Kufuor commissions $230m petroleum project

Tema (Greater Accra) -- President John Agyekum Kufuor on Wednesday commissioned the Residual Fluid Catalytic Cracking Unit (RFCC) at Tema Oil Refinery (TOR), which was constructed at the cost of $230m.

The RFCC, which is the phase two of TOR's modernisation programme would enable the refinery convert the low cost residue fuel oil into additional quality of high value Liquefied Petroleum Gas (LPG) and gasoline, sufficient to meet domestic demand and a surplus for export.

The 14,000 Barrel Per Straight day RFCC was constructed by the S.K. Engineering and Construction, while Samsung Corporation, both from South Korea, financed the project. The completion of the RFCC means 7,800 barrels of gasoline and 3,500 barrels of LPG and other useful petroleum by-products could be produced daily.

President Kufuor charged the relevant authorities to adopt radical strategies to work out a comprehensive programme for the resolution of the ?3.4 trillion debt of TOR to ensure full cost recovery in order not to destabilise the economy and society.

The debt, he pointed out, is so massive that it would sap the resilience of management unless something radical was done about it, saying the full cost recovery and provision for the repayment of the debt must be our ultimate aim.

President Kufuor noted that looking at events, this would not be possible immediately because the heavy provisions that must be made towards the amortisation of the debt in the short term, would distort any realistic pricing.

The realisation of this problem, however, needs the support and understanding of Ghanaians, who are regarded as the owners of the plant and consumers of the petroleum products.

With the improved efficiency at the plant, President Kufuor urged the management to seize the opportunity to resolve the company's financial problems once and for all and endeavour to break away from the cycle of crisis management and become a modern, efficient and profitable company.

This is because, the improved plant has the potential to infuse the economy with renewed vigour to be able to serve the country and the refinery needs of neighbouring countries to earn foreign exchange for Ghana.

The President was critical about the corrupt practices at the refinery, particularly at the procurement level where senior staff have tend themselves into private contractors to the company leading to conflict of interest situations.

He called for a stop to all the negative practices to give the refinery a chance to be profitable especially, "when there is blatant stealing of large quantities of fuel through the use of false gauges at filling stations where monitoring is minimal, making workers to resort to industrial action at the least opportunity.

Having invested so much money in the project, President Kufuor warned that, "the state is entitled to demand an economically efficient management of the plant and said the entire staff have the responsibility to maintain the highest standards so that we do not fall back into the cycle of expensive rehabilitation as has become the norm in several sectors of the economy."

Albert Kan-Dapaah, Minister of Energy said the RFCC increases the technical efficiency of TOR and explained that the refinery could obtain more high valued products such as premium gasoline and LPG from the same stock of 45,000 barrels a day.

He emphasised that since production of these essential products would exceed national demand, the proceeds from the surplus that is exported would be used to repay the loan that was contracted to finance the construction of the RFCC, adding that TOR would henceforth, be a net exporter of LPG and gasoline in future.

Kan-Dapaah noted that even though the project is commendable, planning from the beginning and engineering preparations left much to be desired. The financing arrangement, which demanded that payment, started even before the project was commissioned, placed an unbearable burden on the cash flow of the refinery.

He pointed out that the management of the project, therefore, required careful handling and commended Samsung, SK Engineering and TOR for their patience, understanding and forbearance over the last couple of months.

Kan-Dapaah said a lot more work, such as improving upon the reliability of utilities to the plant complex, especially steam, power and compressed air, need to be done to enhance the efficiency of the RFCC. "We also need to fast-track the installation of the single Buoy Mooring on Build, Operate and Transfer (BOT) basis to improve upon crude oil supply to the refinery by December 2003."

He said scientific studies have revealed that leaded gasoline is the greatest single source of human exposure to lead, adding that the health impacts of lead are serious and could affect the mental and physical development of children.

It could also cause elevated blood pressure, cardio vascular conditions as well as neurological and kidney ailments among adults. He said it is encouraging to note that the RFCC could permit the processing unleaded gasoline in the country and plans are advanced for the introduction of unleaded gasoline in the country.

Woo Taik Chung, President and Chief Executive Officer of Samsung Corporation, noted that an efficient energy sector is not only a pre-requisite to industrialisation, economic growth and development of any country. He disclosed that the TOR modernisation project had been on the drawing board since the 1970s, adding, "with the encouragement and support of the TOR, the government, my company and SK Engineering had the courage to get on with the project."

"I can see today that our decision to form a development partnership with TOR has been vindicated. It was worth taking the risks and facing the difficulties that we have encountered for the past several years".

TOR began life in 1963 as Ghanaian Italian Petroleum Company (GHAIP), which was a simple hydro-skimming plant designed and built to process 28,000 barrels per special day, equivalent to 1,250,000 tonnes of crude oil per annum.

GHAIP, which was a joint venture enterprise between the Italian Oil Company and the Government of Ghana, produced gasoline, gas-oil (diesel), kerosene, LPG and industrial fuel. The government of Ghana took over full ownership in April 1977 and changed the name to TOR.

The first phase of the modernisation programme, which was started in February 1996 was the revamping of the crude distillation unit from its original capacity of 28,000 to 45,000 barrels per special day by a consortium consisting of SK Engineering Construction and Samsung Corporation, and was commissioned in March 1998 at the cost of $65m. Present at the function were the Korean Ambassador Mr Chung and Mr W.H. Moon Chief Executive of S.K. Engineering Company.