Gov’t woos banks into oil and gas financing

Gov’t woos banks into oil and gas financing

Submitted by misyl on Fri, 03/06/2015 - 16:21 with 0 comment

The banks have shied away from the industry because of the huge capital requirement couple with the associated risks.

Government is seeking local bank financing in the country’s oil and gas sector in a bid to push for local content participation. The banks have shied away from the industry because of the huge capital requirement couple with the associated risks.

At a workshop organised in Accra by the Petroleum Commission, a Deputy Minister of Finance, Mona Quartey, urged the banks not to balk at the huge capital required in the field. “It is possible that the financial industry can support the oil and gas industry. Let’s not balk at the numbers; let’s look at the wider value chain, and let’s make money whilst we offer service to them,” she said. Millison Narh of the central bank echoed the position Mrs Quartey.

The First Deputy Governor of the Bank of Ghana added the central bank is coming up with measures to stimulate interest of banks in the country’s oil and gas sector. To finance the upstream petroleum industry, Mrs Quartey urged the banks to build capacity and risk management. “This is particularly important as these institutions become more exposed to lending to smaller downstream and midstream companies in the oil and gas value chain,” she noted.
Theophilus Ahwereng, CEO of the Petroleum Commission, on his part said banks can also focus on less risky aspect of the sector such as the services.
Citing examples, he said:

If I win a contract to fabricate a portion of an FPSO, that costs US$5million, I mean there are banks in this country that, on their own, can finance this. But the banks want to be comfortable; they want to understand the business…naturally, if someone doesn’t understand what you are doing, he would not want to risk his capital, and that is the essence of the exercise we are doing.

He disclosed that 20 percent contract value in the oil sector in the Offshore Cape Three Points (OCTP) has been reserved for local participation, urging banks to take advantage of this opportunity. The latest push to bring local banks on board comes on the heels of crippling debts owed them by the Bulk Oil Distributing Companies.

Nonetheless, the MD of HFC Bank, Robert Le Hunte, said HFC's success can be traced to its investment in the oil and gas sector of the Republic Trinidad and Tobago. Trinidad and Tobago owns 57 percent share of the bank which he linked to the desire of the bank to

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