Petroleum Commission Promote Joint-Ventures
By Gilbert Boyefio
The Petroleum Commission of Ghana is currently advocating for more Joint Venture (JV) partnerships between Ghanaian companies and their foreign counterparts as a tool for local participation and capacity development in the oil and gas industry.
A JV is a contractual agreement or rather a business relationship between, or among two or more parties for the purpose of executing a particular business undertaking. The parties to the JV are jointly responsible for cost; and profit and loses are apportioned according to dividend policies.
According to Kwaku Boateng, Director of Special Services, formation of JVs is a tool which is intended to ensure maximum Ghanaian interest through equity participation (ownership); promote a mutually beneficial partnership that leads to growth, capacity building through know-how and technology transfers; and prepare indigenous Ghanaian companies to eventually become competitive locally and internationally.
Pointing out the draft guidelines on the formation of JVs, he indicated that a non-indigenous Ghanaian company cannot conduct business in the upstream sector without incorporating a joint venture company with an indigenous Ghanaian company. The joint venture companies shall incorporate a separate legal entity and transact business through that entity for the purpose of undertaking a petroleum activity.
He noted that the transfer of shares to an individual (Ghanaian) shall not be recognized as a joint venture regardless of the shareholding structure.
Mr. Boateng emphasized that the formation of the joint venture shall be in accordance with both companies’ line of businesses.
The local JV partner should provide fair considerations in terms of its contributions to the JV; all petroleum sector Contractors, subcontractors, licensees or other allied entities must give full consideration to existing laws and regulations at the point of incorporating a joint venture; the Commission requires that, the indigenous Ghanaian company in the joint venture must be part of the management and operation of the business.
The Joint Venture Agreement must clearly state the roles and responsibilities of all the parties in the joint venture.Joint Venture Companies shall provide a detailed plan for the transfer of technology and know-how to the indigenous Ghanaian entity.
Parties to the joint venture must disclose all forms of ‘agreements’ and ‘side arrangements’ to the Commission at the point of registration to undertake any petroleum activity.
The Joint Venture Agreement, Technology Transfer and Skill Transfer Plan, Shareholder/Board Resolution and all other documents covering the Joint Venture should be submitted to the Commission for review and approval.
According to him, benefits from the JV include in-country wealth sharing; employment of nationals in various capacities such as top management positions, technical, and non technical. JV Companies also utilize Ghanaian goods and services.
It also allows for the piggybacking technologically advanced foreign companies – in majority of the JVs the local partners have unfettered access to facilities of the foreign partners at various locations all over the world.
“Leapfrogging the arduous processes of development and proof of concept – we do not encourage laziness or sloppiness but we certainly don’t want Ghanaian companies to reinvent the wheel.
Again, local companies through JV will imbibe culture and business processes of their foreign partners,” he added.
Backing from the Local Content and Local Participation Law
Regulation 4(2) stipulates that there shall be at least a five percent equity participation of an indigenous Ghanaian company other than Corporation to be qualified to enter into a petroleum agreement or a petroleum licence
Regulation 4 (6) also provides that a non-indigenous Ghanaian company which intends to provide goods or services to a contractor, subcontractor, licensee, the corporation or other allied entity within the country shall incorporate a joint venture company with an indigenous Ghanaian company and afford that indigenous Ghanaian company a equity participation of at least ten percent.
Regulations 4 (7) indicates that a contractor, subcontractor, licensee or allied entities before the commencement of petroleum activities submit a plan to the Commission specifying: the role and responsibilities of the indigenous Ghanaian company; the equity participation of the Ghanaian company; and the strategy for technology transfer and know-how to the Ghanaian company.
Finally regulations 12 (5) demands that where a non-indigenous Ghanaian company is required to provide goods and services to a contractor, sub-contractor, licensee, or other allied entity, that non-indigenous Ghanaian company shall: (a) incorporate a company in Ghana as provided in regulation 4(5) and operate it from Ghana; and (b) provide the goods and services in association with an indigenous Ghanaian company, where practicable.