Petroleum Transportation ... As Crude And Crude

When workers of the Volta Lake Transport Company insisted on government using its facilities to transport refined petroleum products to the northern parts of Ghana, many missed the enormity of their concerns. The various media houses that reported the story simply positioned their concerns as those of a state institution dying from neglect or the bug of inactivity, through governmental action.

To anyone with little insight into the downstream petroleum industry, the VLTC cry is a ‘jihad’- a jihad worth extrapolating to cover downstream petroleum transportation in general. Like VLTC workers, Ghanaians must demand of government or government institutions in charge of our petroleum industry the courage to pursue initiatives, or enforce existing provisions that protect Ghana (this time not VLTC) from dying.

Globally, pipelines are the most preferred method of transporting petroleum products. When James Hutchings failed in 1862 to transport petroleum products by pipe, he nonetheless created an awareness of the unique advantage of using this mode of transporting oil. Industry players have since 1930 recognized that pipelines have the advantage of economies of scale and have exploited it in transporting refined petroleum products. All countries, Ghana inclusive, and some companies have thus built an extensive network of pipelines, manned and managed by appropriate state institutions and/or companies with the singular objective of delivering refined products from one point to the other. Other modes of refined petroleum transportation exist, which depending on their positioning either complement the pipeline transfer or compete with it. Product tankers or water carriers (this is where Volta Lake Transport Company’s expertise and resources are unmatched in Ghana), according to industry watchers, transport 40% of refined petroleum products globally. Interestingly, Ghana’s preferred petroleum transport channel i.e. road and rail accounts for about 10% of global refined petroleum products transportation. So what informs a position that avoids the use of water carriers in preference of road transport? And what effect does the reliance on these road tankers have on the national purse? Over 1300 petroleum haulage vehicles exist in Ghana. It is obvious, as attempts are being made to kick-start various petroleum depots that our reliance on road tankers would not decline in the short term. A little less than eight years ago, the total number of haulage vehicles was about 500. The owners of these tankers (loosely called transporters) are mostly oil marketing companies, dealers or retailers of petroleum products, money-bags, politicians, and sometimes the petroleum policy makers themselves. The phenomenal growth in operators within the sector and their sustenance is simply traced to the money they make! And nothing can be truer can the fact that the money is made most easily by fraud; some of these operators fleece government daily by way of claims they make on the Unified Petroleum Price Fund (UPPF).

Through a number of machinations, transportation of petroleum products has become far more lucrative than selling or retailing petroleum products. And because the people who know may be benefitting, nothing gets done about it. Government, through the Unified Petroleum Price Fund, pays for haulage of petroleum products to all regions in Ghana. This is done to ensure uniform prices of products as well as maintain availability of petroleum products across the country. For the purpose of meeting the aforementioned obligation, Government collects taxes on every litre of Premium, Gas Oil, Marine Gas Oil, Premix, Kerosene and LPG.

The haulage claim due any transporter is computed by multiplying the quantity of product loaded by a determined ‘rate’ and the distance covered by the vehicle. It is worth noting that the only variable acquiescent to manipulation in the equation is distance. So the distance is heavily massaged, and the UPPF/NPA’s reliance on traditional waybill stamping, and zoning is pretence of a solution. When a transporter discharges a 13500 litres product at one of his outlets in Accra and yet the waybill is designated for Tamale, the state is paying some fictitious claim of GH¢ 1713.51 instead of GH¢ 294.03. Conservative estimates reveal that government loses more than GH¢7,000,000 monthly through these activities. And there are many ways by which the transporters ‘kill the cat.’ The current arrangement where OMC’s double up as transporters is a seamless endorsement of these fictitious claims. Again for OMC/Transporters with scattered stations across the country, the proclivity is to send most of their lifting’s to the furthest retail outlet and rake in fictitious claims. Further down, every retailer or filling station owner in Ghana now has a petroleum tanker and the abuse simply increases down there. And who can blame them when the NPA decides not to see anything wrong with this arrangement? And to the extent that the more established OMC’s like SHELL, Total etc have longed avoided this convenient OMC-transporter marriage, has the NPA not seen how this impacts on their performance within the industry?

Survival has equally turned some transporters and retailers to assume an amorphous title of ‘Peddler’. Peddlers usurp the job of an OMC by supplying other retailers or filing stations. For instance, Customer X buys from OMC A and in turn sells to a Customer Y- a customer unknown to OMC A and even the NPA. The peddler simply becomes the de-facto supplier of Customer Y. This arrangement suits very much OMC’s with no solid infrastructure/ retail outlets on the ground. Ultimately, the peddler’s motivation to make fictitious transport claims is encouraged by the OMC. The cash and carry climate in the downstream petroleum industry is also a veritable contributor to the issue of fictitious claims on the UPPF. It is a fact that not all OMC’s had any idea or care to know where petroleum products bought by their cash & carry customers are actually sent. Apart from the likes of SHELL, Total, GOIL and Allied Oil that can be vouched for, most of the OMC’s are without standards and the few insistent on saving the UPPF lose business from cash and carry customers.

A combination of technology and the strict enforcement of existing laws are sufficient to fix the bug of the transporter. Under the law establishing the NPA for instance, every retail outlet has to be sponsored by one Oil Marketing Company. That retail outlet (filling station) is also enjoined to be registered with the NPA. The law thus empowers the sponsoring OMC to assume responsibility for environmental, health, safety, quality, and operational standards of these retail outlets. The law, by deduction, precludes any other Oil Marketing Company from supplying a station which is not under its sponsorship. The law also stands to reason that any OMC that employs a transporter, ostensibly to send products to an unknown or unregistered OMC, should pay such a transporter, NOT UPPF. This is one way of stopping the abuse.

The inertia by the NPA to install vehicle tracking devices into petroleum haulage vehicles should baffle Ghanaians. The NPA cannot be oblivious of the fact that vehicle tracking devices have solved far more complicated situations in other jurisdictions. The most efficient models use telematics (an interplay between GPS and GSM technologies), allow the user to determine tracking parameters & thereby cost, and allow for customization for specific solutions. Multiple zoning functions in some of these trackers should easily smoke out false claims.

I am of the belief that the NPA can equally sublet certain functions of the UPPF. The workload and/or other considerations may be responsible for the lax vetting of some claims. When the claims verification is subjected to a little more scrutiny, a lot more money can be saved for Ghana. This way Ghana and VLTC won’t die at the same time!

BY S. KWAME MANCHIE

kmanchie@gmail.com