Grabbing Opportunities In The Oil Sector

DIVIDED WE LOSE

- Private Enterprise Foundation Raises Alarm

By Liberty Amewode, News Editor

Ghanaian Entrepreneurs may not be able to take advantage of the emerging oil
industry if current trends observed by the Private Enterprise Foundation (PEF)
continue.
The petroleum industry requires huge amounts of money and businesses need to
combine forces to be able to raise such monies to put in their bids to get some
of the contracts to operate in the sector.
But observations by the Foundation reveal a worrying trend of the Ghanaian
businessman’s penchant for operating alone and the avoidance of mergers by them.
This, according to Dr. Osei Boeh-Ocansey, Director-General of PEF, is likely due
to mistrust among entrepreneurs.
At a workshop on “Opportunities in Ghana’s emerging Oil and Gas Industry for
local participation” at the Coconut Grove Regency Hotel, in Accra, last week, he
noted that the proposed 90 per cent local content in the industry by 2020 was
achievable, only when the country’s businessmen join forces to invest in the
industry.
The workshop brought together some businessmen, civil society and journalists to
deliberate on issues relating to the emerging oil and gas industry and promote
understanding of the Petroleum Industry Value Chain.
It was also to clarify the Policy on Local Content and Participation and to
assist members of PEF to position themselves to derive maximum benefits from the
local content provision in the Oil and Gas Industry.
Alluding to the mining sector, where much has not been seen in terms of benefits
to the local people, Dr Boeh-Ocansey cautioned that the peculiarity of the oil
and gas sector can bring a lot of strife as in some other countries, if the
situation was not managed carefully.
He said the inability of Ghanaian entrepreneurs to raise funds among themselves
to invest in the industry would result in foreigners taking over aspects of what
Ghanaians should be enjoying.
Ing. Dr. Robert Adjaye of the Ghana Institute of Engineers (GhIE) and Petroleum
Skills Development Institute (PSDI), in a presentation, noted that the high
expectations of citizenry needed attention and careful management from the
authorities, saying this was important in determining whether the country
regards the oil find as a blessing or a curse.
He called for the use of proceeds from the industry to develop infrastructure,
stimulate long-term economic activity and enhance the standard of living of
Ghanaians.
He bemoaned the lack of strict implementation of laws in the country and
cautioned against going the same way with the Local Content Bill, when it is
passed into law.
Enumerating some challenges facing local participation, Dr. Adjaye, drawing from
his experience as a former member of the Tender Review Board, mentioned poor
marketing by suppliers and shallow tenders put in by local companies.
According to him, tenders from foreign companies tend to be better prepared than
that of their local counterparts.
He said for local participation to be meaningful, local companies should put
their house in order, to take advantage of the downstream component of the oil
sector, which involves further refining and retailing.
He suggested the institution of a Local Content Fund, to which every upstream
(exploration and production) operator or contractor contributes a percentage of
contract value for the implementation of local content. “The law should make
provision for this”, he said.



Lessons From Norway’s Oil Fund Investment Losses
NII MOI CALLS FOR LOCAL CAPACITY
…To safeguard oil wealth
By J. Ato Kobbie, Managing Editor
A leading Ghanaian Economist, Dr. Nii Moi Thompson, has called for an
accelerated skills development in anticipation of the new challenges that the
country’s emerging oil producer status presents.
Speaking to The Business Analyst in the wake of recent losses suffered by Norway
in its oil fund investments, Dr. Thompson said it was important that training
and education for those in responsible positions and those needed, as far as the
country’s emerging oil economy status was concerned, to be accelerated to enable
them measure up to the tasks required of them.
In this direction, he said there was the need to encourage young men and women
in tertiary institutions, to enter the various fields where their services would
be most needed, in order for them to attain the necessary expertise and
experience to meet challenges.
Dr. Thompson said this was necessary to overcome the challenges that come up,
such as happened to Norway, an oil economy that lost hundreds of millions of
dollars because it relied on the expertise of ‘international experts’ to analyse
and advise on its oil wealth investment.
He said it was important that the country develops the local capacity to
determine not only where to invest the country’s oil wealth, but also monitor
the performance of such investments and advise appropriately.
He said Government and sector participants must collaborate to have such
training countrywide, for instance, in a northern sector-southern sector
approach to create an even field for all Ghanaians.
Norway, touted as one of the world’s best examples of best practice in oil
revenue management, for which reason many watchers of Ghana’s oil sector have
advocated for Ghana to learn from that country, is fighting to recover losses to
its oil fund.
The Norwegian Central Bank, Norges Bank, has dragged Citigroup Incorporated of
the United States of America (U.S.A.) to court, accusing it of providing “untrue
statements and non-disclosure of material information to investors,” which led
to losses of about 835 million dollars to the Norwegian sovereign wealth fund.
The sovereign fund is the fund into which Norway invests its oil wealth for
future generations and its $459 billion Government Pension Fund Global, the
world’s second-largest, after Abu Dhabi’s, is managed by the Central Bank.

Ghana’s version of the Norwegian ‘Oil Fund’ for future generations has been
christened ‘The Heritage Fund,’ in the Petroleum Revenue Management Bill, which
is before Parliament, and already, some analysts have been advocating for
investing that fund on the international bonds market.

It is not clear however, how a clearer knowledge of the depth of the impact of
the financial crisis that hit the international bond market, would influence the
debate on where and how best to invest Ghana’s ‘oil fund’ when it takes off.
First significant commercial oil production from Ghana’s Jubilee field is
scheduled to kick-start in November-December this year.

The Norwegian suit names 20 of Citigroup’s current and former executives and
directors, including: Chairman, Richard Parsons, current chief executive Vikram
Pandit, and his predecessor, Charles ‘Chuck’ Prince.
“Norges Bank lost in excess of 735 million dollars on its investments in
Citigroup common shares and in excess of 100 million dollars on its investments
in bonds and preferred shares,” stated a September 17 lawsuit, filed in a
Manhattan federal court.
The suit continued that due to the defendants’ repeated material untrue
statements and non-disclosure of material information to investors, plaintiff
purchased Citi securities at inflated prices (between January 2007 and January
2009).
The Norwegian Central bank argues further that “When the market slowly learned
the truth of Citi’s financial condition, Citi came close to insolvency, and
plaintiff lost a substantial amount of its investment.”

“Citi’s near-demise” according to the Norwegians, “had its genesis in the
company’s increasing willingness to take on risk for the sake of profit, without
regard for -- and without disclosing -- the magnitude of the downside exposure
it faced if those risks materialized.”
The fund lost 23% of its value in 2008 when global markets took a dip, posting a
record 633 billion kroner ($107.6 billion) loss in 2008 thus wiping out gains
made since the fund started investing the country’s oil revenue in 1996.

The oil fund had a 26 percent return last year.
“We believe the suit has no merit and will defend ourselves vigorously,” was the
response from Danielle Romero-Apsilos, a Citigroup spokeswoman in a statement.

‘The case (title) is Norges Bank v. Citigroup, 10-cv-07202, U.S. District Court
for the Southern District of New York (Manhattan)’.