Power Sector
Petroleum Sector
The West African Gas Pipeline Project
Sectorial Overview
Solar Projects
Speeches
Vision
Profile of Sector Institutions
Deregulation of the Petroleum Sector
Traditional Energy Sector
Petroleum Demand and Supply

Glossary of Terms
FAQ

Site Map
Site Index (A-Z)

Petroleum supply has been the preserve of Government of Ghana since independence. Government’s involvement in pricing has resulted in under recovery of costs by the Tema Oil Refinery (TOR) leading to significant debts on the books of TOR. The debt of TOR imposed severe financial strain on the banking system of the country.

Deregulation of the petroleum sector is intended to encourage private sector investment in the provision of infrastructure and other service in the petroleum downstream sector including participation in the importation of crude oil and petroleum products. It is also meant to reduce the financial burden of TOR through efficient pricing of petroleum products. By deregulation, Government would free scarce foreign exchange resources and government revenue for other developmental projects.

The Ministry of Energy has initiated a process of establishing the necessary legal and regulatory framework to achieve the intended objectives of deregulation. The process is being undertaken in phases to ensure a smooth transition from the present TOR near monopoly to market liberalization. It will nevertheless be ensured that undue market disruption is avoided and unnecessary hardship is not imposed on the consumer.

In March 2004, a Memorandum of Understanding (MOU) was signed between TOR and the Oil Marketing Companies (OMCs) to allow the OMCs to import finished petroleum products, through competitive tendering, to supplement supply from TOR. The involvement of OMCs in the importation of finished products, commenced on March 31, 2004. Since then the OMCs have imported eight cargoes of finished oil products.

The process will now include all interested private companies.

It is the intention of Government of Ghana eventually, to allow the private sector to fully participate in the importation of crude oil for processing for sale to the local market and for export.

All the retail end of the petroleum products supply chain, OMCs and other distributors will be able to set retail prices for petroleum products according to a pricing formula and without prior review or approval by an official authority. The relevant parameters would be incorporated in the formula to ensure that all costs and applicable taxes are fully recovered and at the same time address the issue of access to the poor especially for kerosene and premix fuel for fishermen.

I hope the following questions and answers (Q&A) will address most of the pertinent issues on deregulation of the petroleum sector.

Prof. Mike Ocquaye

Minister for Energy

May, 2005

Q: What is Deregulation of the petroleum downstream sector?

A: Deregulation of Petroleum Downstream Sector means taking Government out of control and regulation of petroleum downstream business.

Currently, Government is fully involved in the petroleum business. It runs Tema Oil Refinery (TOR) as a public monopoly for importing crude oil for the domestic market; and it is also responsible for setting of petroleum prices.

Under deregulation, Government involvement will cease except to ensure a level playing field is created for all stakeholders to efficiently and effectively undertake their activities under the deregulated market environment.

Under deregulation, the following activities will be undertaken:

• The private sector will participate in the importation of petroleum products and crude oil for processing at TOR at a fee;
• The Private sector will operate in the provision of privately owned and operated energy infrastructure and services in the petroleum downstream sector
• Government will no longer be directly involved in the determination of petroleum prices;
• A petroleum price determination mechanism (a prescribed pricing formula) will be used to determine the ex-refinery price of petroleum products based on import parity bench mark;
• The Oil Marketing Companies operating margin will be managed in the initial phase (probably up to Dec 2005) of the programme and thereafter the Oil Marketing Companies will set their own margins and ex-pump prices for effective competition among themselves; and
• Parliament will continue to determine the petroleum taxes and levies by the issuance of an Act of parliament.

Q: What activities are undertaken at the Petroleum Downstream?

A: The activities of the petroleum downstream include the following:

• The importation of crude oil for refining at the Tema Oil Refinery;
• Importation of refined petroleum products when Tema Oil Refinery’s production cannot satisfy the rising demand of petroleum products in the country; the shortfall of products imported is between 20 –30% of national consumption and this is being done by Oil Marketing Companies currently;
• Distribution of Petroleum Products: Bulk storage and transportation by BOST whilst the secondary distribution to the retail outlets and other marketing activities are undertaken by the OMCs. The OMCs also import Petroleum products such as lubricants and price them for the market.
• Finally, handling and use of petroleum products by consumers.

Q: When did the deregulation of the Petroleum Downstream begin?

A: The deregulation of the Petroleum Downstream Sector started in September 1996. The programme has been implemented in a step by step manner as follows:

1. In September 1996, TOR assumed the responsibility for crude oil and finished products procurement and importation.

2. The distribution network was decentralized through the use of the Bulk Oil Storage and Transportation (BOST) depots that are strategically located throughout the country. This was completed in 1998.

3. The next step was to publish and implement a more transparent automatic petroleum pricing formula for setting and adjusting ex-refinery prices periodically to ensure full cost recovery at all times. This was completed in June 2001.

4. The distribution margins were adjusted to comparable levels within West African sub-region to provide adequate incentives for the private sector to participate in the procurement, marketing and sale of petroleum products in Ghana and also minimize and/or completely eliminate cross-border smuggling. This was initiated in January 2003.

5. The next step was to put in place the necessary petroleum marketing regulations for the procurement, marketing and sale of petroleum products by the Oil Marketing Companies. These include:

(i) Visibly displaying ex-pump prices set by the OMCs at the retail outlets and thereby stops Government from announcing prices. This has been completed since December 2003.

(ii) Phasing out the practice of setting a fixed ex-pump retail prices for the OMCs. This is on going.

B. ACCELERATED DEREGULATION

Government in the fourth quarter of 2003 took the decision to accelerate the deregulation process.

The accelerated deregulation programme is to harmonize all procedures and regulatory framework for the full participation of the private sector in the petroleum sector.

To ensure successful implementation, the accelerated deregulation programme has been planned to be implemented in phases as follows:

Phase 1: Importation of refined products by the Private Sector

The Tema Oil Refinery under this phase will be restricted to its core business of processing crude oil for national consumption. A significant amount of refined petroleum products will be imported by the private sector at competitive prices.

The private sector (including the OMCs) has agreed to finance the procurement of the shortfall of finished products to be imported. A Memorandum of Understanding (MOU) was signed between TOR and the Oil Marketing Companies (OMCs) to allow the OMCs to import finished petroleum products, through competitive tendering, to supplement supply from TOR. The involvement of OMCs in the importation of finished products commenced on March 31, 2004. Since then the OMCs have imported eight cargoes of finished oil products. The process will now include all interested private companies.

TOR has been restricted to the processing of crude oil since 1 st January, 2004. This will relieve TOR from the financial burden of opening Letters of Credit to import finished products. It will also lead to a reduced cash flow requirement for TOR.

Phase 2: Importation of Crude Oil by the Private Sector

The Private Sector will be encouraged to participate fully in the importation of crude oil for processing at TOR for sale to the local market and for export. TOR will then operate as a tolling refinery and will be mainly responsible for operation and maintenance of their plant. This programme could probably start from the third quarter of 2005 and will lead to substantial reduction of financial burden to TOR and the national economy.

The National Petroleum Tender Board together is working with other private sector stakeholders to determine the procedures to enable the private sector import crude oil for processing at TOR on a fee basis.

The Board will work to determine closely the real cost of production at TOR and help figure out the strategy to apply in ensuring that favourablej/ygrldjnarkel pjcesj^hjn,they occur are factored into consumer prices.

Phase 3: Creation of the National Petroleum Authority (NPA)

The current National Petroleum Tender Board will be transformed to become the - National Petroleum Authority (NPA). The NPA will among other things be responsible for monitoring the application of the pricing formula to ensure its full and timely implementation. This entity will be empowered to intervene only in the event that the formula has not been applied appropriately, in which case it could insist on corrective actions and possibly sanctions. Specifically, the NPA will review the petroleum pricing mechanism for the private sector environment and adjust in the initial phase the integrated distribution margin to comparable levels in the West African sub-region and thereafter adjust their own margins for effective competition.

Phase 4: Cross Subsidization Levy

A Cross Subsidization Levy will be incorporated into the pricing structure to ensure price cross-subsidy among the product mix especially for kerosene and premix.

C. THE WAY FORWARD

To ensure successful implementation of the above accelerated deregulation programme, year 2004 was set aside as the transition phase and the following activities were undertaken:

- Completed Deregulation Policy

- Completed review of Petroleum Pricing Formula

- The Draft Deregulation Bill is being worked on for passage into Law by Parliament during first quarter 2005.

- The Deregulation Law will include the establishment the National Petroleum Authority and harmonization of the Petroleum Taxes/Levies to ensure level playing field for all stakeholders

Q: What would happen on February 15 th that has been slated for the implementation of the deregulation policy?

A: It is Government's intention to implement the new pricing formula not later than 15 th February 2005. February 15 is a guide to action. It is a point of reference in the implementation of the new pricing formula. But it is not a magic date. The whole exercise remains progressive and ongoing. It is an expression of intention and can be reviewed.

Q: What are the advantages of the deregulation to the consumer? Will it always mean price increase?

A:
• Deregulation is not synonymous to increase in prices even though that may be one of its short-term consequences. But prices could go up or down under the deregulation.

• Government will set the regulatory framework to ensure effective competition by the private sector in the provision of energy infrastructure, services and supply of petroleum products.

• The consumer will have the choice to buy products from the most cost effective Oil Marketing Company;

• Government resources previously used for subsidizing petroleum products will be freed to undertake more developmental projects and programmes such as construction of good roads, clinics, hospitals, schools, and provision of good drinking water etc., for the benefit of the general public and especially the rural poor.

• Deregulation of petroleum products would most certainly make petroleum products available at all times to consumers.

Q: How is the consumer going to be protected?

A:
• At the retail end of the petroleum product supply chain, OMCS and other distributors will be able to set retail prices for petroleum products according to a pricing formula and without prior review or approval by an official authority.

• An independent oversight body, on which the government will be represented, will monitor application of the formula to ensure its full and timely implementation. This entity will be empowered to intervene only in the event that the formula has not been applied appropriately, in which case it could insist on corrective actions, and possibly sanctions.

• A cross-subsidization levy will be incorporated in the formula to ensure that the poor will have access to essential petroleum products like kerosene and premix fuel for the fishermen on relatively affordable terms. The cross-subsidization levy on the budget will be revenue neutral.

Q: How would the new regulatory body handle this new mandate of regulating the industry? Would government still be involved?

A:
• National Petroleum Authority (NPA) will be established as an autonomous and independent Regulatory Authority by an Act of Parliament to take care of stakeholders' interest in the petroleum downstream sector. This will remove the Government from the supply and financing of the petroleum requirements

of the country and free resources for other developmental projects and programmes like building more roads, more schools, more clinics, more hospitals, improve on national security and many more.

• NPA's roles shale include but not limited to the following:

a) To issue notices in the form of directives, procedures or warnings to ensure fair competition and prevent cartels, monopolies and predatory pricing in the Industry.

b) To conduct studies, research, surveys and analyses for the improvement of the efficiency and effectiveness of the industry and the protection of the consumer

c) To develop a comprehensive database on international petroleum production/supply, demand inventory and price for the information of the public.

d) To review the petroleum pricing formula periodically with the Government and OMCs to reflect the private sector environment and best industry practices.

e) To conduct open and transparent International Competitive Bidding for the procurement of petroleum products and crude oil into the country by the private sector to obtain the most competitive prices. The procurement process should be opened to all reputable suppliers and traders including the OMCs operating in the country and the evaluation should be fair and transparent.

f) Monitor and publish "import parity" cost of refined petroleum products (RPP) into Ghana.

g) In the interim, probably up to December 2005 to review and set integrated distribution margin (comprising marketer, dealer and transporter/UPPF margins) to comparable level within the West African
sub-region with a view to promote and retailing of products.

h) To register reputable oil suppliers, oil traders and OMCs to participate in the procurement of petroleum requirements into the country.

i) Government will not be involved in the pricing of petroleum products. However, Government will be represented on the National Petroleum Authority which would undertake periodic review of the pricing formula together with the stakeholders.

Q: How often would prices be reviewed and how would the price ceiling operate?

• Prices will adjust depending oh the prices of the new deliveries. In practice, this would normally 'be quarterly and the OMCs will be given the right to set retail prices according to a prescribed formula without prior review or! approval by any national authority or agency. In the initial phase, the NPA will set the integrated distribution margin to comparable levels within the West African sub-region with a view to promoting competition in the marketing and retailing of petroleum products. Each OMC will have to set Its margin within the maximum margin allowed by the NPA in the initial phase, which will end by December 2005.

• The ceiling would be determined as and when quarterly tenders are held.

Q: What is Deregulation of the petroleum downstream sector?

A: Deregulation of Petroleum Downstream Sector means taking Government out of control and regulation of petroleum downstream business.

Q: Why is the Government Deregulating the Petroleum Sector?

A:
• The deregulation of the petroleum sector was provided for in the 2004 Government Budget statement approved by Parliament of Ghana and it is being undertaken for a number of reasons:

a) Introduce a system of competitive tendering for the procurement of crude oil and petroleum products into the country.

b) Introduce a more transparent "import parity" based system for setting and adjusting ex-refinery prices for petroleum products.

c) Promote competition in petroleum product marketing and retailing activities of the Oil Marketing Companies (OMCs), thereby providing scope for new entrants into the industry and the elimination of fixed ex-pump prices for all OMCs.

d) Reduce the burden of petroleum subsidies on the budget.

e) Consistent with its strategy of allowing the private sector to play a greater role in the allocation of resources in the economy, government has decided to open up the petroleum industry to private sector participation and competition. In this framework, TOR will compete with other private sector operators.

11. Under-recovery of petroleum prices. What does it mean?

The under-recovery of petroleum prices means that the true cost of the petroleum products at the ex-refinery price level (import parity cost) is not passed on to the consumer at the ex-pump price.

Q: Is the deregulation a Government policy or it has been imposed by the IMF and our development Partners?

A: The deregulation of the petroleum downstream sector is essentially government decision. It was approved by the Parliament of Ghana as part of the 2004 budget. The intention of Government to deregulate the petroleum downstream sector was made known to our development partners and that the new pricing regime will come into effect not later than February 15, 2005.

Q: Is deregulation not going to hurt the poor?

A:
• In fact it can be argued that deregulation is in the interest of the poor in that it will free funds to be made available for health, education, feeder roads, rural electrification, rural development, etc.

• One of the results of the deregulation of the sector will be the removal of subsidies, which limit the government's ability to allocate adequate resources to social programs that could benefit the poor. In 2004 alone, Ghana spent about 41,872 billion (equivalent to about $200 million) to subsidize the consumption of petroleum.

• This subsidy amount is higher than the entire budget allocation of 41,449 billion for the ministry of health in the 2004 budget. This means that we could have doubled the health budget in 2004 if we had made the choice not to subsidize petrol. Will the poor not have benefited more?

• Over 70% of vehicles in Ghana are located in Accra, Tema, Kumasi and Takoradi and these are not exactly the high poverty zones in Ghana.

• In fact a large proportion of the subsidies to petroleum is consumed by the reasonably well-off in the society. It is not the poor who drive most of the cars on our roads.

• There is a high opportunity cost to the poor in terms of forgone expenditure on social and other infrastructure which could benefit them more.

• The $200 million spent on subsidizing petrol is equivalent to the total HIPC relief for Ghana in 2004. The petroleum "subsidy" in a paradoxical sense is a cruel tax on the poor.

• Consumers in neighboring countries like Togo and Burkina Faso are taking advantage of the subsidy that is being offered on petroleum products in Ghana.

The Table below shows that prices in our neigbouring countries are much higher than those in Ghana.

(Please find African sub-regional prices in Appendix "A")

Source: Bank of Ghana Date: February 2005

• There is thus brisk smuggling taking place as a result of the price differentials. Why should Ghana use its scarce foreign exchange to import petroleum products for consumers in our neighboring countries? It should be noted that Ghana spent $816 million on oil imports in 2004 compared to $562 million in 2003.

Q: Would the price of kerosene which the poor consume not go up?

A: Given that we have not adjusted petroleum prices in line with world oil market prices for over two years, the new pricing regime will result in an increase in the prices of petroleum products, including kerosene, which is consumed largely by the poor. The Government will subsidize kerosene and premix fuel through the imposition of the cross subsidization levy to help minimize the effect on the poor farmers and fishermen.

Q: Will the Oil Price Adjustment not result in higher Inflation?

A:
• The upward price adjustment could have effect on inflationary indicators but with prudent macroeconomic measures inflation will be brought to normalcy and further continue to decline.

• The Bank of Ghana, working closely with the Ministry of Finance will put the necessary policies in place to deal with the price effects of the new pricing regime.

Q: What are the advantages of deregulation to the National Economy?

A:
• Government resources previously used for subsidizing petroleum products will be freed to undertake more developmental projects and programmes such as construction of good roads, clinics, hospitals, schools, and provision of good drinking water etc., for the benefit of the general public and especially the rural poor.

• The private sector is the engine of growth and deregulation has the potential to increase private sector participation in the petroleum industry to boost the national economy.

Q: Which portion of the petroleum price build-up would be regulated?

A: Parliament will have the authority to review petroleum taxes and levies as a way of regulating the ex-pump prices.

Q: Is the Final leg of the deregulation going to be completed in the first quarter of 2005?

A: No, the deregulation process will still continue. The new pricing formula would have commenced by end of the first quarter.

Q: Is there a relation between Full Cost Recovery and Deregulation?

A: Yes, under deregulation the private sector would fully recover their cost.

GNPC Activity Map

Q: Isn't the deregulation policy just a cover for a price increase?

A: No, under deregulation prices could go up or down.

Q: Is Ghana prepared for deregulation?

A:
A number of measures have been put in place by the Government to prepare the ground for the smooth transition into a deregulated regime. Some of the measures include:

• Regulatory Body: National Petroleum Tender Board will be transformed into a National Petroleum Authority by an Act of Parliament to oversee the smooth operation of deregulated sector, ensure fair competition and consumer protection from prohibitive pump prices.

• Pricing Mechanism: There is a pricing mechanism that ensures full cost recovery, cross subsidy on essential products like kerosene and premix and uniform prices throughout the Country.

Q: What effects will deregulation have on macro economic performance because from history, any shift in the prices of petroleum products adversely affects inflation rate?

A: In the short term, price increase as a result of the deregulation will increase the cost of goods and services and adversely affect inflation rate. In the long terms, however, prudent macro economic measures and policies will bring inflation down and the general growth in the economy.

Q:When the National Petroleum Authority comes into being, will the private sector be given a free hand in pricing petroleum products to break even and make some profit?

A: The private sector including the OMCs will be given the right to set retail prices for the petroleum products according to a prescribed formula, without prior review or approval by any national authority or agency.

Each OMC would operate within a realistic margin (from January to December) which is comparable to margins in West Africa sub-region and thereafter be free to set their own rnargins.

Q: What role will the agencies such as the Tema Oil Refinery (TOR), Bulk Oil Storage and Transportation among other players in this new system.

A:

The first alternative is for government to release part of its shares to a strategic investor in the first instance and thereafter release part of its shares to the general public. Under this strategy the refinery would be able to import its own crude oil for refining for domestic market and for exports. The refinery would be in competition with other new refineries and wholesale petroleum tank farms to be established in the country by the private sector.

A second alternative is to transform Tema oil refinery (TOR) into a private company with greater private sector participation in ownership. Government may retain some shares in TOR. In this case the refinery would on its own be able to import crude oil for refining for the domestic market and for exports, it would, under this strategy, be in competition with other refineries and wholesale petroleum tank farms to be established by the private sector in the country. Government would however benefit from the sale of the refinery and other revenue from taxes and levies. Government may not be directly involved in planning for the day-to-day supply of petroleum requirement but may ensure healthy stocks levels through the appropriate regulatory framework.

A third alternative is for the TOR to function exclusively as a "tolling" refinery, it would provide only refining services for other parties for a fee and will not own the crude oil or the refined products. In addition, TOR will be in position to provide storage services to others for a fee. Government would still own TOR and would be relieved of the burden of financing importation of crude oil and petroleum products.

In this regard, certain alternative strategies have been considered for the Tema Oil Refinery. Specific recommendations will be submitted for consideration in due course.

Bulk Transportation and Storage of Refined Products

The responsibilities of bulk transportation and storage of refined products is presently vested in the bulk oil storage and transportation company (BOST). BOST was established to function as an assets manager and engage an operator for its facilities including the pipelines and storage facilities. Since May 2001, TOR has been functioning as the operator of the BOST depots and pipelines. BOST is solely responsible for holding strategic reserve stocks for the country.

Though BOST would maintain the current facilities of BOST under the company, BOST would tender for the operation of its facilities on a term operations and maintenance (O&M) contract to ensure efficient and effective operations and maintenance of its assets.

New storage facilities may be installed by BOST or any private sector entity under license by the energy commission.

Distribution and Retail of Refined Products

Refined products are currently distributed and retailed nationwide by the oil marketing companies (OMCS). These activities are regulated by license from the energy commission. The existing regulation by the energy commission regarding entry into the business of petroleum products distribution and retailing would continue. Efforts will however be made to strengthen the technical regulatory capacity of the energy commission in this regard.

Creation of National Petroleum Authority

NPA

Qn. 1 Should the country expect petroleum price increases soon?

Ans: This is the responsibility of the National Petroleum Authority, an independent
body set up fully for that purpose. We expect that they would do this work
diligently to protect the interest of all stakeholders.

Qn. 2 How come there are not enough filling stations around the country?

Ans: Establishment of a filling station is a capital intensive venture. Since the OMCs
want some level of return on their investments, there is always the tendency that
they will establish filling stations at places where returns on their investments are
assured i.e. the urban centers.

The National Petroleum Authority (NPA) has recognized this anomaly and is putting in place mechanisms to address the shortcoming. The NPA is currently reviewing its guidelines for the renewal of licenses to OMCs to ensure that all OMCs are represented in all the districts. Additionally, the considerable increase in margins will serve as additional incentive to enable them set up outlets in the rural areas.

Qn. 3 What is being done to safeguard consumer interests at the filling stations?

Ans: The Ghana Standards Board calibrates and certifies dispensing pumps at the petroleum product retail outlets half yearly. This is to ensure that the volumes of petroleum products discharged into the fuel tanks of customers are accurate and commensurate with the money paid by customers for petroleum products. The National Petroleum Authority also conducts unannounced checks regularly to ensure that the operations of the retail outlets do not pose a threat to public health and safety. The NPA will soon come out with tit-bits of do's and don'ts at the stations.

To avoid being cheated by pump attendants at retail outlets, consumers are always advised to ensure that the pump display is always at zero zero, before products are discharged into their fuel tanks.

To enable customers check on the accuracy of delivery of dispensing pumps at the retail outlets, the Ghana Standards Board has fabricated 10-litre measuring cans for sale to the OMCs. The OMCs are expected to purchase these cans and distribute them to all their petroleum product retail outlets in the country.

In order to address the issue of the sale of adulterated gas oil to unsuspecting motorists at the pumps and bring offenders to book, the NPA is collaborating with the Bureau of National Investigations -(BNI), the Criminal Investigations Department (CID), the Tema Oil Refinery (TOR) and the Ghana Standards Board (GSB) to monitor the activities of the tanker drivers and the dealers. The NPA, in conjunction with the said collaborating agencies, will continue with the random sampling of gas oil at the retail outlets to verify whether gas oil being offered for sale at the retail outlets meet the TOR's specification.

Qn. 4 How many OMCs have been licensed in the country and what are the criteria for granting such licenses?

Ans.: Prior to the establishment of the NPA, 28 OMCs had been duly licensed by the
Energy Commission to operate in the country.

The following are the NPA's new criteria for the grant and issue of a Petroleum Product Marketing License:

a. A detailed Business Plan.

b. A corporate environmental policy culminating in the grant and issue of an environmental permit by the EPA.

c. A Bank Guarantee issued by a reputable financial institution in the country, raised in favour of the Tema Oil Refinery (TOR), the value of which to be determined by TOR.

d. A Bank Guarantee issued by a reputable financial institution in the country, raised in favour of the Customs, Excise and Preventive Service (CEPS), the value of which to be determined by CEPS, and

e. Construct at least three (3) state-of-the art service stations for the sale of petroleum products. Such a station should have a minimum plot size of 100 x 80 sq. feet and must also have a lube bay, a washing bay, a mart, a vulcanizing centre equipped with air compressors, air gauges, and good communication equipment. Additionally, the station must have a canopy at the pump island, an oil interceptor and a forecourt that should be well- paved using either concrete or pavement blocks.

In case of break-up of franchising agreement with an affiliate company, applicant should

a. Provide three months' notice of intent to break-up franchise with affiliate OMC(ifany);

b. provide proof of settlement of issues with regard to ownership of affiliate company assets, outstanding arrears, among others;

c. disclose interest that the directors/shareholders may have in the affiliate

company; and

d. proof of discharge from the Affiliate Company.

A provisional license will initially be granted and issued to all applicant companies requiring Petroleum Product Marketing Licenses. Under this license, applicant companies cannot lift products from the Tema Oil Refinery, the depots or any other refinery but shall be granted permits to construct service stations. The validity of the Provisional license is 2 years. Within the validity of this license, applicant companies must construct at least 3 state-of-the-art service stations.

Applicant companies that fully satisfy and meet the above requirements shall be granted Petroleum Product Marketing Licenses to operate fully as Petroleum Product Marketing Companies. Within the validity of the operational license, the applicant company should further construct and operate 3 additional state-of-the- art service stations within 3 years.

Qn 5. What measures have the NPA adopted to address shortages or under-delivery of fuel at the retail outlets?

Ans. The National Oil Loss Control Committee (NOLCC) was reactivated by the Ministry of Energy and the Energy Commission in May, 2003 to address all the losses that occur along the entire distribution chain. The Committee made a number of recommendations to address the losses that occur along the entire
distribution chain. Regarding oil losses at the supply chain, the NOLCC was of the view that the loading of petroleum products above the reference temperatures of 30°C for premium gasoline and 32 °C for gas oil contributes to the apparent loss of petroleum products. The NOLCC, therefore, recommended the following
to address oil losses at the supply source:

At the gantry, Premium Gasoline and Gas oil will be loaded at the reference temperatures of 30°C and 32 °C respectively.

TOR must install temperature-compensated flowmeters at the gantries and the other depots throughout the country.

Until and at such a time that temperature-compensated flowmeters are installed at TOR, temperature compensation will be carried out using temperature compensation tables. The compensation will be computed using the reference densities of 748 kg/m 3 for gasoline and 847 kg/m 3 for gas oil.

Regarding losses associated with the distribution and transportation, the NOLCC recommended the following, among others, to address the major factors:

i. Leakages - these occur when the valve systems and the bulk of a tanker
are not in good condition. This could be reduced through proper
maintenance of the tanker

ii. Spillages - these occur when the manhole cover of the tanker is not in good condition, especially when the seals are worn out. This could be reduced by replacing the seals of the manhole covers.

iii. Evaporation - this could be reduced through proper maintenance of the tanker and/or replacement of the manhole cover.

iv. Meter under/over delivery - Normal wear and tear tend to cause a meter to malfunction resulting in over/under-delivery. Calibration of meters at the TOR gantry and other installations must be done regularly as recommended by the manufacturers.

v. Pilferage - Product security can be improved by employing the use of a measuring system, which ensures that the level of product at the loading point is the same as the level at the discharge point.

Regarding losses associated with the marketing and sales of petroleum products, the NOLCC recommended the following, among others:


i. All OMCs are to provide sampling thermometers at their retail outlets to observe temperature measurements.

ii. Decentralization of the calibration of BRVs and underground storage tanks (USTs)

iii. Wooden and steel dipsticks will be phased out. Either aluminium or brass dipsticks will be approved for UST measurements.

iv. Introduction of the Ghana Standards Board 10-litre measuring can at all retail outlets to enable the public verify the accuracy of delivery of the dispensing pumps in case of doubt v. All OMCs must provide a flat level ground for product receipt.

Qn 6. What measures have the NPA adopted to address the issue of the sale of adulterated gas oil to motorists at the retail outlets?

Ans: In order to address this issue and bring offenders to book, the NPA is collaborating with the Bureau of National Investigations (BNI), the Criminal Investigations Department (CID), the Tema Oil Refinery (TOR) and the Ghana Standards Board (GSB) to monitor the activities of the tanker drivers and dealers. The NPA, in conjunction with the said collaborating agencies, will continue with the random sampling of gas oil at the retail outlets to verify whether gas oil being offered for sale at the retail outlets meet the TOR's specification.

Qn 7. What mechanisms are in place to ensure that the retail outlets operate within the industry's safety standards?

Ans: The NPA conducts regular inspections of the facilities at the premises of the retail outlets to ensure that they operate within the industry's safety standards.