Executive Director of the Institute for Energy Policies and Research, (INSTEPR) Mr Kwadwo N. Poku has said that the Tema Oil Refinery (TOR) has never been a profit-making asset of Ghana.
He said that the historical records of TOR will show that the debt of the refinery nearly collapsed Ghana Commercial Bank 20 years ago.
This, he said, led to the introduction of TOR Debt Recovery Fund Levy.
This fund was enacted into law in 2003, Act 642. In 2003, the TOR debt stood at GHc 450 million, Mr Poku stated.
“The Africa Centre for Energy Policy (ACEP) in October 2021 put out a report called ‘Plugging the two-decade leak’, to give an insight into the debt and challenges at TOR. In section 3 of that report, ACEP reported that: ‘Between 2014 and 2018, TOR losses were above GHc 300 million annually, recording the highest in 2014 at GHc 927 million and the least in 2018 at GHc 382 million.
“Cumulatively, the total loss over the five-year period amounts to GHc2.707 billion against the total revenues of GHc1,263 billion’
“Tema Oil Refinery (TOR) made a loss of GHc 1.675 billion according to the 2022 Income Statement of the company. This is the same company that some so called experts are writing in the media that the company can make USD$700 million dollars profit a year,” he said in a statement reacting to news about the the lease negotiation between Tema Oil refinery (TOR) and Torentco Asset Management Limited (TAML).
He further stated that “Currently, TOR owes staff pension (SSNIT, TIER 1 &2 ), GRA, Ghana Water, ECG and many other companies. The total TOR debt to date is USD$540 million and growing by the day.
“The refinery has not refined any crude oil since March 2021, meanwhile the workers are paid every month.”
Mr Poku who is also an energy expert further stated that for a refinery that is making monthly losses, the BOD and government approved the following proposal from Torentco: “TAML will pay TOR $1.067 million monthly ($12.8 million yearly) to cover monthly operating expenses (staff renumeration, taxes, statutory debts etc) TAML will pay the yearly insurance of the refinery $6 million. TAML will make a one-time payment of $22 million to improve and fix the refinery, also $2.5 million to workers Provident Fund. TAML will pay an annual ground-rent of $1 million in advance for each year. TAML will reserve 40 UScent per barrel of oil processed for maintenance of plant (estimated at $3.2 million) as well assume the utility cost estimated at USD $200,000 every month.”
With this proposal to lease the refinery, he said, TOR will still retain it’s current yearly revenue from GPMS dividend estimated at $9 million, Right of way revenue of $2.13 million and laboratory $663,000.
This will give TOR a total revenue of $11.793 plus the above payments from TAML.
“The refinery will move from a loss-making company to a net positive cashflow of $14.79 million a year while all their bills and financial obligations fully paid. Over the 6 year lease period TOR will receive a total cashflow of $88.7 million with all GRA , ECG, Workers renumeration, Ghana water paid. Plus the one time payment of $22.5 million before the lease contract starts.
“TAML in turn will assume the responsibility of importing 8 million barrels of crude oil a year to be refined at the refinery and the sale of the refined products. Whether TAML makes a loss or profit in their refining and trade of products is not the concern of the Government or TOR. This proposal was envisaged as a stop gap measure to keep the refinery running for the next 6 years while government looks for a permanent solution. TAML proposed and agreed that during the 6-year lease, government can terminate the agreement if they find an investment proposal which is long term and better terms than what they proposed.
“INSTEPR is of the view that this proposal is the best proposal on the table within the short to medium term. Government has not stopped any company from expressing interest and to that effect we have sighted a letter dated 18th April 2023 from the Office of the President, asking the Ministry of Energy and TOR to engage a company called Legacy Capital from Dubai.
“We always say we want to build Ghanaian wealth and business but the minute a company from Ghana express interest in doing a transaction, all hell breaks loose. You will hear ‘he is politically connected, he does not have capacity, friend with the president family’ etc.
“Meanwhile, if you check the history and competence of all these companies registered in Dubai, they are empty as well but I guess in Ghana we ask less questions when it’s the white man or the Arab.
“The government does not have the $100 million needed to revamp TOR or sovereign guarantee to be given to any company to bring crude oil to TOR. So with the current discussion, we must as well shut the refinery and all workers look for other jobs. As the refinery stands, it has negative cashflow so any transaction that will bring about positive cashflow is welcoming news.”