Daniel Kwarkyi, the Managing Director of Danest Engineering, a Ghanaian welding company, told his peers at a recent workshop to address challenges in winning work from oil and gas companies. “Because of the numerous challenges that have been gripping my operations,” he said, “the progress of my business has slowed and the patronage of my business by corporations is low.” The challenges Kwarkya described were many. The industry’s extremely stringent welding and fabrication standards are difficult to meet. Opportunities for formal vocational training are limited; many welders only learn on the job.
Kwarkyi is only one of more than 20 Ghanaian business owners who have benefitted from a recent effort, funded by the USAID Mission in Ghana, to improve the local supply chain to Ghana’s rapidly growing oil and gas sector. This initiative is driven by the recent discovery of massive off-shore oil.
Ghana’s Oil and Gas Sector Drives Economic Growth.
In 2007, Kosmos Energy made Ghana’s first commercial oil discovery off the country’s western coast. The discovery, now known as the Jubilee Field, moved from initial discovery to production in just three and half years. Achieving the fastest time to market for deepwater floating production, storage, and offloading (FPSO) operations ever, the Jubliee Field is the largest oil deposit in West Africa uncovered within the past decade.
Kosmos joined Tullow Oil, Anadarko, Ghana National Petroleum Company and PetroSA to form the Jubilee Partners. Because of the rapid time to market, Ghana quickly became the darling of the oil and gas industry. The Jubilee field production is expected to plateau at 120,000 barrels per day (bpd). Another nearby discovery, the Tweneboa, Enyenra, and Ntomme (TEN) fields, are expected to begin producing oil in 2016, elevating Ghana’s expected production to 190,000 bpd.
Context is critical; compare Ghana’s offshore development timeline to the Norway’s North Sea discoveries. Exploration activities in the North Sea began in earnest in the early 1960s and first oil was produced in 1971. The Statfjord Field, the largest on the Norwegian Continental Shelf, discovered in 1974, averaged production of 140,000 bpd from 1980 to 2004.
Ghana’s rapid progress in becoming an oil producer has meant that its companies and workers have faced challenges in seizing business opportunities, due to lack of experience and expertise in the sector. Indeed, Norway struggled to overcome similar challenges over the course of the 1970s to eventually ensure the accrual of local industrial benefit from the North Sea discoveries. Of course, Norway is a sparsely populated country with a lengthy history of industrial activities such as shipbuilding. The contrast between Norway and Ghana on these fronts could hardly be sharper. Ensuring Ghanaian companies and workers are in a position to benefit from oil and gas activities will not happen overnight, but with a balance of policy and practice, the country can meet this challenge.
Businesses Struggle to Meet Growing Opportunity
Whereas Norway capitalized on its natural resource wealth, many West African oil and gas producers have not been so lucky. For decades, Ghana’s neighbors have struggled to turn oil and gas discoveried into financial and economic return for society. The Government of Ghana is determined to defy this trend, and in 2013 Ghana introduced a local content law to maximize the use of local labor and participation of Ghanaian businesses in the delivery of goods and services to the oil and gas industry. The Ministry of Trade and Industry is currently reviewing its 2011-2015 plan for industrial policy. Additionally, the Parliament is discussing a new Exploration and Production Law, which will help level the playing field between Ghanaian businesses and international contractors. These legislative and policy initiatives are positive first steps on the path to successfully empowering local businesses.
“Ghana’s aggressive approach to local content policy will go a long way towards ensuring that the value from these recent oil discoveries remains in Ghana,” said Harry Pastuszek, PYXERA Global’s Vice President for Enterprise and Community Development. “But policies, benchmarks, and minimum requirements in and of themselves won’t make Ghana the next Norway,” Pastuszek said.
The oil and gas industry’s stringent accounting protocols, rigorous health and safety demands, and other professional standards often prevent companies from winning work in oil and gas. The industry’s complex procurement and contracting processes are a frequent source of frustration in developed and emerging markets alike. Many Ghanaian businesses lack systems to effectively comply with health and safety requirements, manage finances, and ensure quality. Many Ghanaian entrepreneurs struggle to navigate the “maze” of the sector’s contracting arrangements and fail to compete due to their lack of qualified personnel, and insufficient information about procurement opportunities. With limited access to finance, and inadequate government support for enterprise, local businesses are struggling to seize the opportunity before them.
Unlocking Supply Chain Opportunities
Long-term institutional challenges, like poor transportation infrastructure, lack of vocational training, and unreliable electricity, constrain the country’s economic potential. Yet, Ghanaian business owners are enthusiastic about the opportunities that lie ahead, and steps can be taken to deliver immediate results despite these systemic constraints.
The Ghana Supply Chain Development (SCD) Program —a five-year USAID-funded initiative implemented by PYXERA Global in the Western region of Ghana—attempts to deliver immediate results. The SCD Program aims to increase the participation of Ghanaian small businesses in the value chain of the oil and gas sector by focusing on the following objectives:
The program seeks to increase the capacity of local business service providers (lawyers, accountants, management consultants) to address specific requirements of the oil and gas industry. Experts also provide training, networking opportunities, and other outreach to increase Ghanaian firms’ understanding of the oil and gas sector’s procurement requirements and standards. Targeted technical assistance helps businesses achieve international certifications in areas such as environmental management, health, safety, and quality.
In 2014, the Ghana SCD Program successfully organized and delivered a number of stakeholder engagement events and trainings. “Establishing trust and building relationships between local business and the oil companies has been an essential starting point for the SCD,” said Ken McGhee, the SCD’s Chief of Party. “Nothing happens in Takoradi without establishing warmth and trust,” said McGhee.
The Ghana SCD Program offers a wide array of technical trainings and workshops on subjects including welding standards, environment, health, and safety policies, quality management systems, procurement best practices, business ethics, and access to finance. For example, in December 2014, the SCD program organized advanced training sessions on Occupational, Health and Safety Management for local SMEs. This Certificate training program meets internationally recognized standards and equips participants with the knowledge required to implement policies, procedures, and controls to achieve the best possible working conditions and align with international best practices in the oil and gas industry.
Since the start of the program, businesses that have benefited from SCD Program trainings and networking events have won over 20 contracts worth more than $10 million with oil and gas operators and service companies including Tullow Oil, Baker Hughes, Schlumberger, MODEC, Technip, and Haliburton.
After participating in a suite of workshops offered by the SCD Program, Danest Engineering won a service contract with one of the Jubilee Partners’ leading firms, and he is only one of a growing number of companies reaping this benefit. Nathaniel Kwansa, the General Manager of Kwansa Auto Ltd., has benefited from the SCD Program’s Environmental, Health, and Safety trainings. “If there is one organization that has built the capacity of our staff this year, it’s PYXERA Global through the USAID Supply Chain Development Program.” He is optimistic about what the future has in store. “We are looking ahead into the future with so much positive expectations.”
Kuralai Kunz is the Director of Enterprise and Community Development. She manages PYXERA Global programs in Ghana -USAID-funded Supply Chain Development Program and Jubilee Livelihoods Enhancement and Enterprise Development (LEED) Program – and supplier development programs for international oil and gas clients in Equatorial Guinea. Prior to joining PYXERA Global, Kuralai worked for Counterpart International as the Program Officer on a USAID-funded civil society program in Kazakhstan and as a Finance and Administration Officer for the embassy of Spain, where she managed all operational aspects of the Embassy and supported successful market entries for Spanish companies. Kuralai holds an MBA from the University of Massachusetts and is fluent in Kazakh, Spanish, and Russian.