Time to crack the whip to discourage fronting in oil sector

BY: Graphic Business
Time to crack the whip to discourage fronting in oil sector
Time to crack the whip to discourage fronting in oil sector

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Not many nations in the world are blessed with natural resources. It is ,therefore, imperative that the lucky ones such as Ghana will make full use of that blessing to transform the economic fortunes of the people.

Aside the government, it is also imperative for the people to ensure that they leverage the resources, using the appropriate laws to realise their aspirations to the fullest.

Ghana’s extractive sector dates far back with gold mining taking centre stage as a major economic activity and foreign exchange earner aside cocoa. But just when the call for the country to diversify to reduce its dependence on gold because of the price volatilities on the international market, the country was blessed with oil in commercial quantities in 2007.

When production finally began in 2010, expectations were rife and citizens had high hopes that the ‘black gold’ will be a major resource to turn around their economic and social fortunes.

Based on calls for laws to enable Ghanaians benefit directly from the resource, the government under the Kufuor regime then decided to promulgate laws that will ensure that revenues from oil production were utilised in an efficient, transparent and accountable manner and also ensure that locals participated in every activity around the oil resource.


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The Petroleum (Local Content and Local Participation) Regulations 2013, LI 2204 was ,therefore, introduced to ensure that a percentage of locally produced materials, personnel, financing, goods and services are used in the oil industry and this can also be measured in monetary terms.

With respect to participating in the sector, the regulations made a five per cent Ghanaian equity participation provision for local companies to have a level of ownership in the oil and gas industry.

Constrained by the capacity and lack of financial muscles to compete in the sector, some of the local companies rather prefer to front for International Oil Companies (IOCs). Unfortunately, in the end, they take pittance, while the companies they front for take the lion share.

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This practice has been ongoing for many years, forcing the Petroleum Commission and the sector ministry to raise red flags in their quest to end the practice.

Consistently, the GRAPHIC BUSINESS has noted with concern the rhetoric of governments constantly warning local companies to desist from the illegal practice and rather establish themselves to take full advantage of the opportunity. Unfortunately, these warnings have fallen on deaf ears and the crime is still persisting.

Much as we commend the government for the constant warnings, the paper believes it is time to crack the whip without fear or favour to get the people to do the right thing.

The sanctions should not only be meted out to local companies involved in the act but also foreign companies that are involved should also not be spared because the practice is a clear violation of the laws of the country.

Lastly, we expect the government to up its game in helping to build local capacity to enable indigenous companies to participate in the sector as per the dictates of the law.

We also urge local companies involved in this illegal practice to desist from it and stay focused on meeting the demands expected on them and take full advantage of the country’s oil resource.