News Guide Africa

Tag: Bulk Oil Distribution Companies (BDCs)

  • Cheap Fuel: BDCs need special forex access arrangement – Analysts

    Cheap Fuel: BDCs need special forex access arrangement – Analysts

    Adnan Adams Mohammed

    A former Chief Executive  Officer (CEO) of both downstream and upstream petroluem sector of Ghana has added his vice to the call that government address the structural challenge on how importers, Bulk Oil Distribution Companies (BDCs) acquire foreign currencies for their business.

    Alexander K. Mould believes the structural problem of making forex available can be addressed by  streamlining the process by BoG working with NPA to make foreign currency available to the commercial Banks of the BDCs;

    The call by the former CEO of National Petroleum Authority (NPA) and Ghana National Petroleum Corporation (GNPC) was a followup to concerns raised by an Energy Policy Analyst  that the foreign exchange rates used by BDCs and OMCs in determining fuel prices are too high. According to the Analyst, the oil companies used a forex rate of between GHC18 and GHS19 to the dollar in setting the prices in this current price window

    “The forex rate they are using is too high ……if they use that forex rate to set prices within two weeks and the cedi depreciates the BDCs will be affected not government,” Benjamin Nsiah said in an interview.

    However, Mr Mould has noted that, the long credit period –another structural problem in the industry –  is basically to accommodate the challenges in sourcing forex.

    In a galloping inflation and galloping exchange rate regime, you can’t wait long to pay back what is owed as the exposure is marked-to- market.

    “Availability of forex is the biggest challenge facing the BDCs.”

    Me Mould, who is a former corporate banker and a former  Executive Director of Standard Chartered Bank, has called on the BDCs and OMCs to better manage their forex trade aspect of their business and suggested some possible ways they could do that.

    “Managing the forex exposure is the key risk they face and as such they should be better manager this risk by buying dollars as soon as they sell the fuel, at least on a weekly basis, and not wait till when the Letter of Credit, or suppliers, credit is dues.

    “The BDCs should also move away from given OMCs more than 7 days credit.”

    “The forex price is unpredictable due to the speculation caused by the short supply and lack of any assurance from BoG of future forex flows;  If BoG make any allocation, the allocation willl first go to GOIL then  to others.”

    Consequently, Mr Nsiah urged the government to work with the BDCs to reach an agreement and sign a Memorandum to reduce the forex rates.

    He added that if the BDCs fail to comply, government can elevate Bulk Oil Storage and Transportation Company Limited (BOST) to compete with the BDCs. He added that BOST should be made “to import products into this country and sell it on the market.”

    “That 60 million dollars given to BDCs to set the prices, if the government handed it to BOST for instance to import the products, it would help all of us,” he said.

    On Tuesday, petrol and diesel prices were sold for an average of ¢18 and ¢23 per litre, from the previous prices of ¢15 and ¢19 per litre respectively.

    Presently, the price of crude oil on the world market is relatively stable, selling at $90 per barrel;

    Meanwhile, in relieving the Ghanaian from the fuel hikes, Information Minister, Kojo Oppong Nkrumah disclosed that the government  is sourcing cheap and affordable petroleum products for supply into the Ghanaian market.

    According to him, the National Petroleum Authority (NPA) and the Ministry of Energy will provide further details about the importation of fuel onto the Ghanaian market in the coming days.

    He noted that the Energy Ministry had already begun talks with some major sources and sovereigns in the supply of petroleum products.

    “In President Kufuor’s time, we did it with Nigeria, Sahara lifting for us and you could have supply credit lines and a fixed price that you could bank on and it is a very similar arrangement that has already commenced and I am expecting that in the coming weeks the NPA, the Energy Ministry will have the opportunity to provide the details,” he said.

  • Fuel prices to surge further as BDCs to sell at going exchange rate

    Fuel prices to surge further as BDCs to sell at going exchange rate

    Adnan Adams Mohammed

    Consumers of fuel product are advised to fill or buy any quantity of fuel they can safely store as prices are to surge further, according energy analyst.  

    The analyst asserted that, Bulk Oil Distribution Companies (BDCs) are now supplying petroleum products to the various Oil Marketing Companies (OMCs), operators of fuel stations, at the exchange rates higher than the current market exchange rate of the U.S dollar.

    According to information gathered from the BDCs,  they have recorded losses since early September when they sold the products to OMCs at the then prevailing exchange rate of averagely GHC9.0 to US$1.0 in the price build up.

    Now, in November, they need to change those Cedis they received using the 8, 9, 10 Cedis exchange rate  in the price build up in September into dollars at current price of GHC14. “You’ve locked in these products at a certain rate, and after you’ve sold the product and you’re going to buy forex, it has started going a certain trajectory,” he said.

    “Many BDCs are in this dilemma except maybe Allied BDC which is well managed and has his own OMC. So they are now selling a liter of fuel at GHC18-19, as at last week Thursday, October 3, to recoup some of the losses they made”, Alex K. Mould, former CEO of National Petroleum Authority told Economy Times in an interview last week.

    “Like I said most of the BDC‘s have made losses in September and October because of the 120 day credit given to them by their suppliers (the likes of Trafi, Glencore, Vitol and BP).  

    “They sold the products early September and are still holding the Cedis they got using  GHC8, 9, 10 exchange rate used in the price build up at that time. Now they need to change those Cedis they received using 8, 9, 10 Cedis exchange rate  in the price build up into dollars at current price of GHC14 to 15.

    “So they have made losses (using the mark-to-market rate) although still, unrealized, because they haven’t changed the Cedi into dollars.

    The situation has been confirmed by the Chief Executive Officer of the Ghana Chamber of Bulk Oil Distributors, Dr. Patrick Kwaku Ofori in a speparate interview last week.

    He indicated that, Bulk Oil Distributors are currently bleeding due to the harsh economic conditions they have to operate in.

    “You’ve locked in these products at a certain rate, by the time after you’ve sold the product and you’re going to buy forex, it has started going a certain trajectory,” he said.

    Dr Ofori noted that, the prevailing economic situation has led to some distributors taking a break from the business to wait out the storm in order not to accrue any more losses.

    Those who continue to trade, he said, are really having a terrible time and are most likely being driven to continue trading in order to make up for the huge losses they have accrued in earlier trades.

    He noted that the rapid depreciating of the cedi against the dollar has cost many distributors millions of dollars in losses; this he says has been exacerbated by the fluctuating price of fuel on the international market, currently on a steady rise.

    “So that notwithstanding, about the volumes of products that you’ve brought in-country that I was talking about and then also maturing LCs that you quickly need to cash in on. So most of the members in order to keep their credit lines open and then also to keep their banks happy needed to even give super abnormal discount on products knowing clearly that they were even going to make some losses”, he said.

    “One of our major players has a dollar obligations of a minimum  23 million dollars a week, whilst the Bank of Ghana gives us 120million dollars a month. And I’m talking about just one player. So you look at the challenges that they go through.”