The Petroleum Downstream Industry Report for the First Half of 2024, published by the National Petroleum Authority (NPA) under the erstwhile leadership of Dr Mustapha Abdul Hamid provides analysis of Ghana’s petroleum sector, highlighting supply and demand trends, pricing dynamics, and market performance of key industry players.
While the report presents valuable insights, a critical examination is necessary to aide the current CEO Godwin Edudzi Tameklo Esq, The Ministry of Energy and all relevant stakeholders in the petroleum downstream to assess the economic implications of its findings in the resetting agenda of the President.
This article critiques the report’s key findings, identifying inefficiencies, vulnerabilities, and gaps, while recommending practical policy interventions.
*_1. Overdependence on Imports and Its Economic Risks_*
_Critique_
The report states that imports accounted for 77% of Ghana’s total refined petroleum product supply in H1 2024 (p. iv). This heavy reliance on foreign imports exposes Ghana to exchange rate volatility and external supply chain disruptions.
The depreciation of the cedi by 18% against the US dollar (p. 12) has led to higher import costs, contributing to increased ex-pump prices of petrol (GHS 13.13/L), diesel (GHS 13.82/L), and LPG (GHS 14.13/Kg) (p. 13).
_Policy Recommendation:_
*_Accelerate Local Refinery Expansion:_* The government must incentivize investment in local refining capacity to reduce import dependence.
The strong 294% increase in domestic production (p. 2) due to Sentuo Oil Refinery is commendable but still inadequate. Revitalizing the Tema Oil Refinery (TOR) could significantly cut import costs.
_By comparison, India through Reliance Industries and Indian Oil Corporation has reduced dependency on fuel imports by expanding domestic refining capacity_
*_Strategic Fuel Reserves:_*
Ministry of Energy through collaboration should expand strategic fuel reserves to mitigate price volatility caused by exchange rate fluctuations.
*_2. Market Concentration and the Risk of Price Manipulation_*
_Critique_
The top 10 BIDECs controlled 79% of petroleum sales (p. 6), indicating high market concentration, which can reduce competition and enable price manipulation.
Additionally, the HHI index for LPG exceeded 1,500 (p. 7), signaling a concentrated market with the potential for price distortion.
_Policy Recommendation:_
*_Strengthen Anti-Monopoly Regulations:_*
The NPA must enforce competition laws to dismantle monopolistic tendencies in the downstream sector.
_The USA has Anti-Trust Laws in Energy Markets ensuring no single petroleum company dominates the market_
*_Encourage New Market Entrants* :_ Providing tax incentives and subsidized infrastructure access to smaller BIDECs can increase market competition and enhance price efficiency.
*_3. Underutilization of Bulk Storage Depots_*
_Critique_
The report highlights a low utilization rate of 28% for bulk storage depots (p. 9).
This inefficiency suggests excess capacity and poor infrastructure planning, leading to higher fixed costs that may be passed on to consumers.
_Policy Recommendation:_
*_Optimize Depot Usage:_*
The government should consolidate underutilized depots and implement a hub-and-spoke model to improve efficiency.
_Petrobras in Brazil operates a nation wide reserve system maintaining strategic reserves to stabilize fuel supply and prices_
*_4. Over-Reliance on a Few Fuel Discharge Facilities_*
_Critique_
The Conventional Buoy Mooring (CBM) handled 77.6% of total fuel imports (p. 10), creating a logistical bottleneck and potential supply chain vulnerability.
Any technical failure at CBM could severely disrupt fuel supply.
_Policy Recommendation:_
*_Expand Import Terminals_* :
Increasing the capacity of the New Liquid Bulk Oil Jetty in Takoradi (currently handling only 7.7% of imports) will diversify import points and enhance supply security.
_Singapore has the multiple import terminals & digital logistics. It is blue print we can learn from._
*_5. Rising Fuel Prices and Consumer Burden_*
_Critique_
Fuel prices increased in H1 2024, with petrol rising by 0.81%, diesel by 2.48%, and LPG by 8.86% (p. 13).
These increases are mainly due to the rising FOB prices of petroleum products (p. 12) and the cedi depreciation (p. 12).
The government’s efforts to introduce Open Competitive Tendering for LPG imports (p. 14) reduced import costs but were not enough to offset price increases.
_Policy Recommendation:_
*_Expand Fuel Subsidies for Vulnerable Groups:_*
Introduce targeted fuel subsidies for public transport operators and low-income households to mitigate economic hardship.
*_6. Regional Fuel Demand Imbalances_*
_Critique_
The Greater Accra region consumes 32.7% of total petroleum products, while Upper West has the lowest consumption (p. 4).
This regional imbalance suggests inadequate fuel distribution infrastructure in rural areas.
_Policy Recommendation:_
*_Decentralized Fuel Distribution:_*
Establishing regional depots can enhance accessibility in under-supplied areas.
*_Rural Fuel Price Equalization:_*
The government should implement a uniform pricing policy to ensure fair fuel costs nationwide.
_Canada has Fuel Equalization Policy in Remote Areas._
*_Conclusion_*
While the Petroleum Downstream Industry Report offers valuable insights, its findings reveal serious economic risks in Ghana’s petroleum sector, including import dependency, market concentration, infrastructure inefficiencies, and rising consumer fuel prices.
Addressing these challenges requires a comprehensive mix of regulatory reforms, market liberalization, and infrastructure investment.
By adopting the recommended policy actions, Ghana can build a more resilient, competitive, and consumer-friendly petroleum sector.
https://npa.gov.gh/wp-content/uploads/2024/12/Petroleum-Downstream-Industry-Report_H1-2024-1.pdf
By: Smith P. Boahene
