Energy 2024 - Proposed Guidelines for Strategic Alliances and Channel Partnerships in the Petroleum Sector

Energy 2024 - Proposed Guidelines for Strategic Alliances and Channel Partnerships in the Petroleum Sector

March 18, 2024

In February 2022, the Petroleum Commission introduced proposed amendments to the Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) through the Petroleum (Local Content and Local Participation) (Amendment) Regulations, 2021 (L.I. 2435). Under the existing regulations, if a non-indigenous Ghanaian entity wished to provide goods or services to a contractor, a subcontractor, licensee, or other allied entity in the upstream industry (or the Ghana National Petroleum Commission itself), it is required to incorporate a joint venture with an indigenous Ghanaian company in which the indigenous Ghanaian company holds at least a 10% equity participation. The new amendment added an additional provision, which provided that, notwithstanding the requirement referred to above, the Petroleum Commission may direct that:

  • an indigenous Ghanaian company enters into a “channel partnership agreement” or a “strategic alliance arrangement” with a non-indigenous Ghanaian company; or
  • a non-indigenous Ghanaian company enters into a “channel partnership” or “strategic alliance arrangement” with an indigenous Ghanaian company,

where (in each case), the Petroleum Commission is of the opinion that such channel partnership or strategic alliance will deepen local content and local participation and maximise technology transfer to the indigenous Ghanaian company.

The amended regulations define:

  • a “channel partnership agreement” as “an arrangement between an indigenous Ghanaian company and a non-indigenous Ghanaian company including a distributor, a vendor, a retailer, a consultant, a system integrator, an original equipment manufacturer or a value-added reseller to market and sell the products, services or technologies of the non-indigenous Ghanaian company in the country”; and
  • a “strategic alliance arrangement” as “an arrangement between a non-indigenous Ghanaian company by which the responsibilities of each partner are clearly defined and the partners agree to share resources to undertake a specific mutually beneficial project whilst each retains their independence”. The amended regulations also define an indigenous Ghanaian company as a company wholly owned by a Ghanaian citizen, with Ghanaian citizens holding at least 80% of executive and senior management and 100% of the non-managerial positions.

In explaining the rationale for the proposed amendments, the Petroleum Commission noted that despite the improvements resulting from the passage and implementation of the Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204), a value chain analysis of the petroleum upstream sector revealed a deficit in the labour market of essential skills, know-how, and the lack of capacities and capabilities of local companies to support petroleum activities, as well as the domination of non-indigenous firms in critical sectors of the value chain. The Petroleum Commission hopes that the formation of a channel partnership or strategic alliance arrangement will result in a deeper involvement of indigenous Ghanaian companies in day-to-day operations and a greater transfer of skills and know-how, rather than the indigenous Ghanaian company simply being an inactive minority shareholder of the joint venture. In February 2023, the Petroleum Commission held discussions with the Ghana Upstream Petroleum Chamber (“GUPC”) on the draft guidelines for strategic alliance and channel partnerships as part of a stakeholder consultation process, but these guidelines have yet to be published. 

For more insights on the Ghanaian Energy Sector, check out our chapter in the GLI Energy 2024 Guide here