Government’s Woeful Handling of the Petroleum Sector

- the need for a Public debate

Distinguished Ladies and Gentlemen of the Media; thank you for responding to our invitation at very short notice. Like most Ghanaians, AFAG believes that there is enough confusion in the petroleum sector of our country these days to warrant comment and questions. The purpose of this press conference therefore is quite simple: to seek answers from Government to legitimate questions that agitate the minds of millions of ordinary Ghanaians.

By now it is no longer news that the Tema Oil Refinery has not refined a single barrel of crude in the first ten months of this administration. At the same time, supply of refined products on the market has been erratic at best. Indeed, for the first time in 8 years, Ghanaians have had to queue for fuel in many parts of our country, including the national capital, Accra. The cost to the nation of this state of affairs would only become clear, when the annual GDP figures are available at the end of the year. But suffice it to say that, it has been a considerable source of instability and uncertainty for the business community of our country.

Despite all these it has been easier to find a needle out of a haystack than get answers from the people we put in Government about what the real situation is. This is not for want of trying, but because the answers from government for this state of affairs have been wobbly at best. It took an open threat of action by the hard working and patriotic workers of TOR and the Tema District Council of Labour, to bring us close to our first delivery of crude oil - One more piece of evidence to highlight the mediocrity in the government, which is masquerading as excellence. Why did it have to take the President going to Tema Oil Refinery to learn the problems of the place? What kind of briefing was the President getting from his men at TOR? Will it be far-fetched to surmise that the President’s men are sleeping at the switch?

The Sahara Promise versus Reality:

Ladies and Gentlemen of the Press, AFAG’s investigations have revealed that, indeed, the only thing that was standing between Tema Oil Refinery and the first consignment of Crude from Nigeria, was not any outstanding debt to the oil suppliers, but an outstanding debt to the NDC manifesto. Our usually reliable sources have informed us that, the extremists in the ruling NDC were hell-bent on ending TOR’s dealings with Sahara Energy Resources Limited (SERL). Even when it became quite obvious that TOR was not going to be able to lift oil from Nigeria without the involvement of SERL, this fringe wing of the NDC, still believed it was politically more expedient to let the people of Ghana suffer fuel shortage, rather than breach what they believe was a cardinal promise, which is eloquently captured in the Party’s Manifesto for the 2008 elections: “Review the monopoly of Sahara Energy in crude supply to TOR and VRA”.

AFAG would normally not be against such a review. Indeed, we are crucially aware of the significance of competition in an open liberal economy, and would support any such review. However, elementary prudence would dictate that one must select his grains before he burns the chaff. Why was the Government so much in a hurry to end the contract with SERL, even at the risk of not getting the crude supply from Nigeria?

We are aware that, couple of weeks ago, our Government and the authorities of Tema Oil refinery, sent a tanker to the Republic of Nigeria, ostensibly, to lift oil. On the strength of that arrangement, the Ministry of Energy held a press conference to announce the imminent arrival of crude oil into the country. The rest, as they say, is history. However, the critical question arising out of that debacle is; how much did it cost us to send a tanker to Nigeria and back without crude? What arrangement was in place before we dispatched a tanker to Nigeria? What due diligence was done before we decided that it was ok to spend money on such a fruitless trip to Nigeria? For a government that came to power on the promise to cut “profligate expenditure”, we believe it is legitimate for Ghanaians to be told how much was spent on that trip. In our view, if anything would qualify as profligate spending, this kind of expenditure definitely does. It was in fact a reckless expenditure to make.

After 10 months of denial on the part of our government and ten months of sheer suffering willfully imposed on Ghanaians in an attempt to fulfill a manifesto pledge, the Government has finally come round to what many ordinary Ghanaians have known all these months. At last, Sahara Energy Resources Limited has been contacted to lift oil for TOR. Question is; why must it take 10 months of suffering and sacrifice by the Ghanaian people for our government to realize that no campaign promise (particularly a bogus one such as the one in question) is worth fulfilling at the expense of the comfort of our people?

We want to believe that it was for good reason that the NDC then in opposition thought it would be good to review the monopoly of SERL. We can surmise this from another quote from their manifesto: thus “apply the anti-corruption crusade fully in the energy sector – ensure transparency and enforced compliance with regulations”. That being the case, are we to assume that since Sahara has now been given the all clear to bring in the Crude (which has already arrived), that the company has passed this “transparency and enforced compliance with regulations” test? Has the government now discovered that TOR’s dealings with SERL all these years, after all, have been above board, or are they just happy to look the other way while Sahara gives the nation a raw deal, because it is now politically convenient to do so?

The TOR Debt:

By now, we are all aware that Tema Oil Refinery (TOR) owes a lot of debt on its books. What we do not know, however, is; How much? Depending on whether you are listening to the President, the Vice President, Minister of information, the Deputy Minister of Energy, Hon. Moses Asaga or Hon. Alfred Kwame Agbesi, you get a different figure. The latest figure of the debt was given by Mr. Agbesi only last week, on an Accra radio station, as GH¢1.5 trillion. The variations in the numbers, deliberately or otherwise; makes it difficult for constructive intelligent debate on the subject. Be that as it may, we are of the view that, by the very nature of the oil business, it is not possible to deal with the commodity on a purely cash basis. It is that reality that letters of credits (LCs) are meant to resolve. Therefore, at any point in time, the balance sheet of the company would naturally show some liabilities. Indeed, there is no business that has no liabilities on its books.

In our opinion, it is the ability to manage and leverage these liabilities that distinguishes a government that talks from a government that works. At any rate, our estimates show that the inaction on the part of the government in managing the debt beyond continuous churning out of new figures, is costing TOR in monthly interests, amounting to GH¢20 million (¢200 billion). This translates into some GH¢200 million (¢2 trillion) over the last 10 months. In other words, government inertia alone has ballooned TOR’s liability to Ghana Commercial Bank (GCB) by an additional ¢2 trillion. By even the world’s lowest standards, this cannot be said to be a better management of the TOR debt.

We call on the government to immediately let the good people of Ghana know exactly how much the NET TOR debt was, as at 7th January 2009, and by how much it has increased since they took over the management of the refinery. Since government claimed, TOR’s inability to bring in any crude was because of the “huge debt”, can we assume, now that the crude is in, the debt has been cleared or substantially paid?

10 Months of TOR Shut Down:

AFAG wishes to congratulate the workers of Tema Oil Refinery for their selflessness and patriotism in coming out in the face of threats and intimidation by management, to let the people of Ghana know that, contrary to the official statements on the state of Affairs at the Refinery, things were really getting out of hand. They could have chosen to keep quiet over the issue. After all, they were being paid their FULL WAGES, even though they were forced to idle for 10 months. But they thought it was not in the best interest of the nation for the status quo to persist. We thank them for their patriotism. We need many more Ghanaians of their kind, who would be able to speak up and speak the truth, even when it is inconvenient and risky to do so. That is what differentiates a patriot from anyone else.

However, AFAG wishes to know, how much it cost the nation to pay the Wages of these patriotic professionals for 10 months at the time the plant was shut down, in apparent fulfillment of a campaign promise to “Review the monopoly of Sahara Energy”?

AFAG calls on the President to immediately activate his promise to investigate the very serious allegations made by the workers of Tema Oil Refinery, that some persons in Government were deliberately frustrating the efforts of TOR to secure crude oil delivery, in order to further their personal interests. For a start, we call on the Ministry of Energy to publish the names of ALL companies that were supplying refined oil to the Ghanaian market during the last ten months, when TOR was not refining oil, along with the prices at which they were supplying to us.

Fuel Price Increase:

AFAG in principle is not against fuel price increases. However, we believe that a government which believed that a price of ¢51,000 for petrol at a time when the world market price of crude was US$147 was too high, has no justification to sell the same petrol for ¢52,000 at a world market price of only US$79 a barrel. As candidate, the President promised our nation a“DRASTIC” reduction in fuel prices. It is our intention to hold the President to this promise which he made to help him win power in the 2008 election. It is for this reason that AFAG believes that the current fuel price increases are not only ludicrous, bogus and unacceptable, but also a clear aberration from the social contract the President had with the citizens of Ghana.

The explanation by the Government that the recent 5% fuel price increases have been precipitated by international crude market prices is absolutely farcical and unjustifiable. Elementary arithmetic would prove that if US$147 gives a price of ¢51,000, which the President considered to be too high, then US$79 cannot give a higher price of ¢52,000, unless one is using some reverse, twisted logic.

We therefore debunk the assertion that this increase is necessitated by demand pull factors linked to the rising world market price of crude, as bogus and a deliberate attempt to throw dust into the eyes of the people of Ghana. This is sheer propaganda and absolute perpetuation of falsehood.

The truth is that Government is only being faced with the reality of its grandiose and deceitful campaign promises and has no option than to pass on cost to Ghanaians.

It would be recalled that during the last the NPP administration when the world market price of crude climbed to the unprecedented level of US$147 a barrel, at a time when a world food crisis was also generating tension around the world, especially in Africa, the then administration took the very difficult step to freeze the ex-pump price of petrol at ¢51,000, to cushion the people from the effect of the global food crisis as well as the fuel prices.

When the international prices suddenly tumbled to as low as US$44 a barrel, at a time when TOR had already bought inventory for three months’ supply of fuel, Government’s explanation that it needed to sell refined crude at existing prices for the existing inventory was rubbished by the NDC and its allies in the CJA. Under mounting pressure from political pressure groups and other civil society organizations, the government was forced to further reduce the ex-pump price of fuel. Inevitably, this action immediately caused TOR to accumulate significant stock losses, which is part of the now famous “TOR Debt”.

The fact is therefore inescapable that though the NPP Government was able to clean up the books of TOR by repackaging and refinancing the debt with bonds, the cumulative effect of the under recoveries during the height of the of the World Market Prices and the stock losses for a three-month inventory, the NPP Government’s tax waivers and reductions, interest on TOR overdraft, exchange losses resulting from the depreciation of the cedi is what has now become famously known as the “TOR Debt”.

Again the NDC government’s botched attempt to fulfill its campaign promise to reduce fuel prices in the first 7 weeks caused TOR to lose enormous sums of money. That reality caused the President to break his first major campaign promise by immediately reversing the 5% reduction into a 10% increase in petroleum prices in a matter of days.

Government instead of apologizing to Ghanaians for their massive deceit or otherwise, keeping its campaign promise, suddenly wants Ghanaians to face the reality of competitive market forces, thereby indemnifying itself from price increases.

They now want us to believe that it is the National Petroleum Authority (NPA) that is responsible for setting local fuel prices, a position they had previously rubbished.

Conclusion:

Ladies and Gentlemen of the media, whatever the answers to these questions might be, we believe that it is about time for the political class to elevate the political debate in our country. It should no longer be acceptable for a political Party to compile a bunch of discredited rumours into a book and call it a manifesto. It should also not be enough, for the media to tolerate false equivalences in the name of fairness and balance. It should be common practice for political parties to base their claims in campaign manifestos on well grounded research and facts, never on speculation and innuendo.

As citizens of this land, we choose to exercise our right to demand from leaders who make such unrealistic promises to fulfill them.

The NDC states in its manifesto under the Heading; Managing the Energy Sector: Thus, “From Energy exporter to darkness and crisis – OUR ENERGEY SECTOR MUST BE FIXED to feed industry, improve social services and give the people a Better Life. The NDC has the experts to make energy work for growth and spread prosperity”. Well then, you had your chance in the last ten months to “FIX IT” and we are in a mess.

On this note AFAG wishes to invite the NDC Government, leading political parties (NPP, PNC and CPP) and other civil society groups for a debate on: “The TOR DEBT: Causes and financing A review from 1992-2009”. This would allow for a thorough cost benefit analysis of decisions behind the management of TOR and the way forward as a nation.

We believe that such a debate is necessary to give politicians a great lesson from this phenomenon to stop toying with the hopes of Ghanaians and end the endless blame game over the management of TOR.

Ladies and Gentlemen thank you for honoring our invitation and let’s meet at the AFAG debate on energy.

For and on behalf of AFAG:

Steve Amoah: 0246912305

Henry Asante: 0248274646