June 10, 2019
An Energy Expert and Former Chief Executive of the Ghana National Petroleum Corporation (GNPC) has called on the management of Tema Oil Refinery (TOR) to address its operational inefficiency and loss-making condition.
That, he said, needs to be done “before it starts to make a claim for GNPC to allow it to refine Ghana’s crude and additional state investment from the 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 as feedstock to refine; this is due to the fact that TOR has not been able to demonstrate its ability to refine profitable in a sustainable manner.
“To provide the needed working capital, the financial institutions need a payment security structure which alternate 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.
Also, he said, the problem of frequent operational disruptions to TORs processing was as a result of mechanical and operational failure of its processing units “which manifests itself in the poor profitability record which has constantly been a drain on the taxpayer over the years to support its balance sheet due to years of loss-making”
Mr Mould was reacting to the Managing Director of the Tema Oil Refinery (TOR) Mr Isaac Osei 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. 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.
But, responding to a question on if government should invest more taxpayers 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.
Mr Mould said TOR would need to give a financial guarantee to GNPC (like all traders and refineries who purchase crude oil from GNPC) to ensure that payment was made promptly “so that GNPC does not violate the Petroleum Revenue Management Act (PRMA) which requires 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 Govt does instruct GNPC to do so then GNPC should treat it as an investment and insist on the performance improvement plan be put in place by Government before any such support be given; and, GNPC would have to seek approval from the appropriate authorities to do so” Mr Mould stressed.
SOURCE: Ghana | JoyBusiness