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Frequently Ask Questions - FAQs

1.0 Introduction

The National LPG Policy seeks to provide direction on marketing and distribution of LPG in a safe and efficient manner, and facilitate an increase in access to LPG nationwide. The goal of the policy is to ensure at least 50% of Ghanaians have access to safe, clean and environmentally friendly LPG for increased domestic, commercial and industrial usage by 2030. The policy seek to achieve the following objectives:

  1. Develop a market-driven structure to ensure safety, increased access and adoption of LPG.
  2. Enhance the capacity of existing regulatory institutions in order to meet the regulatory requirements of the new market structure.
  3. Ensure the existence of robust and standard Health, Safety and Environmental practices in the production, marketing and consumption of LPG.
  4. Ensure the sustainability of supply under the new market structure
  5. Ensure local content and participation in the LPG sub sector in compliance to the Downstream Local Content Policy.

The National LPG policy provides backing for a new LPG distribution model which is centred on the use of the Cylinder Recirculation Model as the market structure.

In order to ensure smooth implementation, LPG refilling plants would be classified into low risk and high risk based on their deficiency in meeting safety standards in a Risk Assessment of all plants by the NPA. The high risk refilling station would be immediately converted into filled cylinder retail and distribution outlets whereas low risk refilling stations would be dedicated to the supply of Autogas only, with improved safety standards.

The proposed new LPG distribution model will begin with the LPG Bulk Distribution Company (LBDC), whose responsibility will be to either import or buy the LPG from local refinery or/and gas processing plant, such as Tema Oil Refinery and Ghana National Gas Company, and store the LPG in their Bulk Storage facility. The LBDC will then sell the LPG in bulk to either the Bottling Plant for the sole purpose of filling the empty cylinders or to the LPG Marketing Companies (LMCs) for bulk sale to industrial end-users - factories, restaurant, and mini-power plants- and also to auto gas users. The LPG Bottling Plant Company will be responsible for filling the empty cylinders for onward distribution to LMCs. The LMCs will be responsible for procuring, branding, and maintaining the cylinders. Specialized trucks will be used to transport the filled cylinders from the bottling plants to the retail stations or exchange points, where consumers will exchange their empty cylinders for filled ones.

A minimum of 4,000Mt capacity storage depot shall be used as the primary receiver of LPG either from imports or from domestic production, with gantry facilities for discharge into BRVs. This will be the preserve of an LBDC.

The LPG bottling plant is expected to have a minimum storage capacity of 250Mt with an automated bottling plant and a filling capacity of 1,000 cylinders per hour. The country will be zoned for the siting of these bottling plants. However, the distribution of their filled cylinders will not be limited to any particular zone.

2.0 Questions and Answers

Q1: What measures will be put in place to ensure that the empty cylinders submitted by customers in exchanged for filled ones are in good condition?

It is the responsibility of the LPG Marketing Companies (LMC) to ensure that the cylinders are in good condition before handing over to the end user. It is mandatory that all the bottling plants have a minimum maintenance facility to check for dents, leakages, replacement of valve, etc. This maintenance would be done on the full knowledge of the LPG Marketing Company.

Q2: How does the NPA ensure the policy does not negatively impact low income earners, especially those who are unable to afford bigger sizes the companies may not have.

There will be different sizes of cylinders to meet the needs of all income earners. The LMCs are expected to have different sizes of filled cylinder sizes such as 3kg and 6kg to cater for those who would want to purchase smaller quantities.

Q3: Some of the industry players are unhappy with the one year given to roll out the policy, what answers do you have for them?

The new policy will be implemented together with the existing market structure until we gradually phase out the old market structure. The discussions surrounding the LPG promotion policy started in 2014. We will continue to engage the industry players.

Q4: My question to the NPA and by extension government is that our country’s stock of LPG are stored in huge storage facilities by TOR, Fueltrade etc. Why have we not experience explosions at these depots but only when these BRVs reach the retail stations during discharge?

This is as a result of negligence on the part of BRV operators and also some of the operators lack capacity to undertake this activity.

Q5: What is the LPG penetration rate of countries that have implemented the cylinder recirculation model?

Brazil has been able to achieve about 90% adoption. Also, India has been able to achieve 80% adoption.


Q6: Movement of several domestic filled cylinders pose more safety risk than bulk movement?

The movement of the filled cylinders will be carried out by specialized trucks with high safety standards to the LPG distribution outlets.

Q7: Warehousing filled cylinders are more dangerous than the current system?

Warehousing of filled cylinders is less risky than the current system because it does not require filling of cylinders at the station. Also there will not be discharge of LPG at the station.

Q8: Regarding the zoning of the business entities to operate the model, how is the NPA going to ensure same business persons in the system don’t form proxy companies in the name of other people at the blindside of the NPA?

There will be LI to prevent one business entity to operate in the various segment in the supply chain. There will be strict enforcement of the regulation laid down by the Authority to ensure compliance.

Q9: What happens to those with domestic fiber glass cylinders in their homes, will their fiber glass be exchanged with filled fiber glass or steel cylinders?

The LPG Marketing Company as part of its marketing strategy will have fibre cylinders for consumers using fibre glass cylinders.

Q10: With two new actors in the supply chain i.e. Bottling/maintaining cylinders and distribution, will there be any change in the price of LPG?

Yes. There will be a marginal change in the price of LPG. There will be a margin to cater for the LBP operations, filling, maintenance and refurbishment.

Q11: Some users said they don’t fill their cylinders to the maximum, some by 10gh and 20gh cedis and so on, how do we address this problem?

There will be 3kg cylinders to meet their needs. Apart from this, there is a company that is considering purchasing filled cylinders and supply to various homes with a controlled regulator which could allow consumers to buy smaller quantities.

Q12: Who will provide the cylinders, the new players or the government?

The marketing companies will be responsible for providing the cylinders. They will be responsible for owning, branding and maintaining the cylinders to ensure that the cylinders are safe for use.



Q13: So will the customer be paying for the gas in the cylinder or both the gas and the cylinder?

The consumers are expected to pay for the initial cost of the cylinder and the gas. Subsequently the consumers will pay for only the gas.

Q14: What happens to cylinders currently been used in our homes?

A plan is being developed to come up with strategies to address this issues. It is likely that we may adopt the refrigeration rebate scheme implemented by Energy Commission to address this issue

Q15: What happens to current OMCs who double in LPG, does it mean they have to register a separate entity if they still want to do LPG?

Yes. There will be different license category for different segment of the supply chain. No entity will be allowed to operate in more than one section of the supply chain. This is to ensure that many Ghanaians have opportunity to operate in the LPG industry.

Q16: There is also a current practice where you find LPG filling station on the same premises with other fuels, what is going to change if any?

The LPG filling plant will be expected to be 1km away from the other station.

Q17: There are still many more questions to be answered. Cost of LPG is becoming more and more expensive. Nothing is mentioned about cost. Nothing is mentioned about how to curb illegal domestic transfer of LPG especially by Taxi drivers where location of filling station does not make economic sense to the driver."

Q18: Are we also going to be guaranteed leakage proof cylinders?

Yes. Because all cylinders will be checked by the bottling plants for leakage and other defects before they are released into the market. Those which are unusable will be sent to GCMC for recycling.

Q19: And with the low risk stations? Are consumers still going to transport their cylinders with taxis?

The low risk stations will rather sell autogas. Also there will be door to door distribution of filled cylinders as well.

Q20: Will there be inspections to check that the cylinders are actually being properly maintained and up to scratch? Inspection being one of our major problems in this country.

Yes. There will be regular inspections to ensure that cylinders are properly maintained


Q21: Have they communicated a time line for this to happen or are we still just discussing?

The new and the old model will be implemented side by side for one year. However, the old model will be phased out by the end of 2019.

Q22: And what happens to the old cylinders we're using now?

A plan is being developed to come up with strategies to address this issues. It is likely that we may adopt the refrigeration rebate scheme implemented by Energy Commission to address this issue

Q24: Is the remodeling of old cylinders at a cost to us consumers?

No. The marketing company will bear the cost

Q25: Within the time of remodeling, will I get a new cylinder?

Yes. There will be filled cylinders at the retail outlet to be exchanged for the old cylinders

Q26: This means auto gas users can still refill within town at low risk stations.

Yes. The safety standards in the low risk station will be enhanced.

Q27: This also means we are going to transport gas in tankers through town to these low risk stations.

Yes. The frequency of transporting the gas will be smaller than it is now. More safety measures will be put in place.

Q28: What will happen to existing LPG Refilling Plants?

LPG Refilling plants would be classified into low risk and high risk based on their deficiency in meeting safety standards in a Risk Assessment of all plants by the NPA. The high risk refilling plants would be immediately converted into filled cylinder retail and distribution outlets whereas low risk refilling plants would be allowed to supply autogas only with improved safety standards.

Q29: What role will current stakeholders play (LPG Bulk Distribution Companies, LPG Bottling Plants, LPG Marketing Companies, Dealer and Tanker Drivers?)

Role of Players:





Bulk Distribution Company (BDC)

a)      Imports LPG;

b)      Stores; and

c)      Distributes in bulk to LPGMCs and Bottling Plants.


Bottling Plant (BP)

a)      Procure LPG from BDCs and resells to LPGMCs;

b)      Refills cylinders for LPGMCs;

c)      Tests cylinders; and

d)     Undertake maintenance of cylinders with minor defects and refer cylinders with major defects to Manufacturing & Maintenance Facility.


LPG Marketing Company (LPGMC)

a)      Procure LPG from BDCs for supply to Auto Gas outlets and Bulk Commercial Customers;

b)      Own and brand cylinders;

c)      Transport refilled and empty cylinders;

d)     Manage entire supply chain between BP and consumers; and

e)      Maintain cylinders.



a)      Operate cylinder exchange points on behalf of LPGMCs;

b)      Dispense LPG to autogas (Low risk outlets) and;

c)      Manage LPGMC safety and regulatory protocols and customer relations on behalf of LPGMCs.


Manufacturing & Maintenance Company

a)      Manufacture cylinders; and

b)      Undertake major maintenance of cylinders.

c)      Disposal of cylinders

Q31: Would this create job losses?

Direct job losses is estimated to be about 400 in relation to the estimated number of refilling plants that will be converted to autogas outlets. Direct job creation is estimated to be over 4500 in relation to new jobs under the LMCs, LBPs, LCTs and door to door delivery. This does not affect current jobs of LPG Bulk Transporters, LPG Bulk Distribution Companies, and LPG Bulk Storage companies as well as the retail outlets that would transition into distribution centers.

In addition to the above jobs created, NPA will recruit over 200 Safety Auditor throughout the country as well as resource its newly established Health Safety Security and Environment department. There will also be a number of indirect jobs created for installations, maintenance, fabrication and other services.

Q32: How do we treat Rural LPG Promotion?

The proposed distribution model will provide filled cylinders throughout the country. However, it will absorb ongoing efforts to promote the use of LPG in rural areas. LMCs would be provided with incentives to supply to rural areas through the LPG Distribution Compensation Margin Fund. The Annual Budget Funding Allocation (ABFA) will however be used to fund the distribution of free cook stoves and accessories under the Rural LPG Promotion Programme.

Q33: What are the expected Socio-economic Benefits?

  • Job Creation
  • Increased Viability of LPG supply
  • Improvement in health status of women and children
  • Improve public health and safety

Q34: Are u going to carry out a sensitization programme for the existing players and consumers?

Yes. There will be a nationwide sensitization of all stakeholders.

Q35: Converting high risk LPG outlet into a distribution outlets raises safety concerns. How do you intend to address safety issues associated with the high risk LPG outlets?

We will ensure that all the high risk LPG outlets comply with improved safety measures.

The Mandate is quite simple. In 2005, Parliament passed an Act 691 which mandated the National Petroleum Authority, (NPA), to regulate the downstream sector of the petroleum Industry. By downstream, we mean from when crude oil or petroleum products enter the shores of Ghana till it is discharged either to the Refinery or to another depot in the country, the distribution of the petroleum products that are refined or brought into the country .We also have the mandate to regulate every single Petroleum Service Provider (PSP) that provides its service in the Industry. By regulation, we mean we will License that PSPs to operate in the particular sector the license is given for. We’ll also set the standards and the rules and regulation by which that organization in that particular sector will operate. To do this, we have two divisions that is, the Inspectorate, Monitoring &Licensing (IML) division and the Pricing, Planning and Research (PPR).The Inspectorate division handles all the Licenses of all PSPs in ensuring that they abide by the rules and regulations of the industry.

The Standards that we’re talking about for example have to do with the quality of Petroleum products that are sold in the country which are the standards by which all the OMCs and the Refinery that produces these products and the Bulk Distribution Companies, (BDCs) that bring in the products, import the product to augment what the refinery can’t supply into the country. Those are the standards. We also regulate the standards the Oil Refinery should operate, the standards through which depots should be kept and operate, standards of how pipelines should operate and also standards by which OMCs should operate their retail stations which dispense fuel to the consumer.

We have a unit which receives complaints and once a complaint is received, we go to that particular station with the Ghana Standards Board, (GSB) which is mandated to actually do the measurement and quality test. NPA doesn’t have that mandate. The mandate we have is we will make sure that you abide by those standards; so we do work with GSB. We go out with them on numerous occasions. We also have inspections that we that we do. We have the random inspection and program inspections. For example, there are notices in the Dailies informing the various OMCs that as from Monday, Inspectors will be going to inspect the Eastern and Central Regions. The OMCs have a checklist by which they know we are coming to inspect them so they can do their own self compliances and self testing. What we do on the spot check is go round to make sure that one; the consumer is being dispensed with the right quality of petroleum product. By that, we mean every petro  station is mandated to have a 10 litre measuring can .Whenever  consumers  believe they are being short changed, they should ask for the 10 litre can for an on the spot check to be done. It is the right of the consumer and by law, the OMCs are supposed to produce it. If they can’t produce the 10 litre can, or are refusing to do that test, the consumers can call the NPA.What we’re going to do this year is quite different from what we’ve been doing. We are going to put stickers around all the filling stations and dispensing pumps, telling the consumer of their right especially-the right to ask for the 10 litre-can when they believe they’ve been short changed. We also will have our numbers there and the hotline which will be a toll free line for anyone to call and the NPA will come to that station  within some few minutes provided it is within our proximity. So that’s what we do on the Inspection. But I agree with you that we’ve had complaints about the quality, especially the people who buy the V Power and the deregulated products believe that they may be short changed in the quality .We also have complaints about the quality of Gas Oil, and people believe that they may be adulterated with kerosene and other products. These are some of the things we are going to clamp down.

TOR debt is basically the debt that is in TOR’s books. What we have to understand is that the TOR debt is made up of TOR’s indebtedness to banks, creditors and also to other creditors apart from the Oil companies that supply them. The bottom-line is that as of the end of 2008, the amount on the TOR’s total liability is Gh.c1, 488.00.

Calibration is the method that the GSB uses to ensure that each dispensing unit at the retail stations gives you the right product. The pumps are sealed by GSB officials when they do the calibration. Our Inspectors go out to check whether the seals are broken or whether the time by which the GSB Officials has given for the next Inspection to be done by them has elapsed. All of these are breaches of the regulatory standards that we have set. So the OMCs are to have a compliance officer that should know when each dispensing unit should be calibrated; the GSB should then be called in to do it. My understanding is that the GSB has outsourced some of these jobs to some mechanics who are licensed to do that. But the onus is on the OMCs to use the 10 litre can each day in the morning and in the evening or any time they believe that pumps may not be dispensing the right unit. By the way, sometimes the pumps over dispense as well and that also are a violation.

Several times; and we have instituted penalties against them. Some of the penalties include fines, closing down the stations and the closure of particular pumps till we get the verification from the GSB.What we don’t want to do is to do a type two error i.e. close down the station when really the station is not at fault. While we take these reports and allegations very serious, we also have been mindful that the petrol station is a business which we are also mandated to protect. We are to protect the consumer as well as the PSPs so we have to be quite cautious when we are carrying out our duties.

There is a premix committee we work with and they work with the landing beaches. What we’ve done with premix is we have made sure that all the Tankers that carry premix are painted a special number and to also have premix written on them so that if premix is taken to a station, for example, it will be very clear and obvious that it shouldn’t be there. But from time to time, we have recalcitrant Bulk Road Vehicle drivers who may be in cohorts with some OMC retail stations with or without the knowledge of the OMC. When we hear about this, we go first of all to ascertain that product has been adulterated. We’ve heard recently that this was done in the Ashanti and Brong Ahafo Regions so we’ve sent our team out there to inspect it. We have a Northern Zonal Regional Manager who handles Ashanti, Brong Ahafo and the Northern Regions. It’s quite a tedious job; you need a large task force to get it done. We for example have a target to do 90 per cent of all the stations in the country. This goes without the spot checks we’ll be doing; so our mandate is quite broad and the manpower we need to do our job is quiet high and it’s very expensive as well to do. We’re trying to get our Board to increase the penalties so that we can also raise some more money to carry out this duty.

I have always said that our Gas problem is an infrastructural problem and it’s a logistics problem and not because we do not have Gas in the country. Just to you some statistics, TOR when it’s producing on a regular basis produces about 1,000 to 1,500 Metric Tons of Gas depending on its capacity and the through-put and the type of crude it is refining. Our consumption is about 800 metric tons a day which for six days gives us between 4,500 and 5,000 a week. So whereas we’re producing a 1000 to 1500, our consumption has grown. For your information, in the 80’s, the consumption was below 50 metric tons a week and not a day. We’ve had a surge in demand which is mainly being driven by vehicles who are taking advantage of the subsidy on LPG. LPG is about the heaviest subsidized product in the country. The subsidy each week amounts to more than Ghc2million. You have a surge in demand from the commercial vehicles especially and then you have logistics problem; whereas TOR is producing 1,000, to 1,500. We have to bring in shipload of LPG every week. This ship load will be up to from 3,000 to 5,000 metric tons. We only have one jetty: thus one point in which a ship can dock and discharge the product in the country. We only have one pipeline from the jetty which is about four to five km from the refinery .We only have one depot which is the Refinery that can receive this LPG in the country and we also have the Refinery that has the storage depot. We also have a problem with dispensing the LPG into the BRVs mainly because we have about two or three loading arms at the Refinery. So, all these logistics bring us to a problem that we cannot discharge enough products into the market especially when there is panic demand. I mean if anything goes wrong in the supply chain, let’s say pumps break down at TOR and they can’t load 50 BRVs like they do every day and they load 30 vehicles ,immediately there will rumors going round that there’s a shortage.

We need to communicate more that there is product. Most times, there is product at TOR and most times,TOR is also producing .Most  times we have a ship either coming in ,docked or discharging products so with regards to logistics ,although  we run a very tight schedule in ensuring that there is LPG.We have constant discussion with the BDCs that are bringing in the LPG. We know do this with the help of GPS tracking systems. So, most of the times, these shortages are due to panic buying. By that I mean normally, everybody will buy a cylinder for a household, but when people hear that there is going to be a shortage, everybody takes two or three cylinders and I must confess our households normally do this .We also have the taxi drivers who, when they hear there’s shortage also store extra gas in domestic cylinders which they later decant into their tanks for use. All these bring about a surge in the demand which is not normal .What we are trying to do is to have programs on the radio to tell them there is no shortage of supply and the people should just buy the normal amount they buy because that practice has a ripple effect where everybody thinks there is a shortage. I must admit that there are times when we have very low stock but we always monitor to ensure there is enough stock. We have raised all these issues with the Ministry of Energy. There are BDCs who have the License to build their own storage tanks-I think for business continuity purposes; we need to have another Port in which we can actually discharge the product. That means we need a new line and a new storage areas. We’re currently in discussions with some BDCs who have applied for permits to actually build these storage facilities in Tema. We’re convincing them to go to Takoradi as well mainly for business continuity purposes. Our business continuity purpose right now is: if anything happens to TOR, the jetty or the line, we would have to go Benin who also do come to us whenever they have problems as well. So despite the fact that that we have to supply our local demand, we also have to supply our ECOWAS neighbours as well. We have vehicles coming from Burkina Faso and Benin and we can’t just turn them away.

Just to let you know, we have written a paper to the Ministry of Energy and are in discussion with the Minister because one of the things I think we can’t continue doing is subsidizing LPG. In the 80’s, these subsidies was meant for the rural folk to curb deforestation, just to give you some statistics, I was with the Timber people yesterday in Kumasi and the statistics they have is that the consumption of logs by the timber industry is about two million cubic metres. The consumption of timber by rural folks to ensure that they have energy to carry out their cooking is six million cubic metres ie, three times what we consume to produce wood for use in the country. We have to let people first of all pay the right price of fuel. If the subsidy is meant for the rural folk, it should be given to the rural folk so that brings us to a little challenge. How do we ensure that the vehicle owners, urban people, domestic consumers pay the right price whereas we can give the subsidy to the rural folk? That’s one challenge. There are various schools of thought. One is ban, thus totally banning LPG use by vehicles which have been done in Abidjan & Ivory Coast and some other countries. The second one is have different LPG dispensing areas for automobiles and have that for domestic use. Third is basically license the vehicles and let them pay a license fee that can absorb the subsidy that is given to them. Each one has its pros and cons as you may imagine, I think we should be able to this year come out with one of these three that would be implemented. Implementation began in 1994 when the LI was passed but it was never executed. I think we have to look at this seriously. Our demand will surpass the supply and even if we start building and get in the next two years more storage and more logistics then we would be able to supply the product. The subsidy, I don’t think can go on.

I think the whole policy has to be looked at again. The Ministry of Energy who is the policy makers would have to come out with something and of course all of us will give our input. You have to get the stoves to the rural and urban folks for them to use. The alternative is to use charcoal and this is what is used in most of our institutions especially the Senior High Schools. The cooks prefer using charcoal because it gives a better heating value which I don’t think is true…Kwesi: well they say charcoal aroma is good. All of that is not true. Basically, there is a gig going on charcoal and they prefer using charcoal because LPG is supplied by the government.

First of all, you have the Ministry of Energy at the top, then the NPA which is the regulatory body.  The Ministry of Energy is currently a regulatory body for the upstream industry but it works with the GNPC which is the operating entity that does exploration and production.  To carry some of those regulatory functions, my understating is that a bill will be passed very soon sometime this year to set up a petroleum commission which will now handle all the regulatory functions of the upstream and midstream.  The NPA will continue doing the regulatory function for the downstream. Now when you come to TOR, TOR is licensed by the NPA so are the OMCs and BDCs.  That is a relationship. With regards to how we collaborate with the Ministry, we report to the ministry of Energy which also handles policy issues whereas we handle the actual regulation.

You know we do not work in a vacuum so the ministry definitely has to know what is going on.  It’s the right of the Minister too and he should know what is going on in every single organization that falls under the Ministry be it TOR, GNPC or NPA.  We have a Board of Directors so we report to the Board of Directors and the Board of which I am one, are charged with the responsibility to ensure that NPA carries out its duties.  The NPA from time to time would give report to the Ministry every quarter; a report on our activities. We let them know also what our budget is, which is approved by the Board and not by the Ministry .With regards to interference, I am sure you are talking about pricing and things like that.  The Ministry is a policy driver, so the Ministry should have an influence on what you are doing and basically, your organization. If you are under a ministry, your activities should be geared towards a policy that is being driven by that ministry.  Yes the Ministry should have a lot of influence on what you are doing.  So if you don’t agree with the Ministry on certain things, you should go back and have a discussion with them. Of course the Ministry is there to listen to the operating arms as to how we want to carry out our functions.   We all have BOD that we report to, so through our BOD, we can get communication directly with the minister or the CEO can have a discussion of the Minister on any change in direction and policy that they would like to see happening.

I won’t say there’s friction; I will say the Minister is our Super “Board of Director” (BoD) so as the BOD, they wish to see that certain things are done.  They may want to see certain things done in haste which you may not be able to carry out because of the operating functions you are carrying.  So yes, you would have frictions sometimes.  I have worked in the private sector and I must say any organization that doesn’t have friction is an organization that will be set out for doom. You need organized quaos, you need friction in an organization but it should be the constructive.  It should not be destructive.  As such, I do welcome friction. I am one that always wants to listen constructively for any change involved with what we are doing.

There’s always friction in between whether you ‘re interfering  with the organizations.TOR may think that NPA is interfering with how much it should charge GNPC for processing the crude oil but it is one of the function of the NPA  and I think the more everybody understands the functions of your role ,things become easier.  One of the functions of the NPA is to approve every charge between PSPs.We have to approve the charge that is put because it ultimately affects the consumer.  And one of our roles or objectives is to ensure that we protect the consumer as well as the PSPs, we have to ensure that people invest in this industry and also their Partners, thus Banks are assured that they will be paid and also that they would have a decent return on their investments.

I wouldn’t say it was a problem because a disagreeTOR debt is basically the debt that is in TOR’s books. What we have to understand is that the TOR debt is made up of TOR’s indebtedness to banks, creditors and also to other creditors apart from the Oil companies that supply them. The bottom-line is that as of the end of 2008, the amount on the TOR’s total liability is Gh.c1, 488.00.ment can be solved. When it can’t be solved, then it becomes a challenge.  The challenge grows up and becomes a problem.  It wasn’t a problem. TOR believed that they needed to be paid a certain amount for processing and GNPC also believe that.  What we do at the NPA is that we have this every day. The OMC’S believe that they should receive certain fees and the transporters believe that they should receive certain fees. Our job is; our Board has a technical committee which is made up of NPA, Executives or Management of NPA Plus stakeholders from other parties of the industry mainly outside the NPA.  And we bring this committee together.  They have tech expertise some of whom are formal MDs of TOR, Operating managers of Shell, among others. So we bring this expertise and also people have operation background, finance, management and leadership background for them to understand each organization’s presentation, their modules and we actually test the owners and their modules and challenge them on both sides.  We come out with what we believe is fair to both parties.  So in that particular respect with regards of GNPC and TOR, what we did was the Ministry of Energy asked us to do our job. The Board’s Technical committee looked at it, I did my analysis from the information we recorded from both parties and we arrived at a number.  So far they have accepted the number and they’ve worked with the number for over a year and a few months now and we haven’t had any change in the numbers so I think it’s a fair number.

Well, the method we use is what we call an ‘import parity method’ and that method basically says that we should use a market that serves our market here. The market we use is the North West Europe market and that is the most traded market in the world and that is where about 99 per cent of all products coming to West Africa be it from Senegal all the way to Angola come from the North West Europe market. What we do then is we use an average of 14 days prices, past historical prices, immediate historical prices to price what the product prices will be. We do this twice a month and we lease that price on 1st and 16th of every month. Pricing goes after you have found the average price of each petroleum product which is in dollars per M/T, you and add a related charge and that related charge takes care of the freight from North west Europe to Ghana. It also takes care of the Insurance, It takes care of all port charges both load and discharge port charges, it takes care of the financing clause which is LCs that have been used by the banks. It also takes care of the refinancing cost when the LCs is matured and you have not collected your money, you have to borrow from the banks so it takes care of all of that. We actually simulate what the traders do and we also go in and check exactly how much they are paying for each of these and then come up with what we call is a related charge .Once we get the related charge, we add it to the FOB charge and then we arrive at what we call the ex-ref price. So this is the price that the supply of the product is to pay and he is expected to use this money to take care of all his charges and that supply of the product includes TOR, after that, the second part of the Price Build Up has to do with taxis and levies.

This is basically from a mandate of parliament. The NPA has nothing to do with it. We just apply what has been approved by parliament and then the 3rd part of it is the distribution cost. This part of the PBU goes to the OMCs and the dealers, it goes to BOST for all storage facilities we’ll have in the country. It also goes to a PDM and the UPPF which ensures that every product sold in the country is sold at the same price and that is basically the transporter’s margin .All of these give us the ex-pump price. The spot price basically is the price at which you buy products today or for delivery in a day or two. The reason why we use Historical prices is if you buy products in Europe, it takes you about 10 days to get the product to the country and it will take you a few days to start discharging and basically you would have spent that money .It would have cost you based on an a average of some prices in the past for you to sell the product so you have to recoup what you’ve have spent so that is why we use that. The reason why we give people spot prices is just as an indicator. The Spot price is crude. We do not price based on crude. We price based on petroleum products but crude oil is the bench mark for the sum of all petroleum products that are derived from crude oil. So if you have crude oil that is $100 today, it means that if petrol products are based on the cost of bringing in a$100 crude oil and producing products now. Every refinery produces different amounts of products so it is difficult to use one particular crude to actually tell you how much product you are going to get. So what we do is to use the benchmark and the benchmark we use is the benchmark that is used in North West Europe which is the same benchmark used for all crude oils in West Africa which is Brent bench mark. I have seen some people quoting WTI but the WTI is a bench mark for North America and not a bench mark for Europe. From time to time, there is a differential between the WTI price and the Brent price and that differential is mostly caused by if there is a high demand in North America or the high demand in Europe .It is basically the shipping cost and the time value of money of moving products form one market to another market. But the bottom line is we give you the bench mark of crude oil, so that you have an understanding of where the price is. It is a highly correlated bench mark to all the petroleum products and if you simulate a refinery, you will find out that if you spend $100 to buy parcel of crude, the product you get and based on the spot price on those products, you should earn what you call a refiners margin. The sum of the product sale minus that of the crude oil purchase price will give you a refiner’s margin.

Everybody buys at spot market. Very few people buy at negotiated prices because you have the bench Mark price. Crude is a commodity and somebody tells me that you can get cheap crude somewhere, I tell him to bring it because crude is a commodity and are of different kinds. There are about 400 types of Crude in the world. The spot is always bought at the spot price so I would have bought futures at $105 and would have sold the spot at $70. At that time, the futures would also have dropped so then I can actually buy back at a lower price and make a margin which be added to the physical and basically, I would have sold my crude oil at 105$. So the futures… market is used basically to help both producers and consumers to decide what price they want to buy oil at .Most times, the future price is based on buying the crude now carrying it then that means it has basically a finance component in it and also because you’re not storing it, you can do that. But if you’re buying the physical, you have to store it and pay storage and financing cost. There could be imbalances in the spot price. There could be a surge in demand .As we see now Suez Canal can only receive certain vessels .You can’t pump fuel out of the vessel to move through the Suez Canal.

All Government to Government contracts are treated as Aids. But you are going to pay the right price which is the market price. So our contract with Nigeria, we pay the market price. Nigeria has something we call Official Selling Pricing (OSP). Every month they issue the OSP. They issue the OSP for that month and by the end of February, the OSP will be issued for March. So you don’t know what the OSP is but you have an idea of what it’s going to be.   The OSP is derived from the fact that they run a net back calculation to see exactly how much product you will get from the crude and what the crude price is what the differential. They don’t want you to make too much money so the OSP for Bonny Light may be about a dollar fifty cents above Brent because it is superior crude to Brent and that is how the Nigerians are pricing it. Although the pricing is based on the fact that you have to take it from Nigeria, to N/W Europe where the biggest market is, for Bonny Light, or you have to take it to America so they work backwards and they give you what the OSP is and the OSP for Nigeria crude is Brent Plus for Bonny Light for some Nigerian crude it is Brent minus.  By the differential the OSP margin is basically based on how much revenue you can get from the crude oil based on the current Spot prices of the products verses the spot price of the crude oil. And that is how they arrived at it. There may be some countries that may want to give you aid and may Say pick up our crude at a discount but you should always work the economics because you could go and pick up a crude you may think is cheap based on the price they’ve given you but the economics determines exactly the price of the crude in the end and the economics is simple.

It is the value of the product you can get from it based on your refinery’s capacity or configuration verses how much you’re bringing the crude oil and where the crude oil is the landed cost of that Crude Oil plus your refinery’s cost and that is how we calculate which crude to buy.

Our daily capacity at the refinery is 45,000 barrels per day. Total products have exceeded 2.5 billion litres a year. Depending on the type of Crude Oil and depending on the configuration of your refinery, you can produce certain products. So even if we had 100,000 barrels per day which may be what our requirement is; you may not be able to produce certain products to meet the market. You may produce excesses of some products and you may need to import some products. Our daily refinement exceeds 70,000b/d but with 70b/d of any crude, we will not meet some products’ demand because based on our types of crude and refinery configuration. It’s over 70,000 b/d and I think we could even reach 100,000b/d.

TOR should be as competitive as someone importing the product. That’s why we use the Import Parity which is pricing used in many countries and which is well tested.TOR should benefit as much as someone who is importing the it. If the refinery was producing 100 per cent and we didn’t require any imports then yes, we could use the refinery’s cost. But what if the refinery’s cost is higher than importing the product? And are we going to encourage the refinery to be inefficient? How would we know that the refinery is inefficient? The Chief Executive asked the interviewer. This mechanism, which is the import parity mechanism, also helps us to see whether the refinery is as efficient as us importing because the alternative we have for refining in our country is importing so if that alternative is cheaper than refining, then the question is should we continue refining in the country?

From October 30, 2009 to September 30 2010, about 30, we set up the price on October 30 at $70 per barrel that meant that if products and crude oil remained in that range of $75 per barrel, plus or minus five per cent, ie $72 to $78, we will not change prices. One of the reasons is that we did not want to let prices go up, change prices, bring it down because the Transporters may not change their prices as frequent and also it may have a ripple effect on the economy. So from that period October 30 2009 to September 30,2010, there were virtually no subsidies although there may be a few pricing periods where we went above the range but what the NPA does is we monitor to see if prices have moved. If prices have moved after two monitoring periods we may advise the Government to increase prices.

Since this didn’t happen on October 30 – September 30 2010, there was initially no subsidy and did not have to increase prices. Prices started moving in October 2010 quite rapidly, October average was about 83.5, November was about 87 and December was about 92. There are times in the year monitoring the prices and when it came to mid November we indicated to Government we will start either by increasing prices and passing it on to the consumer. Each time prices were above, the Government did subsidize and it was only in December 2010 that the Government finished his consultative discussion with Transporters, TUC and AGI and that is when we increase prices at the first opportune time which was 4th January 2011.  

It’s quite simple. At the beginning of the year, Government budgets how much revenue it is going to get from various areas and one of the areas is petroleum. There are taxes and levies that are mentioned in the PBU although our maximum taxes are between 10 and 14 per cent, we do have negative taxes when the huge subsidies on products like kerosene premix and LPG.Government gets some revenue about Ghc150 to 175 from tax revenue so it’s not that much as people may misconstrue. The government has earmarked this money for certain projects in the budget. Budget is balanced with the mind of getting specific revenue let’s say from CEPS, Petroleum, and is going to use it for certain projects. Once government says that it is expecting the money.

If the government has to subsidize, it has to give money to the petroleum providers like BDCs or TOR when it doesn’t want the consumer to bear the increase in price. Because we have a full cost recovery mechanism which is based on import parity, the Government then takes revenue and gives it to these Organizations so that they can make sure they pay for the fuel. That is called a subsidy. It is a subsidy because the Government has taken revenue which is earmarked for certain projects. Our daily capacity at the refinery is 45,000 barrels per day. Total products have exceeded 2.5 billion litres a year. Depending on the type of Crude Oil and depending on the configuration of your refinery, you can produce certain products. So even if we had 100,000 barrels per day which may be what our requirement is; you may not be able to produce certain products to meet the market. You may produce excesses of some products and you may need to import some products. Our daily refinement exceeds 70,000b/d but with 70b/d of any crude, we will not meet some products’ demand because based on our types of crude and refinery configuration. It’s over 70,000 b/d and I think we could even reach 100,000b/d.  

planned  event if the government has not planned that it will put money aside to spend on price increases which it does not want to pass unto the consumer, then government is taking revenue which is earmarked for projects such as roads ,hospitals, school feeding and is using that money for the petroleum products. From October to December, 2010, the actual subsidy far exceeded $70 million for us to bring in petroleum products. This $70 million has to come from somewhere, and is at the end of the year, government has received the revenue for petroleum products for the year and has used it for other projects, where does government get the money to pay for the $70 million?

TOR debt is basically the debt that is in TOR’s books. What we have to understand is that the TOR debt is made up of TOR’s indebtedness to banks, creditors and also to other creditors apart from the Oil companies that supply them. The bottom-line is that as of the end of 2008, the amount on the TOR’s total liability is Gh.c1, 488.00.


Pump Colour Definition

red Premium fuel black

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