FINANCIAL CHALLENGES IN THE OIL AND GAS INDUSTRY-A PAN AFRICAN APPROACH PRESENTER: EMMANUEL QUARTEY - EXECUTIVE MEMBER, GOGSPA VENUE: MOVENPICK AMBASSADOR HOTEL DATE: 4 TH JUNE, 2014 . Protocols:.
FINANCIAL CHALLENGES IN THE OIL AND GAS INDUSTRY-A PAN AFRICAN APPROACHPRESENTER: EMMANUEL QUARTEY - EXECUTIVE MEMBER, GOGSPAVENUE: MOVENPICK AMBASSADOR HOTEL DATE: 4TH JUNE, 2014
Mr. Chairman, Invited Guests’, the EcobankTeam, Members of GOGSPA, Ladies and Gentlemen…
We wish to express our profound gratitude to the organizers of this Forum, for the invitation to be here today to be part of this occasion and most importantly for the opportunity to share our thoughts on the Financial Challenges affecting the Oil and Gas Industry in Ghana. We would also give you an insight into the operations of our Association.
Our presentation highlights the views of members of the Ghana Oil and Gas Service Providers Association (GOGSPA) and calls for the involvement of Ecobank Ghana Limited, other financial institutions to come on board to ensure success in the Oil and Gas Industry in Ghana.
Ghana Oil and Gas Service Providers Association
We also facilitate and promote local content in the oil and gas industry,
ensure compliance with local and international standards, as well as
proceduresandpractices in the petroleum industry.
1. Business Development services
2. The Facilitation of Business Start-Up for both local and foreign companies
3. Capacity Building
4. Consultations for service providers in the Oil and Gas Industry.
Our core members are indigenous Ghanaian companies registered with the
Petroleum Commission as well as some foreign companies in the Oil and
Gas Industry. Membership is open to all service providers in the Industry.
Currently, our membership strength is Sixty Two (62).
Our mission is to contribute to the growth and development of the Oil and
Gas Industry in Ghana.
Our vision is to strengthen the competitiveness of indigenous companies
in the Oil and Gas Industry, to train and build human resource capacity for
members and to work closely with all stakeholders in the industry.
THE EXECUTIVE COUNCIL OF GOGSPA
The Executive Council has the ultimate authority to take decisions and
make polices affecting the Association. This Council, elected through
GOGSPA elections is made up of 7 members.
Our patrons are the C.E.O.’s of Seaweld Engineering Limited and Zeal
In Ghana, most indigenous Oil & Gas companies fall under what we term as SME’s (Small and Medium Enterprises). Under GOGSPA we have about 20 companies that we classify based on turnover to be medium with the rest being small enterprises. The nature of the businesses carried out has been mentioned in SLIDE 7.
1.The SME’s are financed firstly, by Equity that is in the form of Ordinary shares for cash or for consideration other than cash.
2.The second source is Debt which is in the form of Long term loans or Bank Overdraft with the interest rate currently hovering around 30% per annum. It is popular these days for Companies to
patronize Finance Houses for transactions like (clearance of goods from the ports) which of course have very prohibitive interest rates of about 10% per month.
3. The third and most advantageous form of Funding is Trade payables. A reliable client could supply items at no finance cost if payment is made on due date. The Customs Bonded warehouse concept is also a means of finance as it enables the Company not to tie up needed working capital in Equipment and Consumer goods which is not for immediate use.
5. The next best alternative is borrowing in dollars at low interest
which is at LIBOR (London Interbank Offering Rate) plus a
spread of approx 4%. However, with the current rate of
exchange depreciation of the Ghanaian Cedi, a Local Enterprise
could run into financial difficulties as it would need more local
currency to service debt/loan contracted. Local banks could
lend at LIBOR only if receivables are in hard currency.
We need not re-invent the wheel so it would be most appropriate to look at the experiences of some oil producing countries (e.g. Nigeria, Angola, Brazil, Norway) that have faced such challenges and how they were able to surmount them. We can learn from their experiences.
Account and to prepare cash flow projections which would make it
easier for banks to process their application for advances timeously.
activitiesin Ghana as a means of reducing the very high interest
rates charged on Ghana Cedi denominated Loans and Advances.
In our concluding remarks, we are appreciative of the fact that Ecobank Ghana Limited has joined GOGSPA and would encourage other banks to follow suit to assist members solve their financial challenges.
We hope our concerns and recommendations if addressed would go a long way to improve the Oil and Gas industry for the benefit of all Ghanaians alive and those unborn.
It is also our fervent hope and prayer that Ghanaians would move from being Service Providers to Field Operators through the acquisition of oil blocks in Ghana in the spirit of the Local Content initiative.