header('Content-type: text/html; charset=ISO-8859-1'); TOR not fit to be supplied with Ghana crude for refinery – former GNPC Boss - News Guide Africa
News Uncategorized

TOR not fit to be supplied with Ghana crude for refinery – former GNPC Boss

Image result for alex mould
Adnan Adams Mohammed
Former Ghana National Petroleum Corporation (GNPC) has called on the management of Tema Oil Refinery (TOR) to address its operational inefficiency and loss making condition before it start to make a claim for GNPC to allow it to refine Ghana’s crude and additional state investment from the central government.
Mr Alex Mould, while commenting on an article written by Paa Kwasi Anamua Sakyi, research fellow at Institute for Energy Security, last week, reiterated an earlier comment he made emphasizing that, “The problem of frequent operational disruptions to its processing which is a result of mechanical and operational failure of TOR’s processing units and which manifests itself in the poor profitability record which has constantly been a drain on the tax payer over the years to support its balance sheet due to years of loss making.”
Business of crude refining has been found many oil and gas experts as a catalyst for accelerating growth in the downstream petroleum sector providing jobs, creating economic value, building and grow a strong petrochemical industry which comes with a varied economic impact on various sectors of the economy (agriculture, manufacturing, trade and commerce), reducing capital flight. However, in Ghana’s case, the Tema Oil Refinery has become more of a drainpipe, a source of alleged massive corruption and direct government interference, Mr Sakyi has alluded in his article titled, “At what cost must TOR be allowed to refine a portion of local crude?”
Given what Ghanaians know of TOR today “as poorly managed”, one fundamental question that begs for answer is “at what cost must the entity be allowed to refine a portion of Ghana’s share of the local crude”, the energy analyst quizzed.

The Managing Director of the Tema Oil Refinery (TOR) Mr. Isaac Osei at this year’s Offshore Technology Conference (OTC) in Houston Texas, made a call for TOR to be allowed to refine portions of Ghana’s crude oil for the local market, instead of selling all on the international market.
He bemoaned the situation where Ghana National Petroleum Corporation (GNPC) sells all of the country’s oil entitlement on the international market while TOR shops around for crude oil to refine into finished products for local consumption. And in his view, the situation did not give Ghanaians the confidence and excitement they were supposed to have following Ghana’s discovery of oil in commercial quantities.
His call was geared towards the creation of a healthy synergy between the upstream and downstream sectors of the Ghanaian petroleum industry, and also to ensure value creation.
Of course, this call resonates with many that have been made in the past by well-meaning Ghanaians, especially of the need to refine indigenous crude to increase State revenue through value addition; and to provide fuel security, reduce the growing fuel imports, and possibly to reduce domestic fuel prices.
However, given what Ghanaians know of TOR today as poorly managed, one fundamental question that begs for answer is at what cost must the entity be allowed to refine a portion of Ghana’s share of the local crude?
But, responding to a question on if government should invest more tax payers money in the state enterprise which has been a liability over the years to the state, Mr Mould said in an interview that, for government to decide or take a bold step to investing in TOR to revamp it, the following will be required: a complete process audit by a recognized international engineering firm; a time bound program to implement the findings of this process audit; and injection of funds to achieve the goals of the audit.

“Basically TOR needs a performance improvement plan (PIP) after which it needs to demonstrate efficiency”, he noted.

Legally, TOR will need to give a financial guarantee to GNPC (like all traders who purchase crude from GNPC) to ensure that payment is made promptly so that GNPC does not violate the PRMA which requires full payments for crude lifted be made within 60 days.

Mr Sakyi in his article echoed that, the assertion that a state would be richer and derive all the benefits stated above if it could simply add value to its crude by refining locally is flawed on most occasions, especially in sub-Saharan Africa (SSA) where it is rare to find a domestic refinery reporting profits and sustainability; compared to their peers in more liberalized markets due to varied reasons that makes the refineries unattractive for Government and private investor support.

“That is why it was imperative for the Managing Director of TOR representing the entity; to have made a much stronger case to support the call. He must demonstrate to Government and the investor community beyond any economic doubts, that the refinery is economic and operationally viable in this regard. But to simply ask Government to allow the somnolent entity to refine the country’s crude without an assurance of “value for money”, is simply flawed.

“He was equally unable to state that crude suppliers, be it international companies or the State; are convinced that they would either obtain in full with acceptable operational losses the quantity and quality of products from the crude oil it supplies to TOR for refining, or for the payment of the crude.

“Indeed, Mr. Osei failed to argue that in his dealings with distributors and marketers of refined petroleum products, they have come to accept TOR as internationally competitive in the supply of refined products for the Ghanaian market. Failing to convince Ghanaians to the effect that TOR’s refined products could be sold cheaper than or at par with the products that are currently being imported into the country; given the advantage of zero or minimal freight cost, and import duty”, he juxtaposed.

He intimated that, anything short of above relevant arguments makes the Managing Director’s call for a portion of Ghana’s crude to be refined by TOR quite an emotional and unnecessary one, as the statement lacks economic basis, and is inconsistent with what Ghanaians think of today’s TOR.

The Managing Director of TOR made the unwarranted call at a special panel put together by the Ministry of Energy (MoE) to discuss issues affecting Ghana’s energy sector at the OTC. But
The matter of TOR refining local crude as requested by the refinery MD is not in any way a problem that affects the country’s energy sector, giving that the Tema Oil Refinery has ever refined a local crude.

In December 2016, TOR took delivery of the first local crude oil produced from the Tweneboah, Enyera, and Ntomme (TEN) fields in the Western Region. The cargo of approximately 1 million barrel was delivered aboard the vessel MT. Bordeira, and supplied by AOT Energy on an Open-Account basis (120-days credit).

Today, if TOR wishes to refine crude from any of Ghana’s production fields, then all that is required of Management is putting in place the
right trade frame-work and product accounting system that guarantees payment of the crude. With a proven ability to pay, it wouldn’t matter who supplies TOR the crude, and whether from a local source or elsewhere; period.

If a refinery can demonstrate the ability to pay for a crude parcel, suppliers will be more than willing to offer the commodity based on international pricing benchmarks.

Related Posts

Leave a Reply

Your email address will not be published.

three × two =