Friday, October 24, 2014

We can’t give oil to TOR — GNPC

Tema Oil Refinary

The Ghana National Petroleum Corporation (GNPC) says it will be very risky to give its crude oil to the Tema Oil Refinery (TOR) to refine.

The Acting Head, Corporate Affairs of the GNPC, Mr Eric Pwadura, said the efficiency of TOR was questionable and looking at the fact that the law was strict on how many days it would take to lift, refine and then pay back, it would not augur well for GNPC to give crude to TOR.

At an academic forum in Accra, he said if TOR could give GNPC a Letter of Credit (LC) to guarantee that it could deliver its money in 60 days, then it would give TOR its oil to refine.

“Per the law, we are supposed to ensure that all these monies are paid back within 60 days. Even when TOR had 90-day LCs it could not honour them. But for us it will be very risky at this point to give our crude to TOR to refund because if you look at TOR’s capacity it does 40,000 barrels a day and it’s not efficient,” he said.

He said a lot of capital was needed to be injected into TOR to make it efficient.

“Is TOR efficient? I don’t think so. Who will put money into TOR to make it efficient? That is a question that you and I need answers to. Or is it the money that we are currently giving back to government as a result of our operations? I don’t think so. Do we need an investor to invest in TOR? Well, that’s an issue that we need to find answers to,” he said.

Oxford Business Group

The academic forum was organised by the Oxford Business Group (OBG) in collaboration with the University of Ghana Graduate School.

The OBG delivers lectures to students around the world and also produces annual investment and economic reports in over 35 emerging markets. Every business intelligence report by OBG is based on in-country research by experienced analysts, who conduct hundreds of interviews within each country as part of their research.

An address on “The Role of Oil and Gas in Economic Development” was delivered on behalf of the Chief Executive of the GNPC, Mr Alex Mould, by the Director of Human Resource of the GNPC, Naa Bortei Doku.

He disclosed that GNPC was working hard to become a leading global oil and gas company, whose operations impacted profoundly on the quality of life of the people of Ghana.

“Our strategic goal is to be a stand-alone operator in seven years and a world-class operator within 15 years,” he said, adding that the Jubilee Oil production changed the country’s status from a net importer to a net exporter of crude oil with Gross Domestic Product (GDP) growing to a record 14. 1 per cent in the first year.

“New investment in Ghana’s oil and gas sector reached a high of an estimated US$2.7 billion in 2012 and US$1.6 billion in 2013. The size of the industry is expected to reach US$20 billion by 2015 and US$60 billion by 2022,” he said.

He also pointed out that great opportunities existed for oil and gas to positively impact the lives of the people of an oil-producing country like Ghana and therefore, the benefits accruing form the country’s petroleum resources must outlive the resources themselves.

Jubilee oil lifting and TOR

Records from the GNPC show that from November 28, 2010, when production began to December 31, 2013, there has been a total lifting of 86.929 million barrels of Jubilee crude oil with Ghana Group's share as 15.655 million barrels, which represents 18.0 per cent.

The total lifting for 2011, 2012 and 2013 are 24,450,155 barrels, 26,430,934 barrels and 36,048,290 barrels respectively.

TOR, which started as a simple refinery has subsequently been upgraded presently to a secondary plant with a residual fuel catalytic cracker (RFCC) and enhanced capacity of 45,000 bopd, equivalent to about 6,138 tonnes of crude oil per day.

The refinery has, over the years, been bedevilled with crude oil supply challenges in addition to poor financial management that had at different times led to disruptions in refining operations at the plant. The current non-functioning at the refinery is not unfamiliar, but it is worryingly of the longest duration and strangely so since the country’s indigenous crude could be lifted to TOR easily, cutting out supply risks.

But TOR, initially, was denied Jubilee oil because government officials claimed Ghana’s famous Jubilee oilfield produced the high grade ‘Sweet Light’ oil, and to establish its quality, they had to export substantial quantities to the international market for refiners to evaluate the Ghanaian crude for classification purposes. That currently has been established and the country no longer needs to export all of its crude.

GNPC officials attest to the fact that the original arrangement with Jubilee field partners was to supply Ghana all of its domestic requirements at the prevailing international price before exporting the remainder and, with over 100,000 barrels being produced daily, TOR’s total requirement of 45,000 bopd could easily be met.

However, another argument has been that TOR was built to process low grade crudes, in the sense that a lot of other products, apart from the fuels, that could be obtained from further processing of residual materials from the high grade crudes would be lost, thus not making economic sense to process Jubilee sweet light at TOR.

This therefore calls for significant investments to be made. Data from the Energy Commission shows that the costs of retrofitting required to cope with the higher grade oil is estimated to be almost US$1 billion; a cost not too high to bear compared to the benefits to be derived.

The new twist to challenges between TOR and GNPC over the delivery of oil to the refiner highlights the need for fresh injection of capital into the country’s only refinery to enable it to add value to the country’s crude oil.

This is more critical as world crude prices have shown dramatic declines in recent weeks; a phenomenon that analysts believe will persist into the foreseeable future leading to forecasts of crude prices staying below US$100 well into next year.

The Regional Editor, Africa of Oxford Business Group Academic Programme, Mr Robert Tashima, stated that it was odd for a region in the world that was attracting so much attention of late, to remain poorly understood for its economic performance.

He said the fact that there was still so much ignorance out there was a huge opportunity to fill that void with well-informed individuals who could contribute not only to specific industries, like petroleum engineering or college teachers, but also to the general discussion about what Africa rising actually means, here on the ground.

“This is because we know better than any analyst abroad where the best opportunities are for investment in Africa,” Tashima said.

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