Fast forward to 2014, TOR’s refinery was shut down because of operational inefficiencies and failure to secure Letters of Credit for the purchase of crude oil. This has not changed and industry players argue that investments cannot be made into a company that cannot prove to be profitable in the long run.
Although the current non-functioning at the refinery is familiar, it is worrying because it has kept long and strangely so since the country’s indigenous crude could be lifted to TOR easily, cutting out all other supply risks.
The Head of Policy at the Africa Center for Energy Policy (ACEP), Dr Ishmael Ackah, in an interview on January 21, said although TOR had the capacity to refine 45000 barrels of oil per day, most of the finished petroleum products consumed in the country were imported by the Bulk Distribution Companies (BDCs).
“Transportation charges, extra demurrage charges, insurance, among others, are added to the price buildup before the cargo even berths at the Tema Harbour. This makes imported finished petroleum products relatively expensive. Achieving an efficiency rate of 19 per cent in 2009, TOR needs sustained investment to turn things around. If not, TOR may collapse. TOR is currently not operating,” he said.
Attempts to revive TOR
Successive governments have tried to revive TOR with financial investments, the result of which was the introduction of the debt recovery levy that has generated public outcry over alleged mismanagement.
Largely due to the fact that government cannot fully account for how much has been generated so far and whether it was enough to clear the debt that has saddled TOR.
Analysis done by the ACEP, an energy think tank, showed that between 2009 and 2015, total collection from the levy was in excess of GH¢1.9billion, which was enough to pay off the debt which had ballooned from GH¢450 million to GH¢900 million as at the end of 2009.
The centre, therefore believes that Ghanaians must stop paying the levy, and the Minister of Finance must account for all that has accrued since its inception.
“Our analysis shows that between 2009 and 2015, the total collection from the levy is in excess of GHC1.9billion. This effectively amortises the debt assuming an interest rate of 10 per cent. We, therefore, find it difficult to comprehend why consumers should continue to pay this debt. Ostensibly, the TOR Debt Recovery Levy has over the years been misapplied, aided by the weak oversight of Parliament,” he said.
The economic benefits of TOR working according to Dr Ackah, would be more and therefore, government must work to ensure that the company is revived.
“TOR can be strategic in Ghana’s quest to develop through industrialisation. TOR can be expanded to be a regional refinery, producing not only gasoline but coal tar and LPG. This requires incentives such as guaranteed payment that will promote private participation with the government as the majority shareholder,” he said.
State institutions such as the Volta River Authority (VRA), he said should be made to pay the full price when they buy from TOR.
“We recommend corporate restructuring that has an international strategic investor (partner) coming on board with a combination of debt and/or equity financing. We propose a 20-40-30 ownership mix whereby the government through the Ghana National Petroleum Corporation (GNPC), or some special purpose investment vehicle acquires 20 per cent of TOR’s shares. Another 40 per cent should be floated on the Ghana Stock Exchange for ordinary Ghanaians and institutional investors (including the SSNIT, BDCs and OMCs) and the remaining 30 per cent offered to the international strategic partner operating on a public-private partnership basis. The composition of the board and management will reflect this new structure and will be incentivised to act in the best interest of the organisation with little government interference,” he said.
The government, he said should also sign performance contracts with the board and management of TOR to reduce inefficiency to less than 15 per cent when money is invested into the company.
“When TOR is able to achieve 85 per cent or more efficiency level, Ghana should start refining a percentage of the crude oil produced from the Jubilee or TEN fields,” he said. — GB