Ghana's
success in hydrocarbon exploration which culminated in production from the
Jubilee Field in 2010 threw up new opportunities as well as challenges for the
promising West African country. One of such challenges is entrenching local
content, which has become a major feature of Africa's petroleum producing
States, into the emerging petroleum sector. The enactment of the Petroleum
Commission Act (Act 821) in 2011 and the Petroleum (Local Content and Local
Participation) Regulations in 2013 were significant legislative steps to make
local content an integral aspect of the Ghanaian petroleum sector.
The
Petroleum Commission Act created the Petroleum Commission for the purpose of
overseeing activities in the country's petroleum industry. The functions of the
Commission extends to promoting local content and local participation in
petroleum activities as prescribed in the Petroleum Exploration and Production
Act 1984 (P.N.D.C.L. 84) and other applicable laws and regulations to
strengthen national development. In exercise of powers conferred on the
Minister by section 22 of Act 821, the Local Content and Local Participation
Regulations were made. The Regulations established the Local Content Committee
as the body to see to the implementation of the Regulations, however, the
Commission still retained its duty of promoting local content and local
participation in petroleum activities and shares the responsibility of
implementing the provisions of the Regulations with the Committee.
For the avoidance of doubt, the duties of the Local Content
Committee as set out in Regulation 5(3) are as follows:
i.
Overseeing,
coordinating and managing the development of local content;
ii.
Preparing
guidelines, to include targets and formats for local content plans and
reporting;
iii.
Making
appropriate recommendations to the Commission for smooth implementation of the
Regulations;
iv.
Setting
minimum standard requirements for local content in local content plans where
applicable;
v.
Undertaking
public education;
vi.
Undertaking
local content monitoring and audit; and
Performing other functions conferred on the Committee by the Commission
in accordance with the provisions of applicable laws. The Committee is further
required to submit quarterly reports of its activities to the Commission.
It is submitted that the provisions of the Regulations and the position
of the Commission operate to cage the Local Content Committee which ought to be
a separate and independent regulator, and we are tempted to ask if the duty of
the Local Content Committee is to oversee the implementation of the Regulations
or to assist the Commission in the implementation.
The Petroleum Commission Act which
establishes the Commission fixes the functions of the Commission to include promoting
local content and local participation in petroleum activities as prescribed in P.N.D.C.L.
84 and other applicable laws and regulations to strengthen national
development. [See section 3 (f) of the
Act.] The Commission’s governing
body (the Board) is empowered to establish Committees consisting of members of
the Board or of members and non-members of the Board to perform a function, [See
section 8(1) of the Act] and in particular,
shall establish a Local Content Committee to deal with local content and local
participation program [See section 8(2) of the Act]. Thus, it can be safely concluded that while the
Commission has a general role towards the entire petroleum industry, the part
of the industry relating to local content and local participation is to be
overseen by the Local Content Committee. This position is strengthened by the
provisions of Regulation 5(1) where it was stated that the Local Content
Committee shall oversee the implementation of the Regulations.
However, a closer reading of the Regulations shows that rather than
oversee the implementation of the Regulations, the Local Content Committee
would only assist the Commission in the implementation of the Regulations.
Evidence of this abounds in all the provisions of the Regulations, but a single
example will suffice. Regulations 7(1) imposes on a contractor, subcontractor,
licensee or other allied entity the duty of submitting a local content plan.
Implementation of this Regulation would envisage the power to receive and
approve the local content plan and issue penalties where there is a
contravention of the Regulation. These powers are all vested in the Commission
[Regulations 7, 8(5) and (7) and 46(7)]. The only duty of the Committee in this process is that of making
recommendations on the local content plan to the Commission, which the
Commission is not bound to act upon. In these circumstances, it is wondered how
the Committee would satisfactorily carry out its duty of overseeing the
implementation of the Regulations.
It
is submitted that for the Local Content Committee to effectively and
efficiently carry out its duties and fulfil the aspirations of the local
content Regulations, then it has to be freed from the Commission’s cage to
become a free and independent regulator.
Harrison Declan, MCIArb (UK)
Author, Local Content in Africa’s Petroleum States: Law and Policy
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