The Auditor-General has identified weak enforcement of local content requirements by the Petroleum Commission, with the failure to impose and collect penalties leaving Ghana with US$1.9 million in unpaid fines and an estimated GH¢194.4 million in potential revenue.
The companies are MODEC Production Services Ghana Limited, which owed US$1,140,584.65; Halliburton Ghana Limited, US$633,887.84; Technip Ghana Limited, US$61,796.52; GOS Company Limited, US$39,498.47; and Norwell Engineering Limited, US$20,000.
The findings are contained in the Performance Audit Report on the Implementation of Local Content and Participation in the Upstream Oil and Gas Sector by the Petroleum Commission of Ghana, which examined the Commission’s enforcement of local content regulations.
The report found low submission rates for local content plans, inadequate enforcement of in-country spending reports and failure to sanction some companies for breaches of the regulations.
Of 100 companies sampled, an average of 43 submitted local content plans annually. The audit said the remaining 57 did not submit their plans because they had no upstream contracts during the audit period, although the report found that this was contrary to Regulation 7 of the Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204).
The report also found that an average of 74 companies in the sample failed to submit in-country spending reports annually between 2019 and 2024.
During the period, an average of 26 companies submitted reports covering a combined US$1.79 billion in spending on goods and services in Ghana.
According to the audit, the Commission’s Cost Audit Department sent 225 reminders to 31 companies that failed to report their in-country spending between 2023 and 2024. However, the report found no evidence that sanctions had been imposed specifically for failure to submit the reports.
The Commission’s directive on in-country spending reporting prescribed a fine of 200,000 penalty units, equivalent to about GH¢2.4 million at the rate used in the report. The audit estimated that failure to enforce the requirement against 74 defaulting companies resulted in GH¢177.6 million in potential penalties not being realised.
The report further found that five companies failed to pay fines totalling US$1,895,767.48 imposed in 2019 for violations of L.I. 2204. Eight of the 13 companies sanctioned that year paid fines amounting to approximately GH¢2.8 million.
It also identified seven companies that had violated aspects of the regulations but were not sanctioned. The audit estimated that the applicable penalties could have generated another GH¢16.8 million.
The report cited disputes over stabilisation clauses in existing petroleum agreements as an additional enforcement challenge. It said four international oil companies had resisted compliance with aspects of L.I. 2204, while the Commission had not sanctioned them. Tullow Ghana Limited was cited as an example of a company relying on stabilisation clauses in its petroleum agreements.
In its response, the Petroleum Commission said it adopted a graduated enforcement approach, beginning with verbal or written cautions. It described the cited violations as isolated incidents involving first-time offenders and said it organised annual workshops to educate registered companies on reporting requirements.
The Commission also said it monitored non-compliant companies during its monitoring exercises. On Tullow Ghana Limited, it cited a December 5, 2022 memorandum of understanding establishing a framework for engagement and said the company and its joint venture partners were complying with that framework.
The Auditor-General recommended that the Commission strengthen monitoring, impose and collect administrative fines, recover the US$1.9 million in unpaid penalties and improve coordination between its Cost Audit Department and Risk and Compliance Unit.
The report concluded that, despite progress in workforce localisation and local content initiatives, ineffective enforcement continued to undermine efforts to increase Ghanaian participation and maximise the economic benefits of upstream petroleum activities.
