The Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), Mr Moses Asaga, has attributed the success story of the Tema Oil Refinery (TOR) substantially to a policy initiated by the authority to deregulate prices of petroleum products.
He said the implementation of the price deregulation policy expanded the space for both state and private companies to participate more meaningfully in the downstream petroleum sector.
Mr Asaga said the deregulation policy had yielded modest results which had found expression in the fortunes of state companies such as the Bulk Oil Storage and Transportation Limited (BOST), the Tema Oil Refinery (TOR) and the Ghana Oil Company (GOIL).
Speaking to the Daily Graphic on the success story of TOR, Mr Asaga indicated that the deregulation had come to eliminate subsidies, foreign exchange losses, as well as persistently accruing interest on outstanding subsidies.
TOR posted a profit of $800,000 from its operations from February 16 to April 20, 2016, a development described by industrial watchers as a sign of the possible revival of the company, whose latest profit is the first in seven years.
The success story of TOR resonated at the May Day parade in Wa in the Upper West Region on Sunday, May 1, 2016, where a section of TOR workers had travelled to thank President John Dramani Mahama for setting the company back on track to recovery.
Mr Asaga said “the deregulation has rekindled investor confidence in the sector and most offshore banks and major oil traders are extending open accounts payment option to Bulk Distributing Companies (BDCs)”.
He indicated that the previous regulated regime saw the control of pricing of petroleum products being in the hands of the government, which guaranteed price for marketers that ultimately occasioned some inefficiency in the distribution chain and less competitive value for consumers.
“The implementation of the policy is the first bold step taken by a government and President Mahama and ought to be commended,” Mr Asaga said.
The CEO was of the view that the previous regulated market failed to create room for TOR to compete, as it was made to sell products below market prices.
Successive governments’ interference in the determination of prices also went to create huge debts that suffocated the refinery’s operations in the past, leading to the creation of the TOR debt recovery levy.
In the last decade, Ghana’s downstream petroleum industry had occupied strategic importance in the economy, accounting for about 15 per cent gross domestic product, “hence there is the need to create an enabling environment for the refinery to thrive”, he said.
The second phase of TOR, Mr Asaga explained, had benefitted from deregulation, “hence they could now sell at economic price where no under-recovery and subsidies could be an impediment”.
He indicated that in the lead up to the implementation of price deregulation, the Ministry of Petroleum and the NPA came up with a plan themed, Strategic Alliance which boosted BOST’s operations.
Under the strategic alliance, the ministry and the NPA granted BOST an oil trading company licence (OTC) to enable it to import crude oil and finished products to expand the company’s market share, and guarantee security of supply of petroleum products in the economy.
“A BDC licence was also granted to GOIL under its subsidiary company GO Energy, which became an off-taker of finished petroleum products imported into the country by BOST for distribution to GOIL’s retail outlets.
“A conducive market environment was, therefore, created for the state oil companies, leading to enhanced commercial fortunes, since they have a guaranteed off-taker for their products,” Mr Asaga added.
An additional release, he said, was granted to BOST in the form of export and re-export permit that allowed it to export products to neighbouring countries in addition holding strategic stocks, thus making it a more viable business entity.
That, he said, led to BOST’s decision to reactivate its Bolgatanga Depot in the Upper East Region to enable it to export products to neighbouring Burkina Faso and the Sahelian Region.
The appointment of a new CEO for TOR, Mr Asaga said, was also spot on by the President as it brought to bear a strong management with high commercial aptitude.
“However, like a four by 100 (4x100) relay, it is the quartet that should be acknowledged in the success story of TOR and not just one single entity, since the rebound clearly shows that a lot of thinking went into how to resuscitate the company from its slumber,” Mr Asaga suggested.
Mr Asaga, however, debunked suggestions that the government’s continuous indebtedness to the BDCs was likely to stifle the financial sector.
According to him, the working capital of most BDCs was previously locked up because the government owed them in subsidies, “but that is no longer the case, since the deregulation regime has improved liquidity in the sector”.
Mr Asaga emphasised that of the $700,000 legacy debts which were still owed to the BDCs, the government had been able to clear some 50 per cent.
“The government only owes for the 2014 and 2015 foreign exchange losses and subsidies, and the NPA has commissioned Ernst and Young for a second phase audit. Once the validation is completed, the Ministry of Finance will begin to make payment to the BDCs,” he emphasised.
Source: Daily Graphic