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In the first phase TOR assumed the responsibility for crude oil and finished products procurement and importation. It also led to the establishment of the National Petroleum Tended Board.

The second phase involved the decentralization of the distribution network though the use of the Bulk Oil Storage and Transportation (BOST) depots that are strategically located throughout the country. Phase two was completed in 1998.

The third phase of the deregulation programme was publish and implement a more transparent automatic petroleum pricing formula for setting and adjusting ex-refinery prices periodically to ensure full cost recovery of at all times. Phase three was completed in June 2001.

The fourth phase was to adjust the distribution margins 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 minimizes and/or completely eliminate cross-border smuggling. Phase four process was initiated in January 2003.

The fifth phase 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;

1. Visibly displaying ex-pump prices set by the OMCs at the retail outlets and thereby stops government from announcing prices. The step (1) has been completed since December 2003.

2. Phasing out the practice of setting a fixed ex-pump retail prices for the OMCs. The step (2) is on going.

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 phased out 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 nation consumption. The shortfall in supply of refined petroleum products declared for any operational period will be imported by the private sector.

The private sector including the OMCs have agreed to finance the procurement of the shortfall of finished products to be imported. Necessary procedures to enable OMCs to assume this responsibility are being worked out by the National Petroleum Planning Committee.

The first tender for the supply of 27,000 metric tones was opened on 31st of March 2004. Five companies tendered for the contract and Shell Ghana Limited won on the basis of their competitive supplier's premium of $30 per metric tonne even though the prevailing premium charged by suppliers to the sub-region is about $40 per metric tonne.

TOR has been restricted to processing of crude oil since 1st January 2004. This will relieve TOR from the financial burden to open Letters of Credit to import finished products. It will also lead to 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 is expected to start from the third quarter of 2004 and will lead to substantial reduction of financial burden to TOR and the national economy.

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

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 independent pricing of petroleum products in the country. Specifically, the NPA review the petroleum pricing formula for the private sector environment and adjust the integrated distribution margin to comparable levels in the West African Sub-region.

Phase 4: Pricing Equalisation fund

A Pricing Equalisation fund (PEF) will be incorporated into the pricing structure to ensure price stabilisation and a means to effect cross-subsidy among the product mix.

The Way Forward:

To ensure successful implementation of the above programme, the following will be completed during the Transition Phase - 2004

-The development of Deregulation Policy
(Terms of reference on the Deregulation Policy has been submitted to the World Bank for comments)

-The development of Deregulation Law

-Establish of the National Petroleum Authority

-Harmonizing of the Petroleum Taxes/Levies to ensure level playing field for all stakeholders.

-Review of Petroleum Pricing Formulas

GNPC Activity Map