Business News of Wednesday, 13 August 2014
The Ghana National Petroleum Corporation (GNPC) says Tema Oil Refinery (TOR) in its currents state is not profitable.
It said unless the Tema Oil Refinery (TOR) is put into proper shape, it cannot be allowed to refine crude from the Jubilee oil fields.
The GNPC also discounted reports that it is refusing to supply TOR with crude oil.
TOR over the past few years has not operated in its full capacity due to its huge indebtedness and other operational inefficiencies.
Workers of TOR have been asking the government to allow Ghana’s crude oil be refined by them, stating that refining the nation’s crude abroad is not cost effective.
The Africa Centre for Energy Policy (ACEP) has cautioned that TOR should only be allowed to refine crude oil if it will be cheaper.
Speaking on the Citi Breakfast Show, the Chief Executive Officer (CEO) of the GNPC, Alex Mould said the Corporation is not insisting on Ghana’s crude oil being refined at TOR because some fundamental problems at the refinery must be addressed.
He said the GNPC must be able to get value for money because “if you send it [crude oil] there, you have to be sure that the yields of the petroleum products you get; you should be able to sell it at the current prices at the pump so that you can get your money back.”
Mr. Mould acknowledged that TOR has faced a lot of neglect over the years, which led to the shutdown.
The GNPC has between 18 to 20% of the total crude from the jubilee oil fields, and it is mandated to sell the crude oil and pay the money within 60 days.
According to the GNPC CEO, if the crude oil is supplied to TOR, the refinery is expected to pay for the supplies and support it with financial guarantees.
He admitted that TOR is capable of refining crude oil, but “a complete process audit of the refinery has to be done…to bring it into proper shape where it should be able to be profitable.”
Mr. Mould questioned how much the state would have to spend on TOR to enable it operate at full capacity.
He asked, “how much is it going to cost us to fix Tema Oil Refinery? Where are we going to get the money? Are we going to use taxpayers money, from the budget or are you going to leverage on the Tema Oil Refinery’s balance sheet?”
In his opinion, no bank in Ghana will be willing to leverage on the balance sheet of TOR because “there is a balance sheet problem.”
He further inquired whether the government will bring in a strategic investor to invest in TOR although such investors would demand total control of the refinery.
The GNPC boss was convinced that TOR’s shareholder [government] would have to make a choice.
“Every crude oil we will take to Tema Oil Refinery, there will be a loss and this loss is paid by the taxpayer” he insisted; adding that, “refining at a loss is not a business proposition. It may be a political proposition, but it is not a business proposition.”