After several years of domination by multinational companies, Ghana’s petroleum downstream industry is seeing increasing participation by indigenous and wholly-owned Ghanaian Companies.
Currently, indigenous companies now control 70 per cent market share of petroleum products marketed and distributed, up from under 28 per cent in 2001.
The increased involvement of Ghanaian companies in the downstream sector can be seen in terms of the number of companies licensed to operate as well as the volume of products marketed and distributed by the indigenous companies.
This increase in local participation by indigenous companies in the petroleum downstream sector can be attributed to the local content initiatives that have been championed since the establishment of the National Petroleum Authority (NPA) by an Act of Parliament, Act 2005, (Act 691).
These include section 12 of the NPA Act and the revised licensing requirements for Petroleum Service Providers (PSPs), which specifies that before NPA grants a license to a person to engage in a business or commercial activity in the downstream industry, he or she must be a citizen of Ghana. Also, a foreign individual or foreign company in a registered joint venture relationship with a citizen of Ghana or a Ghanaian company must provide evidence of local partnership that is at least 50 per cent shares must be held by a Ghanaian citizen before the grant and issue of license by NPA.
Prior to the commencement of crude oil processing at Tema Oil Refinery (TOR), Ghana relied completely on imported refined petroleum products distributed by the local branches of multinational oil companies, such as Shell, Texaco, British Petroleum, Mobil and Total.
The petroleum sector was encapsulated by the brand name “SHELL”. Indeed, the older Ghanaian generation used to refer to virtually every fuel retail station as “PETROL SHELL”.
These multinational petroleum companies monopolized and dominated the importation and sale of petroleum products prior to Ghana’s independence in 1957 and soon thereafter. The multinational oil companies were virtually free to set their own products prices without the colonial government’s interference. The establishment of TOR in 1961 and its commencement of crude oil processing in 1963 curtailed the role of the multinational companies in the importation of petroleum products.
Accordingly, when the Refinery started operation in August 1963, it was the local branches of multinational oil companies such as Shell, Mobil, Texaco and British Petroleum (BP) which were given the responsibility by the Government to import the crude oil required by TOR for processing into finished products.
Subsequently, before the establishment of the Energy Commission in 1997 by an Act of Parliament (Act 541) with the mandate to, among other things, grant licenses for the marketing and sale of petroleum products, the Ministry of Energy was in charge of the grant of such licenses.
During that period, the petroleum downstream business environment was dominated by multinational OMCs with Ghana Oil Marketing Company (Goil) being the only indigenous OMC.
However, right from the inception of the Energy Commission through the setting up of the National Petroleum Tender Board in 2004 to the establishment of NPA, the petroleum downstream business environment has witnessed major changes which have led to the increased involvement of Ghanaian companies.
Enhancing the Indigenous Companies
The Act setting up NPA has placed enormous responsibility on the Authority. Besides playing a regulatory role, it is expected to make regulations for licenses and monitor all activities in the downstream sector.
Under the NPA Act 691, it is only Section 12 which spells out the qualification criteria for license to operate in the downstream sector. It states that: “a license under this Act may only be granted to;
(a) a citizen of Ghana; or (b) a body corporate registered under the Companies Code, 1963 (Act 179) or (c) a partnership registered under the Incorporated Private Partnerships Act, 1962 (Act 152); or (d) A foreign individual or foreign company in a registered joint venture relationship with a citizen of Ghana or a Ghanaian company”.
A critical review of the NPA Act would reveal that the Act was silent on encouraging indigenous and wholly-owned Ghanaian companies in the petroleum downstream industry.
However, the same Act grants the Authority the mandate to create additional requirements that it may deem necessary for applicants.
It is for this reason that led NPA to create additional licensing requirements to include and emphasise local content participation in the downstream sector.
The Journey So Far
The industry for the first time after several years has seen an unprecedented proliferation of investment and expansion of petroleum product storage and outlet facilities by Petroleum Service Providers (PSPs) mostly dominated by a growing number of indigenous Ghanaian companies.
This is evident, due to the fact that, prior to the setting up of NPA, the country’s petroleum retail market was made up of a mixture of both multinational and indigenous companies.
In 2001, there were 14 Oil Marketing Companies (OMCs) operating in the country, with six of them being multinational companies; namely Mobil, Shell, Total, Elf, Oando and Engen.
These multinational companies controlled 72 per cent of the total market share of petroleum products marketed and distributed while the indigenous companies made up the remaining 28 per cent. Clearly the market was dominated by the multinational companies.
However, with the setting up of NPA, the market was opened up to allow a lot more indigenous companies to participate in the industry.
Pursuant to that, the number of OMCs increased to 34, with six of them being multinational companies (Mobil, Engen, Oando, Shell, SO Energy and Total) and the remaining 28 were indigenous companies apart from GOIL in 2006. This excludes five indigenous private companies that solely marketed LPG.
The multinational companies made up 55 per cent of the total market share of petroleum products marketed and distributed in the country while the indigenous companies made up the remaining 45 per cent of the market share.
It is instructive and heartwarming to note that as of the year 2012, there were 92 OMCs & LPG Marketing Companies (LPGMCs) with nearly 2,700 retail outlets operating in the country with five of them being multinational companies (Engen, Oando, Shell, SO Energy and Total) and the remaining 87 being indigenous.
The performance statistics for the year 2012 revealed that the multinational companies had about 30 per cent of the total market share while the indigenous companies made up the remaining 70 per cent.
By the way, that is not the only petroleum service category that NPA has made progress in. The Authority has steered the industry such that we have seen increased local investor interest in the sector; this has resulted in an increase in the numbers of other PSPs currently operating in the country.
At the moment, there are 22 Oil Trading Companies (OTCs) and 18 Bulk Distributing Companies (BDCs) that supplement production from the Tema Oil Refinery through the importation of finished petroleum products to meet the demand deficit. Over 2150 bulk road vehicles and more than 346 licensed transporters in the country.
Others include 22 bunkering companies, calibration companies which was three (3) before NPA establishment but now is five (5), lubricant manufacturing; three (3), lubricant blending and marketing; three (3), nine (9) petroleum product export companies, seven (7) bulk oil storage depots, a mooring company, an emulsified fuels production company and a stratification company.
It is important to understand that the indigenous companies do not have the same strengths and capacities. It is a fact that the multinationals, to a large extend, have much stronger financial muscle than the indigenous companies.
Yet, in spite of the financial difficulties, a lot of these private indigenous companies have defied all odds and commendably competed with these giants over the years to the extent that we are noticing a continuous growth in their market share, their contribution to government revenue and employment.
This is an indication that with time the indigenous companies alone can handle the petroleum downstream industry effectively should the multinationals at any point in time decide to pull out of the country.
Obviously, that is good news for a country that wants to encourage citizens to invest in the country and to develop local expertise in such a critical sector as petroleum.
It’s unfortunate some individuals and entities are still castigating the Authority for not doing much to promote local participation in the downstream sector in spite of all the tremendous efforts and achievements made by the NPA.
We would therefore leave readers to make their own conclusions and judgments as to whether the NPA has made significant progress in the indigenization of the downstream petroleum industry or not.