TOR assures of regular supply of fuel

Back page (lead) August 4/2008

Story: Charles Benoni Okine

THE Tema Oil Refinery (TOR) has given the assurance that it is capable of sustaining the current petroleum supply levels in spite of losses it is incurring due to the halt in the review of petroleum prices since May 4, this year.
Reacting to speculations that the losses could lead to shortage on the market, the Head of Public Affairs at TOR, Mrs Aba Lokko, said the government had a special arrangement with Nigeria to supply 1.85 million barrels of crude oil every month to the refinery under favourable payment terms, and indicated that there was no cause for alarm.
She was answering questions as to the impact of the freeze on the review of the petroleum prices by the National Petroleum Authority (NPA) and the high cost of crude oil on the international market on the operations of the refinery.
She said apart from the freeze on petroleum prices, the rising price of crude oil on the international market had also aggravated the situation.
She, however, denied any reduction in the output from TOR, saying, “What we supply to the nation has not changed.”
Unable to make full disclosure on the actual level of shortfalls, Mrs Lokko said, “We are counting the cost to know how much debt we have incurred.”
Out of the 60,000 barrels of crude oil used in the country each day, TOR refines 45,000 barrels while the remainder goes to fire the thermal plant at Aboadze.
Ms Lokko said the impact of the skyrocketing prices of crude oil on the international market was worldwide and Ghana was no exception.
“But like many others, the government has found a way around the situation and until the unforeseen happens, the situation is firmly under control,” she said.
In announcing mitigation packages for the country by the President a couple of months ago, some taxes on petroleum products were reduced and since then the NPA, an autonomous body that has as part of its mandate to review the prices of petroleum products as per the prices pertaining on the international market, has stopped the review of the prices since the last couple of months.
Ms Lokko reiterated that the situation had had an impact on the finances of the refinery although supplies were intact.
“Surely we may not be able to break even in the end,” she said, but noted that the refinery would continue to deliver.
There have been fears expressed about the level of debt the refinery could accumulate and its impact on the economy.
As a result of a similar situation in the 2000, TOR incurred huge debts because of the then government’s quest to heed the cry of the populace to stop raising prices of petroleum products in spite of the upward trend on the international market.
The Ghana Commercial Bank (GCB) from which the government borrowed huge sums of money to be able to import the crude oil nearly went bankrupt while the other banks also suffered a similar fate.
The treasury bill rate shot up making savings in the banks unattractive and this also had a negative impact on inflation, which stood at more than 40 per cent, while interest rates also reached unprecedented heights in many years.
Although the impact on the economy now is not like the situation in 2000, inflation has jumped to 18.4 per cent from about 12 per cent in February, while the base rate which dropped to about 14 per cent has now gone up to 17 per cent.
Meanwhile, the Association of Oil Marketing Companies (OMCs) has called for more support from the government for TOR and other importers of crude oil into the country to ensure continuous supply of petroleum products to the market.
It said since the present price of the products on the market did not reflect the cost of crude oil on the international market, the importers might be highly tempted to reduce the amount of imports, a situation that could create serious shortages across the country.
The Chairman of the OMCs, Mr Agyemang Duah, told the Daily Graphic in an interview that the situation on the international market as far as crude oil was concerned was creating problems for not only governments including that of Ghana but players in the industry and noted that it was necessary for the government to ensure that there were no shortages that could bring the economy to a standstill.
Mr Agyemang-Duah, however, noted that in order not to bring the importers to their knees, it was imperative for the government to ensure that TOR and others were adequately supported to ensure continuous supplies of the product to the market.
He also refuted claims that there were some shortages because of reduction in imports by the refinery.
“We are not aware of any such shortages but we hope it does not come to that,” he added.
The NPA on the other hand has acknowledged the effect the halt in the adjustments of petroleum prices to reflect what was on the international market was having on the importers of crude oil such as TOR, Trafigura and Vitol.
However, it said the NPA was in discussions with the importers to devise a way forward to clear the hurdles.
The Chief Executive of the NPA, Mr John Attafuah, told the Daily Graphic in a separate interview that there were some positive trends on the international market as of now, an indication of a relief in sight.
Mr Attafuah also denied that the imports had reduced because of lack of funds, saying “if you find some filling stations not having products, it may likely be as a result of the fact that, that OMC is unable to settle its indebtedness with CEPS or may also have defaulted in its statutory obligation”.