Fronting In Oil Industry Now A Criminal Offence – Amin Adam

09-11-2018

Fronting In Oil Industry Now A Criminal Offence – Amin Adam

The Deputy Minister of Energy in charge of Petroleum, Dr Mohammed Amin Adam has cautioned international oil and gas companies and their Ghanaian partners to desist from fronting since the act is now criminal and punishable by law. He said in developing the country’s oil and gas space to ensure that larger members of the citizenry benefited, such corrupt practices that favour only a few would not be allowed.

Oil rent collectors

H said Ghana would not be reduced to a rent collector but rather a country serious about local content and will prioritize indigenous participation in the oil and gas space.

Speaking to a large gathering of oil and gas companies and industry watchers in Cape Town, South Africa where companies have expressed their eagerness to invest in the country’s oil and gas industry, Dr Amin said local content is an important part of the industry in Ghana and that countries that wish to add value to their economy and leverage on the resource, would always pay serious attention to local content.

He said it is important to also note that such a focus by a country like Ghana to ensure indigenous participation will stem corruption, which on the other hand ensures that partnerships are formed not on the basis of merit or the capacity of the local partner but for selfish interests.

Rent-seeking behavior

Dr Amin Adam said if managers and regulators of the industry in Ghana fail to properly control the space, it could lead to rent-seeking behaviours, where individuals or entities use companies’ names to obtain economic gain at the expense of the larger society.

“I must say that local content will work in nations where mangers or the bigger stakeholders deliberately work to develop the capacity of its citizenry and indigenous firms in readiness for participation in the upstream sector and all associated values along the chain,” he said.

He urged oil companies that think that local content provisions add to their operational cost to look at it as part of their strategic move to help add value to the host country’s skills and capacity development and not as an ordinary legal requirement.

Clear definition

He said it is important to clearly spell out what the provision of local content means in order to check such a mentality, or these oil nations would be reduced to group rent collectors from their oil and gas resources.

In accordance with Regulation 4(6) of L.I. 2204, the minster explained that the law is clear that “A non-¬indigenous Ghanaian company which intends to provide goods and services to contractor, a subcontractor, licensee, the corporation or other allied entities within the country shall incorporate a joint venture company with an indigenous Ghanaian company and afford that indigenous Ghanaian company an equity participation of at least 10 per cent.”

Such a move, he said, would ensure that there is a clear focus on what capacity the country requires to build to be able to participate, and whether such required capacity can be sourced locally.

More than equity participation

“We must move away from a mere local equity participation and prioritize local content that seeks to ensure value addition, therefore, the issues again go back to governments’ ability to put in place minimum infrastructure that would allow us to add value through local content”, he said.

Dr Amin Adam said it would be good for oil companies to help develop local content and increase in-country spending, transfer of technology and help build the needed skills required to support their operation.

“When you support in the development of these capacities and the Ghanaian companies or companies in any other country you operate begin to play lead role then you – the IOCs can say you have contributed to a meaningful local content of a country,” he said.

He said the regulator, Petroleum Commission, is poised to ensure that issues of fronting and other unacceptable acts are investigated and those culpable are subjected to the full rigours of the laws of the land.

Source: https://www.ghanaweb.com/GhanaHomePage/business/Fronting-in-oil-industry-now-a-criminal-offence-Amin-Adam-698937

 

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