Regarding ensuring geographical uniformity in the prices of petroleum products, the regulator and industry have successfully ensured that this has been largely achieved, despite some few infractions. This has been as a result of some major steps the regulator has instituted over the years.

The first is the decentralisation of petroleum depot operations or the establishment of zonal depots in Takoradi, Kumasi, Buipe and recently Atuabo, (i.e. LPG Depot), in addition to those in Accra/Tema zone. These zonal depots are to serve some designated areas.  

The second is the implementation of the Primary Distribution Margin which is mainly used to pay the cost of transferring products from one depot to another. With this margin put in place, no BDC is allowed to sell products to an OMC higher than another, just by reason of depot location. This is one area that some OMCs have complained that some BDCs are fond of flouting and giving reasons which are completely unacceptable to the OMCs. The good news, however, is that the National Petroleun Authority (NPA) has stepped up its sanctioning mechanism to ensure that deviant operators are brought to book.

The third is due to the implementation of the Unified Petroleum Price Fund(UPPF). This fund pays for the cost of transporting petroleum products from any of the depots in the country to any fuel station or to any bulk consumer(customer) location in the country. Therefore, because of this fund, no OMC is allowed to price its fuel at a particular station or location higher than another by reason of differences in distance of the said station or location from the depot.  

These inbuilt measures have succeeded in significantly addressing the concerns of those consumers in distant communities and helped in taking off the initial phobia attached to the introduction of the price deregulation policy, especially in the case of those living far away from the coastal areas where Tema Oil Refinery (TOR) and most of the petroleum products depots are located.

Protection of vulnerable consumers

Regarding ensuring that the vulnerable consumers of petroleum products are protected through subsidy on social products such as premix fuel and until recently kerosene, there has been some significant progress over the period. These products have enjoyed some subsidy over the years even though there have been some challenges associated with administering the subsidy to the right beneficiaries.

For instance, Premix fuel continues to enjoy reasonable subsidy. Even though administering that subsidy also poses a challenge due to some abuses, this has largely been under control due to some measures put in place by the regulator such as colour-coding, the petroleum products marking scheme, among others.

Again, considering the fact that the consumption of premix fuel is not as high as the major products such as petrol, diesel and LPG, the subsidy on it does not pose serious danger to government’s fiscal policy.

Some areas of concern and the way forward

Notwithstanding the progress made so far, I am of the view that there are some areas that need to be addressed by the key stakeholders in the industry— the government, the regulator(NPA), the industry, the public (consumers)--- to enable the intended policy objectivities to be adequately achieved.

Enactment of Downstream local content law

It is important that immediate steps are taken to ensure that gains made over the years in promoting local private sector participation in the industry is sustained and increased.

To be able to do this, the Local Content and the participation policy document for the downstream industry should be backed by a legislative instrument, without delay. This will ensure that things are spelt out in clear and unambiguous manner to avoid foreign operators exploiting such situations to their advantage.

The Ministry of Petroleum has done a great job by developing this policy, which they allowed operators in the sector to make significant input. Last year, I was privileged to be part of the team from the industry that made input into this policy document. The passage of a Legislative Instrument (LI) to give it legal backing is key and should not delay at all.

Redefining the roles of BOST and TOR

Another key policy issue for the government to consider is to critically redefine the roles of bulk oil storage & Transportation Co. Ltd (BOST) and the Tema Oil Refinery (TOR), taking into account the current deregulation regime. These two institutions are limited liability companies.

Their shareholder is the government. The government is not debarred from engaging in business. However, where the government does business, it should do so as a neutral player, going by the same regulations and practices governing the sector as instituted by the regulator. If the firms established by the government succeed and are profitable, they pay dividend to the government.

If they fail,the government counts its losses and either decides to reinject more capital or give part ownership to a private entity to inject funds into their operations. I believe this is the case with the government’s limited liability companies such as the Ghana Commercial Bank Ltd, regulated by the Bank of Ghana, the Ghana Oil Co. Ltd (GOIL), regulated by the NPA, SIC Insurance Co. Ltd, regulated by the National Insurance Commission among others.

Conclusion

The above — stated companies make their money through their own commercial margins. Even though they may have their own challenges, to the best of my knowledge, apart from the margins they make which are applicable to operators in the same category of their operations, no special margins are set aside for their operations for other operators in the sector to be tasked to collect such margins and pay to them, with deadlines, failing which they risk being stopped from operating.

Therefore, just like the above stated institutions, BOST and TOR ought to be made to operate as commercial entities and allowed to fend for themselves. This will make them sit up at all times and operate efficiently overtime.

Even though the current management teams of these institutions are putting in their best to revamp them, I think there are certain hard decisions that have to be taken and fundamental changes that have to be made to ensure that there is sustainability in what the current management teams are putting in place. These institutions must be structured to ensure that they continue to remain efficient, even after the current management.

The writer is the Lead Consultant of Wellspring Petroleum Services Ltd, a petroleum business consultancy firm.

He is also the CEO of PETROSOL, an Oil Marketing Company.