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Growing speculation that the Tema Oil Refinery (TOR) has become the object of a tussle between the Ministry of Energy and management of the company has been strongly denied by the sector minister and energy experts familiar with TOR’s history.

The refinery, with a capacity to refine roughly 45,000 barrels of crude oil a day, was forced to shut down last week after the company said it was operating far below capacity. It cited a shortage of crude oil products but rumours circulated that it has been forced to a standstill in a war of attrition with the Energy Ministry.

But speaking to the Daily Statesman yesterday, the Minister of Energy, Boakye Agyarko, stoutly denied the suggestions.

“The problem has been a long time in coming,” he said. “TOR’s balance sheet cannot support access to letters of credit – unless shareholders inject more equity, or exchange shares for equity.

“There was a meeting yesterday [June 26] on the situation, and there will be another one on Thursday. We are all focused on ensuring that TOR gains access to credit,” the minister said.

Palliative
The difficulties with sustaining TOR as a commercial operation independent of government have been made worse by political interference since the company was established in 1963. Successive governments have insisted on keeping it on life support even when its financial position was weakest, as in the 1990s.

“All our decisions about TOR since 1997, when the restructuring of the refinery was done, have been palliative,” Mr Agyarko said. “They have done nothing to address the systemic problem that the company faces. In effect, we have been sticking a BandAid over a gaping wound for years.

“It has been unable to function under a system of open account trading because its financial position has not allowed it to do that,” the minister explained. “The NDC left the company with a huge legacy debt of $300 million up to the end of 2015. The situation was such that open account traders would not extend the company letters of credit.”

 Financial security
The Debt Recovery Fund Levy Act 2003 (Act 642) was passed to help cover the company’s accumulated debt and cater for its recovery. This led to the imposition of the debt recovery levy on certain petroleum products. The refinery has gone through long periods in the past where it has been obliged to shut down, either for technical reasons or because of problems with cash flow.

The minister however said the government is working to ensure that the refinery regains financial security, independent of state action. “On assuming office in 2017, the NPP government decided that the first thing TOR needed to do in order to have a viable future was to clean up its balance sheet,” Mr Agyarko said. “The last audited statement for the company dated back to 2012; it had no audited accounts for the following four years.”

The minister responded fiercely to allegations that the Ministry of Energy is starving TOR of funds in a ploy to bring the company to its knees and make it submit to plans to turn the operation into a tank farm.

He had disclosed at an oil and gas conference in the United States in May that the government was considering turning TOR into a tank farm to pave way for a number of new refineries. However, TOR chief executive Isaac Osei went public with loud objections to the proposal, arguing that this was not part of TOR’s strategic vision. Workers’ representatives joined in the disapproval and vowed to fight for their jobs.

But speaking to the Daily Statesman, the Energy Minister scoffed at suggestions that his department has withdrawn support for the refinery and is starving it of government support in order to force it into accepting the ministry’s plans.

“The issue of whether TOR should become a tank farm or not is entirely irrelevant in this matter,” he said. “As we speak, TOR does tank farming. When we came into office there was some crude in the tanks, of questionable ownership. BOST, which claimed ownership, later found that it was being held for a third party.”

Creditworthy
Mr Agyarko explained that the refinery’s governance structure prevented him from having any direct involvement in its affairs.

“TOR is a limited liability company. I don’t sit on the board and I don’t have representation on the TOR board. My interest in the company is purely one of ensuring that it adheres to policy and agreed procedure. The operational business of TOR is the responsibility of its management and board.”

The minister gave his assurance that the shutdown would not affect supplies of petroleum products. “TOR is shutting down temporarily to reassess its position,” he said. “That is part of sanitising its paperwork and putting its house in order. BOST has creditworthiness with the banks that will allow it to support letters of credit. As quickly as it can get that fixed, it will be back in business.

“In the meantime, the government is manoeuvring to see if it can acquire a consignment of petroleum products and supply some part of this to TOR. We are looking to see if we can supply some 1.8 million barrels of petroleum to the plant.”

Kwasi Anamua Sakyi, executive director of the Institute for Energy Security, confirmed that the shutdown was a result of the facility’s inability to raise letters of credit to acquire crude oil. He proposed that the refinery be privatised to reduce inefficiencies in its operations.