Keywords: local content, oil and gas, offshore petroleum, local content regulations in extractive industry, Ghana’s local content regulation, L.I. 2204, and African petroleum sector.
Abstract
Seven years after the inception of Ghana’s upstream oil and gas industry, a gap is evident between the requirements of Ghana’s Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) and professional practice. This paper examines International Oil Companies (IOC) in Ghana’s upstream sector commitment to increasing their prevailing local content. Survey data were collected from 97 management, technical, and other staff in 2 IOCs whose oil and gas development plans have been approved by the Petroleum Commission of Ghana. One-way ANOVA was performed with staff category (management, technical, and other) as the independent variable and commitment to increasing local content as the dependent variable. The results indicated that IOCs operating in the upstream sector of Ghana’s oil and gas industry are committed to increasing their prevailing local content. The prospective implications of this study for bringing about positive social change include the possible organization of seminars by OICs aimed at informing indigenous Ghanaians about the various skills required to take up jobs in Ghana’s upstream petroleum industry.
Introduction
In 2007, the discovery of substantial deposits of oil and gas at the Jubilee field led to oil production that reached a significant scale in November 2010 (GNPC, 2014). The successful launching of oil extraction in the Jubilee field, which produces an average of 110,000 bopd, attracted other International Oil Companies (IOCs) to Ghana, resulting in a vibrant upstream oil and gas industry. Amin (2011) observed that the inception of Ghana’s upstream oil and gas industry in late 2010 raised the expectation of job creation within the petroleum industry to reduce the level of unemployment among indigenous Ghanaians. Subsequently, on July 5, 2013, the Government of Ghana (GoG) enacted into law Ghana’s Petroleum (Local Content and Local Participation) Regulations, 2013, also known as L.I. 2204. The percentages of locally produced materials, personnel, financing, and goods and services rendered within Ghana’s upstream petroleum industry value chain are regulated under L.I. 2204.
Within Ghana, the indigenous population has questioned the pragmatism of L.I. 2204. Plänitz and Kuzu (2014) reported that 67.1% of Ghanaian citizens who responded to a nationwide survey about the significance of oil in the country believed that politicians would not help to improve their lives. Despite the existence of a local content and local participation regulation in Ghana, there are growing concerns about the lack of available jobs for indigenous people in the country’s upstream oil and gas fields. Though IOCs require time to enable them to keep abreast of the Ghana’s Petroleum Regulation, L.I. 2204, there is a need to ensure strict compliance with L.I. 2204 (Petroleum Commission of Ghana, 2015), for which the tasks of developing the technical capacities of indigenes to enable them to occupy technology-based positions, as well as formulating succession plans to replace expatriates with locals, are paramount.
The prevailing local content regulations vary in their scope and targets for different countries whose mineral resources are being exploited (Esteves et al., 2013). Thus, Ghana’s Petroleum Local Content and Local Participatory Regulation, 2013 differs from the Nigerian Oil and Gas Industry Content Development Act, 2010. Moreover, whereas the local content bills of Ghana and Nigeria set targets for minimum employment levels of indigenes, countries like Saudi Arabia and Oman prefer to give foreign petroleum companies the right to employ foreigners to make their operations efficient. On the other hand, the Ugandan Petroleum Exploration, Development, and Production Bill, 2012 stipulates that within one year of granting a petroleum license to a licensee, a detailed program for recruiting and training Ugandans should be annually submitted for approval (Tordo et al., 2013). As indicated in Table 1, there is a correlation between levels of local content in Ghana and the maturity of its petroleum exploration and production (E&P) sector. The human resource local content requirement in the petroleum sector is thus specific to the nation whose oil and gas resources are being exploited.
Table 1. Ghana’s Human Resource Local Content Requirement Based on Head Counts
According to Tordo et al. (2013), the maturity of E&P within a country’s petroleum sector is linked to the use of quotas and targets for the recruitment, training, and career advancement of indigenes within the human resource component of Local Content Policies (LCPs). Contrasting with such countries are frontier petroleum E&P markets such as Uganda, Mozambique, and Liberia that are yet to establish quantitative local content targets for their oil and gas sectors (Tordo et al., 2013). To ensure greater participation of the indigenous people of petroleum-rich countries in this sector, it would be advantageous to set quantitative local content targets for recruitment and training, with compliance by foreign petroleum companies being mandatory.
Note: Local content levels are to be attained from the date of effectiveness of a license or petroleum agreement. From Petroleum Commission (2014).
Literature Review
Over the past 9 years, African governments have enacted laws aimed at improving the livelihoods of indigenous people by streamlining the employment of foreign nationals within extractive industries, thereby mitigating agitations around local unemployment. The pragmatism of these local content regulations governing the employment of foreigners within extractive industries is typically questionable. Egwaikhide and Omojolaibi (2014) claimed that the steady growth in extractive industries recorded for African countries has not provided the promised jobs, leading to local agitations. Thus, a survey conducted to investigate the prevailing human resource local content in Ghana’s upstream petroleum industry could help to address the gap between the requirements of Ghana’s L.I. 2204 regulation and professional practice.
Theoretical framework
Lewin’s (1947) change theory formed the theoretical framework of this study. Lewin outlined three steps entailed in the process of change. The first is to unfreeze the status quo. The second is to reduce the restrictive forces that unfavorably affect movement, directing it away from the prevailing equilibrium. The third step is to accomplish refreezing by stabilizing the new equilibrium brought about by the change as a result of harmonizing both the driving and restraining forces. Jensen and Tarr (2008) noted that during oil and gas field concession negotiations, the local content and local participatory aspect constituted an integral part of the negotiations. Though L.I. 2204 was enacted by the government to address the local participatory aspect of Ghana’s oil production, the lack of jobs in the oil fields has caused frustration among indigenous Ghanaians.
In support of Lewin’s (1947) theory of change, Stone (2015) advocated Kaizen events, which are an effective approach used by leaders to enhance organizational systems through the application of action learning principles. Stone described the methodical process associated with this approach, which entails identifying waste, implementing solutions, measuring results, and standardizing work practices. Kaizen events entail a holistic approach for improving organizational performance through the elimination of waste within a system and the subsequent measurement of the prevailing key performance index (KPI) relating to the previous one prior to standardizing work practices. IOCs could organize training programs to enable indigenous Ghanaians to acquire the specialized skills required to work in the offshore oil production industry.
Overview of Ghana’s Upstream Oil and Gas Industry
According to the Ghana National Petroleum Corporation (GNPC), there are four oil and gas sedimentary basins in Ghana. These basins are the Saltpond Basin, the inland Voltaian Basin, the Accra-Keta Basin, and the Tano Basin, which includes the Cape Three Points Sub-basin (GNPC, 2014). These four basins are located both offshore and inland. The offshore basins cover approximately 60,000 square kilometers, while the Voltaian Basin, which is the only inland basin, occupies 103,600 square kilometers, constituting the biggest oil and gas sedimentary basin in Ghana (GNPC, 2014).
Foreign petroleum companies operating within these offshore and onshore sedimentary basins have been allocated quotas to explore, develop, and produce oil and gas. These sedimentary basins have been subdivided into blocks that have been allocated to IOCs for producing oil and gas (GNPC, 2014).
Comparative Review of the Regulation of Human Resources by Petroleum Local Content Policies in Developing Countries
The African oil and gas industry is currently dominated by IOCs that end up employing a substantial number of foreigners and strengthening the profitability of operations within their host countries. Heum, Kasande, Ekern, and Nyombi (2011) found that these IOCs ultimately improved the livelihoods of foreign nationals to the detriment of indigenous people. Though IOCs undertake corporate social responsibility projects within deprived communities, it is becoming increasingly evident that prioritized implementation of LCPs leads to significant improvements in local livelihoods. A survey administered among local content professionals revealed that the majority of the participants (48%) felt that LCPs were most effective in Norway, with 30%, 14%, and 8% of the participants considering these policies to be effective in Brazil, Nigeria, and Ghana, respectively (Oil and Gas IQ, 2015). The survey results indicated the need for improvement of Ghana’s LCPs.
Hackenbruch and Davis Pluess (2011) found that there were fewer reported cases entailing nontechnical issues related to oil and gas production in countries where IOCs assisted indigenous people to develop their talents and acquire employable skills. For IOCs operating in Africa to be sustainable, there is a need for the leaders of these companies to take LCPs seriously. In developing countries where IOCs have supported full integration of locals into the petroleum sector, indigenes have been equipped with vocational training and jobs that foster self-generating revenues, resulting in economic improvement (Oil and Gas IQ, 2015). A typical example of such initiatives is a welder training facility that has been established within the Regional Maritime University, Ghana, by MODEC, a multinational oil and gas service provider for Tullow Oil PLC in Ghana. This facility provides training for indigenous Ghanaians, as well as other West Africans, in welding and fabrication to enable them to acquire jobs in oil and gas fields.
Capacity Building of Indigenous Ghanaians for the Oil and Gas Industry
According to the Ghana Oil Watch Strategy Review (2011), the upstream oil and gas industry is technical rather than labor intensive in nature. Its employees are specialists engaged in oil field exploration, development, and production who are proficient in the use of sophisticated and expensive technology. The Government of Ghana has introduced capacity-building initiatives to equip indigenes with the skills required to meet the challenges entailed in the upstream petroleum sector. Tordo et al. (2011) argued that for indigenous companies to grow, governments need to increase the local skills base and develop capital markets and business know-how.
According to Hackenbruch and Davis Pleuss (2011), for IOCs to be competitive and to maintain a thriving business, there is a need to develop local talent, build a base of competitive local suppliers, and deliver lasting socioeconomic benefits in the areas where they operate. IOCs contribute significantly to a host country’s economy by developing and creating value added services that equip indigenes with skills that make them employable and able to meet international standards. According to Heum et al. (2011), investments in capacity building have yielded significant results, bringing about industrial growth that profits both oil and gas companies as well as local communities. Measures being put in place by IOCs in Ghana include provisions for imparting technical skills to indigenes to enable them to acquire jobs within the downstream petroleum sector.
Research Methodology
Research Design and Approach
A quantitative research approach was adopted because this methodology entails statistical analyses aimed at determining whether significant differences exist between groups in relation to various indicators (Carpenter et al., 2006; Rutz et al., 2003; Webster & Haberstroh, 2002). A survey was used as a data collection tool because of the flexibility that it offers regarding the mode of data collection that can include structured recorded interviews, self-administered questionnaires, and interviews Because of the virtual nature of the offshore industry, a web-based survey was used to collate psychometric data on both the independent and dependent variables.
Sample selection
In this study, stratified sampling, which entails first dividing the elements of a population into relevant subgroups or strata and subsequently drawing a sample from within each subgroup (Fowler, 2013), formed the basis of the sampling strategy. This sampling method was selected, because human resources within Ghana’s upstream petroleum sector are categorized into management, technical, and other staff. This categorization is also found in Ghana’s local content and local participatory regulation, L.I. 2204. For the survey of the selected OICs, human resources were divided into the above three strata, comprising six subgroups in all. Once all the human resource categories had been grouped into the required strata, simple random sampling was performed to select the participants. To determine the required sample size for this study, G*Power analysis was conducted using G*Power version 3.1. 9.2. As indicated in Figures 1 and 2, the required sample size of 159 was obtained using three predictors, a medium effect size of 0.25, a power of 0.8, and three groups. A sample comprising 159 participants was drawn from the two selected IOCs. The total permanent estimated workforce of the selected two IOCs was 379.
Figure 1. Results of the G*Power analysis
Figure 2. G*Power statistical graph
Assessment of Research Variables
A seven-point Likert-type scale was used for the questionnaire relating to the commitment of IOCs to increasing the prevailing local content in Ghana’s upstream petroleum industry. A Likert-type scale provides a means of measuring the extent to which survey participants agree with a statement (Adamsen et al., 2013). The survey question focussed on the extent to which the independent variable had an effect on the dependent variable. The independent variable was categorized into three groups: (a) management staff, (b) technical staff, and (c) other staff. The dependent variable was OICs commitment to increasing the prevailing local content in Ghana’s upstream petroleum industry.
A pilot study, involving a few participants to pre-test the research instrument, enhanced the validity and reliability of the collated data. According to Naithani (2011), pilot testing of web-based questionnaires enables the relevant structure, duplication, and errors to be checked. Hence, corrections were made based on the initial feedback before administering the web-based questionnaire to participants in the main survey. Pilot testing the survey enabled refining of the research instrument and mitigation of measurement errors associated with this study.
Data Collection Procedures
Data related to the independent and dependent variables were collated through a web-based survey. Survey Monkey, which is an online survey tool, was used to administer surveys conducted with each of the six groups to collate data. An ANOVA was performed to analyze the collated data obtained from the selected participants. Saari and Scherbaum (2011) reported that over the past decade, web-based surveys have emerged as the preferred survey instrument for collating psychometric and other related data. The virtual nature of the upstream petroleum industry makes the deployment of a web-based survey ideal.
For this study on the local content in Ghana’s upstream petroleum sector, web-based questionnaires relating to the independent and dependent variables were carefully designed and administered to participants who were selected through stratified sampling. To ensure clarity, the web-based survey questionnaire included an explanation of the reasons for the survey, its purpose and objectives, the procedure adopted for the survey, and its benefits (Uprichard, 2013). The confidentiality of participants as well as their right to terminate the survey midway at their discretion according (Stone, 2015) was also guaranteed. Moreover, the participants were informed of the risk associated with the survey and were provided with an explanation of how the collated data would be used (Boynton & Greenhalgh, 2004).
Survey Administration
With the help of the Petroleum Commission of Ghana, I collected psychometric data from the two selected IOCs. The total estimated permanent workforce of these IOCs was 379. The sample frame consisted of management, technical, and other staff in the two IOCs. Following the successful administration of the pilot study, on November 8, 2016, I distributed the survey instrument to the wider group of participants via Survey Monkey. To encourage rapid responses to the survey, I used Survey Monkey to incorporate the consent form within the survey questionnaire. I also promised to share the final results of the study with the participants.
The total number of participants who responded was 88 after I had sent out five follow-up reminders. Including the responses of the nine participants in the pilot study, I obtained a total of 97 responses representing 25.6% of the entire population of the study. I stopped sampling after three weeks to avoid irritating nonresponsive participants.
Data Analysis
IBM’s Statistical Package for the Social Sciences (SPSS) analytical tool was deployed for the collated data analysis and a one-way ANOVA was performed to establish statistical differences between the management, technical, and other staff groups regarding their opinions on the dependent variables. Karagöz and Saraçbasi (2016), who tested the equality of population means, found that an ANOVA enables significant differences existing between two or more groups to be determined.
Prior to conducting the ANOVA, the collated data from the survey were screened and checked for consistency. The data were also checked for inconsistent responses as well as missing data. As recommended by Luigi, Oana, Mihai, and Simona (2012), checks were carried out to determine whether the collated data satisfied the statistical assumptions underlying the ANOVA.
Reliability and Validity Assessment
It was important to guarantee the reliability of the measuring instrument used in this study. Validity in relation to quantitative research designs entails determining whether what was intended to be measured in a study has been measured, or how accurate the research results are (Floyd & Fowler, 2013). Fowler (2013) added that design validity also involves assessing the extent to which the research design is appropriate for the kind of study that a researcher intends to conduct. In this study, because of the appropriateness of the selected quantitative cross-sectional survey design as the data collection technique, validity of this design for investigating the extent to which IOCs are committed to increasing their prevailing local content in Ghana’s offshore petroleum industry was achieved.
Results
The total required sample size of 159 participants was obtained using three predictors: a medium effect size of 0.25, a power of 0.8, and three groups. Anticipating that some participants might not respond to the survey given their busy schedules, I distributed the survey to a total of 298 participants with the aim of obtaining the required sample size of 159.
A total of 97 participants completed this survey. Thus, the survey response rate was 61% in relation to the required sample size of 159 participants. Out of the 97 participants who responded, 26 were management staff, 37 were technical staff, and 34 were other staff. The overall reliability for scale in the pilot study was 0.799, which was considered good.
The descriptive statistics presented in Table 2 indicate that the mean value for the management and technical staff groups regarding their opinions on the extent to which the overall prevailing local content meets the requirements of L.I. 2204 were 5.73 and 5.6 respectively. The mean value for the other staff group was 5.53. This range of means between 5.5 and 6 indicated that the management, technical, and other staff were “agreed” that OICs in Ghana are committed to increasing their prevailing local content.
Table 2. Descriptive Statistics Obtained for the Survey
Before conducting the one-way ANOVAs, the assumption of normality was tested by applying skewness and kurtosis tests as well as histograms. The results of the skewness and kurtosis tests dependent variable fell within a range of -1 and +1, indicating that the assumption of normality held. The results of these tests are shown in Table 3.
Table 3. Skewness and Kurtosis Tests Results
The histogram plots enabled the data to be inspected to determine whether normal distribution was evident. An analysis of the histograms depicted in Figure 2 indicated that the assumption of normality had not been violated for any of the dependent variable.
Figure 3. Normal distribution plot for IOCs commitment to local content improvement
Results of the One-way ANOVA
A one-way ANOVA was conducted to ascertain whether there were any significant differences between management, technical, and other staff groups regarding their opinions on the dependent variable. The results of this ANOVA showed that there were no statistically significant differences between these three staff groups at a level of p > 0.5 for the dependent variables. The results of the one-way ANOVA are summarized in Table 4.
Table 4. Summary of the Results of the One-way ANOVA
The one-way ANOVA was performed to determine whether there were any significant differences between the management, technical, and other staff groups regarding their opinions on the commitment of IOCs to increasing the prevailing local content in Ghana’s upstream petroleum industry. The results indicated that all three groups of staff were somewhat agreed that IOCs are committed to increasing the prevailing local content in Ghana’s upstream petroleum industry. Differences in the means of the management, technical, and other staff groups regarding their opinions on the extent to which IOCs are committed to increasing the prevailing local content in Ghana’s upstream petroleum industry were not statistically significant at the p > 0.05 level for the three conditions, F(2, 94) =.605, p = .548.
Conclusion
The purpose of this quantitative cross-sectional survey-based study was to determine the extent to which IOCs are committed to increasing the prevailing local content in Ghana’s upstream petroleum industry. To conduct this study, I deployed Lewin’s change theory as the theoretical framework and collected survey data from two IOCs whose oil and gas development plans have been approved by the Petroleum Commission of Ghana. Commitment of OICs towards increasing their prevailing local content in relation to the statement made by Esteves et al (2013) was assessed that under the NTO clause, if a better alternative exists abroad, foreign companies cannot be forced to procure goods and services locally. The results of the study substantiated this statement, revealing that the management, technical, and other staff groups somewhat agreed that IOCs are committed to increasing the prevailing local content in Ghana’s upstream petroleum industry as means of sustainability. Differences in the means of the three staff groups were not statistically significant at the p > 0.05 level for the three conditions, F(2, 94) =.605, p = .548.
Limitation of the study
This study had some limitations. First, because of the confidential nature of administrative procedures within the upstream oil and gas industry, the selected IOCs were unwilling to release detailed financial information on their human resources that was required to determine the local content in monetary terms. A second limitation concerned the generalizability of this study as only two IOCs were selected for the survey.
