23 May 2013

Ghana: TOR Crashes Out in Oil Deals

One of the reasons why the Ghanaian Italian Petroleum Company (GHAIP), which later became known as Tema Oil Refinery (TOR), was established in 1960, was to process crude oil for the Ghanaian domestic market.

But, 53 years down the line, the refinery is in a sorry state as a result of mismanagement and failure to procure modern machines to replace the obsolete ones. As a result of this, many of the Ghanaian engineers manning the plant have been recruited by the powerful spending Gulf States to work in their refineries.

For close to six years now, the oil company, which is owed huge sums of money by the government, has not been able to operate effectively, but as if this was not enough, the National Petroleum Authority (NPA), pursuant to the deregulation policy of the government, has gone ahead to license as many as 17 bulk oil distribution companies, which are importing both crude and finished petroleum products onto the Ghanaian market.

Per Alex Mould, Chief Executive Officer of the NPA's definition, Bulk Distribution Companies are companies authorised to import crude, as well as procure, import, store, distribute and sell petroleum products wholesale to bulk customers, including the Oil Marketing Companies.

The Chronicle was told that though the NPA had not contravened the laws of the land in granting licenses to these bulk oil distribution companies, the rate at which these licenses were being granted was beginning to raise doubts about the real intention of the whole deregulation exercise.

The Chronicle was told that before the defunct John Agyekum Kufuor administration handed over the reins of the country to the late Atta Mills' administration, only three bulk distribution companies had been licensed to operate, but five years down the line, the figure has shot to 17.

An unconfirmed report monitored by The Chronicle indicates that out of the 17 licensed companies, seven of them have secret relationships with an oil magnate who currently has links with the Ghana National Petroleum Corporation (GNPC).

The GNPC itself is said to be giving President Mahama a headache as a result of fishy deals some of the staff have embarked upon. In March this year, The Chronicle intercepted an intelligence report to effect that there was going to be a massive shake up at the corporation.

The Chronicle could not lay hands on the individuals who are going to be swept away by the tsunami, but there were strong suspicions that some of the board members, management and staff would be affected.

A confidante told The Chronicle at the time that some of the GNPC staff had been seconded to almost all the energy-related departments and agencies under the government. These staff members have allegedly turned themselves into mafia groups, and have been thwarting the efforts of the relevant authorities on issues relating to energy, and, sometimes, contracts.

The source said because these workers had representatives in areas such as the Petroleum Commission, National Petroleum Authority (NPA), Ministry of Energy, Ghana Grid Company and Volta River Authority among others, they are able to get first-hand information about impending contracts, which they exploit to their personal benefit.

A stakeholder, who spoke to The Chronicle on condition of anonymity on the current issue, alleged that as a result of the unbridled granting of the bulk distribution license, it would be very difficult for TOR to regain its lost glory.

The Tema District Council of Labour recently announced that "the government has released an amount of $30,000,000 to TOR to implement the plant stabilisation and profitability enhancement programme, to quickly turn their situation around."

But, the stakeholder told this reporter that $30 million cannot solve the huge problem confronting TOR, and that until the government focused her attention on revamping the oil company by replacing the obsolete machines with modern ones, instead of giving more licenses to bulk oil companies to import finished products, the problem of TOR would never be solved.

In his view, some of the newly-licensed companies have links with decision makers in the government, and so long as the latter are benefiting financially, they would not support any policy that would revamp TOR.

According to him, TOR currently, needed over $1 billion in investment to modernise the machines that enable it process crude oil from the Jubilee Fields.

TOR underwent the first phase of a major rehabilitation in 1989. The second phase of the rehabilitation was done in April 1990, at an estimated cost of US$36 million. With the support of the Samsung Corporation of South Korea, which provided $230 million, another expansion was carried out.

This led to the installation of the Residue Fluid Catalytic Cracker (RFCC). Since then, the oil refinery has been abandoned to its fate, without any major rehabilitation.

As a result of the under-recovery policy implemented since 1990, the refinery was bedeviled with huge debts, which made it impossible to even raise letters of credit to import crude oil for processing.

At a point in time, the GNPC also wanted to import crude oil for the refinery at a cost, but the workers rejected the idea, saying the board of the former was poking its nose into the affairs of the latter.

A source at the NPA has, however, argued strongly against the claim that TOR was being collapsed as a result of the licensing of 17 more companies to operate in the sector.

According to the source, the 17 companies had rather helped to ensure the constant availability of petroleum products on the Ghanaian market.

He admitted that only three bulk distribution companies were licensed to operate in 2008, but explained that there were no restrictions, and that some of the investors could not meet the strict standards being demanded before registration.

According to him, some of the Bulk Distribution Companies had even constructed huge reservoirs in Takoradi and other parts of the country, where they were helping to evenly distribute petroleum products throughout the country.

The source noted that looking at the current state of the TOR, the nation would have suffered a lot if the bulk distribution companies had not been licensed to bring in crude and finished products, which is also part of the deregulation policy introduced a couple of years ago.

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