An Energy Expert and Former Chief Executive of the Ghana National Petroleum Corporation (GNPC) has called on management of Tema Oil Refinery (TOR) to address its operational inefficiency and loss-making condition.
Mr Alex Mould said that needs to be done before acceding to demands GNPC to allow it to refine Ghana’s crude and calling for additional investment from central government.
The Energy Expert said the main challenge TOR faces is its inability to continuously raise the required financial guarantees – in the form of letters of credit on its own from financial institution to purchase crude oil needed.
“To provide the needed working capital, the financial institutions need a payment security structure, which alternates from what TOR usually provides -stocks, receivables and cash; Most likely these financial institutions would require a guarantee from government for payment as TOR would most likely – due to its current inefficient state – fail to make payment on time,” he noted.
According to him, the problem of frequent operational disruptions to TOR’s processing is as a result of mechanical and operational failure of its processing units, “which manifests itself in the poor profitability record that has constantly been a drain on the tax payer over the years to support its balance sheet due to years of loss making.”
Mr. Alex Mould was reacting to the Managing Director of the Tema Oil Refinery (TOR), Mr. Isaac Osei’s 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.
Mr. Osei bemoaned the situation where 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.
The situation, he argued, does not give Ghanaians the confidence and excitement they are supposed to have following Ghana’s discovery of oil in commercial quantities.
However, Mr. Mould noted that for government to decide or take the bold step to invest in TOR to revamp it, certain requirements would have to be fulfilled and these include:
“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.”
He said, “Basically TOR needs a performance improvement plan (PIP) after which it needs to demonstrate efficiency.”
Mr. Mould indicated TOR would need to give financial guarantee to GNPC (like all traders and refineries who purchase crude oil from GNPC) to ensure payments are made promptly “so that GNPC does not violate the Petroleum Revenue Management Act (PRMA), which requires that full payments for crude lifted be made within 60 days.
“Government should not call on GNPC to take its place and provide support to TOR in the form of guarantees to financial institutions or to the PRMA.
However, if government does instruct GNPC to do so then GNPC should treat it as an investment and insist performance improvement plan be put in place by Government before any such support would be given; and GNPC would also have to seek approval from the appropriate authorities to do so,” Mr. Mould stressed.