting services for clients in the energy sector and in other industries.
• On training: “Governmental policies and regulations should be geared towards mandating the foreign companies to train our local experts and manpower. The current situation of sending engineers and mechanics abroad to train is quite expensive.”
• On investment: “Foreign countries have invested here in many instances, and they’ve been successful. In this regard, Ghana is the best place to invest in oil and gas sector.”
• On licences: “The petroleum agreement itself is attractive enough and gives many incentives to companies who set up in Ghana. A company gets the chance to negotiate its fiscal terms, which gives investing companies more room to operate.”
• On the downstream sector: “In certain situations, it is better to build new infrastructure than improving existing ones. Recently, there have been attempts by private companies to build a refinery infrastructure close to Takoradi.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Kwabena Ankamah below.
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The Ministry of Energy is in the process of drafting local content requirements for downstream companies, some of whom say the draft is too rigid. How would you assess this draft of local content requirements?
Being part of the initial team who was tasked to look into the local content, I would say most of these provisions exist only on paper and we need to build capacity to fully take advantage of the provisions. With this in hindsight, I have started training some young lawyers in oil and gas to build capacity with regards to the provision of legal and consultancy services.
In my view, local content as it exists now is like working hard and having peanut rewards, we should be pushing for 10%-15% free-carried interest to our local companies who are much smaller than their foreign counterparts are. Free-carried interest has to be the best practice, i.e. when a foreign company decides to do business in our country, they will have to free carry one local company offering them a certain minimal percentage.
The current model should be more than requiring a joint venture with a local partner but should rather give the local people a voice in the joint venture. Most local companies don’t have any voice because they don’t have the capital or local resources to do anything, even though the services they render can be capitalised, it is still not enough as it is now.
How can the government promote that?
Governmental policies and regulations should be geared towards mandating the foreign companies to train our local experts and manpower. The current situation of sending engineers and mechanics abroad to train is quite expensive. The best practice is to train these people on the job and make training cheaper and get a lot more engineers and mechanics to acquire the skills to work.
For instance, when oil was discovered in Aberdeen, there were not many experts so Americans had to export experts to help in the operations and train engineers and mechanics. Today, Aberdeen can boast of the best engineers and mechanics in the oil and gas industry.
Should the government invest in making Ghana’s existing refinery more productive or look into building new refineries?
That is the best way to go because oil production has shifted to Takoradi. In certain situations, it is better to build new infrastructure than improving existing ones. Recently, there have been attempts by private companies to build a refinery infrastructure close to Takoradi. I was part of this transaction, thus I think it is a step in the right direction.
How transparent is the Ghanaian economy?
Our economy is transparent even though we can do better, Ghana has been enjoying a stable democratic governance, we have good judicial systems and we have signed on a number of international treaties and incorporated them into our local laws. International arbitration rules are applicable to most contracts in Ghana. Foreign countries have invested here in many instances, and they’ve been successful. In this regard, Ghana is the best place to invest in oil and gas sector.
How would you evaluate financial regulation in Ghana for oil and gas startups?
Unfortunately, our banking industry shies away from assisting local content companies. The oil and gas business requires huge capital and there is the need to be pre-financed. This is a big problem for our local content.
What do investors find most attractive to set up business here in Ghana?
The petroleum agreement itself is attractive enough and gives many incentives to companies who set up in Ghana. A company gets the chance to negotiate its fiscal terms, which gives investing companies more room to operate. We do not have a straitjacket or stand-up contract when it comes to oil fiscal terms. Ghana has one of the most flexible petroleum agreements in the world; all because they were drawn when Ghana had not discovered oil, hence they are less stringent.
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