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PRESS RELEASE: Removal of PSRL on Petroleum Products

The National Petroleum Authority (NPA) wishes to inform the general public that His Excellency the President, Nana Addo Dankwa Akufo-Addo, has granted approval to zero the Price Stabilisation and Recovery Levies on petrol, diesel and LPG for a period of two months.

The above approval follows the advice of the NPA to the Hon. Minister of Energy to seek government’s intervention to mitigate the impact of rising prices of petroleum products on the world market on consumers. Prices of crude oil and refined petroleum products have seen sharp increases on the world market due to a rise in demand of oil globally without a corresponding increase in supply, particularly from the Organisation of Petroleum Exporting Countries (OPEC) and its allies.

Because pricing of petroleum products in Ghana is deregulated, changes in prices of petroleum products on the world market have a direct impact on prices at the pumps. The outlook of prices on the global market shows an upward trend and therefore there was the need to seek government’s intervention to lower the levies to cushion consumers from feeling the full impact of these rising prices.

The purpose of the Price Stabilisation and Recovery Levy (PSRL) is to stabilise prices for consumers and pay for the subsidies on Premix Fuel and Residual Fuel Oil (RFO). At this time it is important that the PSRL which is currently sixteen pesewas per liter (GHp16/Lt) on petrol, fourteen pesewas per litre (GHp14/Lt) on diesel, and fourteen pesewas per kilogram (GHp14/Kg) on LPG are zeroed to cushion consumers.

The NPA will work with the Ministries of Energy and Finance to quicken the legislative processes to give immediate effect to this directive by the President.

We are grateful to H.E. the President for granting the request to zero these levies to minimise the effect of rising prices of petroleum products on the world market on consumers in Ghana.

 

Signed

Corporate Affairs Department

Monday, 11th October 2021

 Government to reserve downstream petroleum marketing for indigenous companies

…NPA unveils impending indigenization of OMC, BDC marketing activities

… Foreigners will be restricted to infrastructure projects, but with local partners

 Last week, chieftains of the downstream oil and gas industry, the National Petroleum Authority, led by its new chief executive, Dr. Mustapha Al-Hamid, unveiled a major shift in state policy with regards to the structure of the sector. Addressing editors   of media houses in Accra, they announced that going forward, the importation of refined petroleum products into Ghana, and their distribution and sales within the country will be exclusively reserved for Ghanaian enterprises. This means that foreign   owned bulk distribution companies (BDCs) and oil marketing companies (OMCs) will be required to cease their activities in those regards.
 No specific timelines have yet been set for the implementation of this profound local participation policy and when it does commence it will be implemented in phases to ensure orderliness and that no stakeholders are unduly affected. In effect this   means ensuring that the supply of refined petroleum products is not disrupted and that exiting foreign BDCs and OMCs are not forced into rushed ‘fire sales’ of their assets which would prevent them from retrieving their full value.

 However even though the impending new policy is bound to stir up intense protestations from foreign companies operating in Ghana’s downstream industry – and indeed the wider international downstream oil and gas industry – there will be plenty   of unfolding commercial opportunities in the sector; foreign enterprises will still be allowed to invest in downstream activities that are infrastructure-driven, such as refineries, although with local partners serving at least as minority partners.

 Thus, the new policy suggests that it has been decided on, as much by government’s desire to get foreign investors to focus on the provision of key infrastructure as by the desire to reserve marketing and sales of petroleum products for indigenous   investors. It is instructive that local investors lack anywhere near sufficient capacity in the former, but have more than enough capacity in the latter.
 This next step in government’s ongoing “oil nationalization” agenda may prove to be its best move so far, even though it will irk the international downstream oil and gas industry. (See editorial).

 The move follows plans announced a couple of years ago to introduce local content and participation regulations for the downstream oil and gas sector as has been done for the upstream sector. Instructively the success of the upstream sector   regulations almost immediately persuaded the solid mining industry to commence self -regulation with regards to local content which is similarly proving successful.

 But the planned local participation regulations for the downstream oil and gas sector will bring the biggest shake up of all.

 It means major foreign market players such as Total and Vivo (operating under the Shell brand name) as well as South Africa’s Engen will be required to exit the retail oil and gas industry in Ghana although NPA chieftains say this will be done in a   phased manner so as to make it convenient for all stakeholders in the industry.

 Although the liberalization of the downstream sector over a decade ago created room for a sharp increase in indigenously owned OMCs which were enthusiastically, but responsibly licensed by the then newly created NPA, the only one that competes   favourably with their foreign counterparts with regards to sales volumes and sheer visibility is Ghana Oil Company Limited (GOIL), the partly state-owned OMC which had been the flag bearer of indigenous participation in the sector since long before   liberalization of the industry began.

 However, since they were allowed into the market through a policy of affirmative action, indigenous OMCs have been noted for their willingness to open distribution outlets such as petrol stations in the rural hinterlands where hitherto, only GOIL was   willing to set up shop. Conversely all the foreign petroleum product marketing companies have preferred to restrict their operations to urban centres where sales volumes are the highest.

 Indeed it is instructive that GOIL has been forced to adopt a deliberate corporate policy of siting retail outlets across rural Ghana in order to ensure that towns and villages in the hinterlands could access petroleum products – this in line with the   development policy of its majority owners, the State – because if it had not, such places would have been deprived of access.

 The entry of indigenous OMCs has changed all that however. Most indigenous OMCs have sought to establish retail outlets in rural areas across the country on a regional or national basis, seeing this as their best opportunity to quickly ramp up     market  share and consequent sales.

 This has greatly supported GOILs hearty, but erstwhile inadequate efforts to go it alone in rural Ghana. As of 2019 the overwhelming majority of the 91 licensed OMCs were indigenously owned and most of them operate in rural and semi-rural areas   in addition to a smattering of outlets in the urban centres. However it is instructive that their contribution to the total number of retail outlets in Ghana (3,167 as at 2019) is much smaller. Indeed, indigenous participation in the OMC sub sector of the   downstream industry has been as much through franchise ownership using the brand names of the industry leading multinationals as it has been through direct, full ownership of their own branded petrol stations.

 Actually though this will smoothen the impending switch over. The franchise petrol station owners will be well positioned to simply pay some level of compensation to the multinational brand owners and become full owners of the subsequently   rebranded retail outlets.

 But the biggest beneficiaries of the impending new policy – and deservedly so – will be the indigenous OMCs that have expanded quickly across rural Ghana but who continue to play second fiddle to the multinationals in urban Ghana, a situation   which is preventing them from earning nearly as much as those multinationals do.

 Since product pricing in the industry is still partially regulated – in that the price build up for imported petroleum products, including the numerous taxes that account for some 40 percent of their sales prices computed by the state – this means that   the foreign owned market players are allowed to reap the biggest profits while their indigenous counterparts end up with smaller profits from smaller business volumes in their effort to ensure that petroleum products are available everywhere around   the country including the rural hinterlands.

 Importantly the indigenous OMCs have proven that they are product quality and price competitive against their foreign counterparts even though they suffer smaller economies of scale.

 Therefore the new policy will finally reward indigenous enterprises for their endevour having indirectly been financially penalized for their efforts so far.

 Foreign companies have less of a presence in the BDC sector of activity – sometimes referred to as the midstream sector. BDCs are responsible for storage and distribution of petroleum products. Before the liberalization process the state=owned Bulk   Oil Storage and Transportation Company (BOST) was the only player in the industry. However the Ghana Chamber of Bulk Oil Distributors, as at 2019 had a membership of 23 BDCs that collectively account for 95 percent of petroleum supplied to the   domestic market.

 After Nigeria, Ghana is the second-largest consumer market for petroleum products in West Africa. The country is also emerging as a petroleum products hub with Ghana-domiciled companies shipping products across borders to markets in Burkina   Faso, Togo and Cote d’Ivoire.

 With their impending exit from the OMC and BDC sectors; foreign enterprises will have to turn their collective attentions to investments in infrastructure. Here, Ghana’s needs are enormous – particularly with regards to refining – and domestic   investment capacity falls far short of what is needed. Indeed the diversion of foreign attention in this manner appears to be part of the rationale for the impending new policy.

 The biggest and most obvious opportunity facing them is in the area of refining. The Energy Commission projects that the demand for petroleum products is rising by between 10 – 15 percent every year. . Historical observation shows that the   consumption of petroleum products in Ghana is always mainly on gasoline, premix, residual fuel oil, premium oil, Kerosene, liquefied petroleum gas (LPG), heavy gasoline, naphtha, aviation turbine kerosene (ATK). Thus, in 2016 the economy of   Ghana consumed 8% of LPG, 32% of gasoline, 53% of gas oil, 2% of premix, 0.2% of kerosene, 0.8% of residual fuel oil, 4% of aviation and turbine keroseneto mp.

 Because of the lack of domestic refining capacity most of this is imported, putting pressure on the cedi’s exchange rate. As consumption exceeds domestic production – and what little local refining capacity is attuned to heavy crude brands rather   than  the sweet light crude that Ghana produces – the country relies almost entirely on imports of petroleum products, for refinery operations, and energy generation for both household and industrial use.. However total import of crude oil gas fallen   sharply since 2016 (from almost 1.45 million tonnes in that year to around 233,000 tonnes in 2017) primarily as a result of local refining operations and the emergence of natural gas as a fuel for power generation stations.

 But while this has been the primary driver behind the transformation of Ghana’s once perennial trade deficits into consistent trade surpluses, the stuttering performance of the country’s only refinery, Tema Oil Refinery (TOR) has made the importation   bill for refined products inordinately high even as it stunts Ghana’s ambitions to be a petroleum products export hub for the West African sub region.

 TOR has been operational since 1963 but is facing considerable challenges. Although it has a design capacity of 45,000 barrels per day, poor maintenance and operational inefficiencies have meant that it output has been considerably less for much of    its history. It most recent problems have been the explosion of a furnace in 2017 forcing a complete shutdown; and following resumption of operations shortly afterwards its maximum capacity was reduced to 30,000 bpd. Still, further production       shortages have come as a result of feedstock shortages including another complete shutdown in June 2018 when it ran out of crude oil and failed to secure funding to purchase more.

 Government has since announced its intention to build a new 150,000 bpd refinery by 2022. This would enable Ghana meet its domestic demand and allow for significant export of refined products to the rest of the sub region but little has been   achieved towards actualizing the project.

 This presents huge investment opportunities for foreign investors including the multinationals about to be pushed out of their traditional OMC and BDC activities. Other opportunities for such enterprises exist in the provision of storage facilities,   pipelines, measurement and calibration equipment and the likes. Government will be hoping that its new policy redirects their investments in Ghana into such projects and infrastructure.

 Crucially, the new law will not be out of line with World Trade Organization rules which relate to merchandize trade rather than investment.

 There is one foreseeable problem however: ECOWAS protocols. There are two Nigerian OMCs operating in Ghana and which are protected by ECOWAS rules on investment – African Petroleum and So Energy – and the impending policy could create a   problem similar to the long standing dispute over Nigerians engaged in retail trade in Ghana. However this problem could be easily overcome by offering them a special dispensation – after all their combined market share in Ghana is insignificant – or   by establishing a new law stipulating that a certain (high) proportion of OMCs retail outlets must be sited in rural areas. Those Nigerian OMCs like their counterparts from other parts of the world would definitely fall short of this stipulation.

 No timelines have as at yet been set for the new policy to commence but it already has the backing of cabinet and is sure to receive the support of Parliament and civil society too.

 Inevitably, the foreign investment community will oppose it but Ghana is expected to stick to its guns by taking the moral high ground which it is fully entitled to.

Source: Goldstreet Business Newspaper

 

The process to deregulate the pricing of petroleum products has been evolving since 2005.

The policy was among other things to reduce the huge losses incurred by Bulk Distribution Companies (BDCS) and Oil Marketing Companies-OMCs which deprived them of the needed capital to make their businesses viable.

As a regulator mandated to oversee and monitor activities in the petroleum downstream industry and establish a unified Petroleum Price Fund, the National Petroleum Authority met with Civil Society Groups to discuss ways to promote a robust and efficient downstream petroleum industry.

Chief Executive of the NPA’ Dr. Mustapha Abdul Hamid says, the time is more than ripe for the move.

He says the NPA will do well to guard its regulatory role of protecting petroleum prices on the Ghanaian market.

This according to its Chief Executive Dr. Mustapha Abdul Hamid will ensure, the industry remains efficient, profitable, fair, and at the same time, see to it that consumers receive value for their money.

The Head of Pricing at the NPA, Abass Ibrahim Tasunti says competition is what drives petroleum pricing by oil marketing companies–OMC’s.

It is important that mechanisms be put in place to help Ghanaians benefit from pricing should it drop on the world market.

Stakeholders have had a session on Petroleum Pricing for Civil Society Groups in the Petroleum Sector.

The meeting comes at a time when the government is in the process of reviewing the price deregulation regime of the petroleum sector, which has been in effect since 2015.

Fuel prices may go up again before end of October – NPA


Projections from the National Petroleum Authority (NPA) suggests that fuel prices in the country may surge close to GH¢ 6.86 per litre at the pumps if all other factors influencing pricing do not change.

According to Abass Ibrahim Tasunti, the Head of Pricing at the NPA, the second pricing window for October puts the price of petrol at GH¢6.84 per litre while diesel will likely sell at GH¢6.86 per litre starting October 16, 2021, baring any changes on the world oil market.
These projections do not take into account the margins of oil marketing companies and that of the bulk distribution companies, which may cause the projected amounts to go higher while statutory taxes and margins remain the same.

“All things being equal, for the next window, [since] the price of petrol on the world market has increased by about 9% and diesel has increased by about 10%, so these two, holding everything constant will project that petrol will increase by about 5% and diesel also increase around the same figure which will take us to about GH¢6.84 for petrol and GH¢6.86 for diesel… This is the next window, which starts from the 16th of October,” he said on Citi TV‘s The Point of View.


Meanwhile, the Executive Director of the Chamber of Petroleum Consumers (COPEC), Duncan Amoah has expressed fears that the movement of forex could further cause the price of fuel to increase to at least GH¢ 7 by the end of the month.

While insisting the taxes imposed by the government on petroleum prices continue to play a significant role in the rising cost of fuel in the country, he said efforts must be made by the government to address the situation to bring relief to citizens.


“We can get to GH¢ 7 by end of October. If we are doing about GH¢ 6.8 for the projection, we are just about 14 pesewas shy so by the close of the month which is the first window in November if the trend continues and the cedi comes under the kind of pressure you will normally see towards the last quarter because of the pressure from importation, I do not see how GH¢ 7 is not possible before November,” he said.

Source: citinewsroom.com

Ghana to assist Sierra Leone on petroleum downstream regulation

The National Petroleum Authority (NPA) has offered to assist its counterpart in Sierra Leone, the Petroleum Regulatory Agency (PRA), to improve efficiency in regulating the petroleum downstream in that country.

In furtherance of this, a team from the NPA, led by its Chief Executive, Dr. Mustapha Abdul-Hamid paid a working visit to the Executive Chairman of PRA, Brima Baluwa Koroma and his team in Freetown in Sierra Leone.

The partnership between the two entities will, among other things, share experiences in terms of structures, processes, policies and procedures in regulating the petroleum downstream sector.

Addressing the Sierra Leonean team, Dr. Abdul-Hamid stated that cooperation was the only way the two entities can advance the development of their countries.

“The only way we can get out of our developmental challenges is by cooperating with each other. We are the only ones who are interested in the development of our countries and neighbouring countries. Because if I am not interested in the development of Ivory Coast, Liberia, Mali and other neighbouring countries and there is a crisis in any of these countries, Ghana or other neighbours will get the spillover effect,” he noted.

The NPA boss pledged Ghana’s willingness to assist Sierra Leone to develop its petroleum downstream industry.

“We mainly came to offer assistance to the PRA in order for Sierra Leone to be able to regulate the downstream sector better by crafting out a system that will ensure efficiency,” he added.

Recounting Ghana’s experience on regulation of the petroleum downstream industry, Dr. Abdul-Hamid said what has been helping the people is also the active participation of government through its entities such as Goil and BOST, unlike Sierra Leone that depends wholly on private players that normally decide what happens.

He commended Dr. Baluwa Koroma for his transformational leadership for the past three years, which has seen new important players within the sector.

Dr. Koroma said PRA was looking forward to strengthening its relationship with the NPA and indicated that a team will be sent to Ghana to learn on regulatory frameworks which will be beneficial to the Sierra Leonean petroleum downstream industry.

“We cannot overemphasize the timeliness of this visit, as this industry is under massive reforms. Sierra Leone needs Ghana in every capacity, and it is our desire to tap onto opportunities and experiences from Ghana that will enable us to overcome the emerging industrial challenges.”

He also indicated that there are many investment opportunities in the sector, especially in storage and distribution value chains.

The NPA delegation later met with the sector minister, Dr. Edward Hinga Sandy, the Minister of Trade and Industry. The Minister emphasized the importance of the visit and appealed for support in terms of capacity building.

He said, with a similar cultural environment and history, Ghana is a better model for Sierra Leone to learn from.

The delegation toured the newly refurbished tank farm facility operated by All Petroleum Products Company at Kissy Town in Freetown.

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