ACEP sends proposals to NPA, GNPC

The Africa Centre for Energy Policy (ACEP), an energy policy think-tank, has welcomed the appointments of Moses Asaga, a former Member of Parliament (MP) and Alex Mould as the new bosses for the National Petroleum Authority (NPA) and Ghana National Petroleum Corporation respectively.

They noted that even though the President appeared to have made the right appointments, the challenges in the energy sector require that the newly-appointed leaders go the extra-mile to address the problems.

“The two institutions are very critical for the sustainable development of the country, and therefore require leaders with higher level of integrity and professionalism to manage them. However, whilst we congratulate them, we will like to bring to their notice some of the challenges that await them both in the downstream and the upstream sections of the industry and to encourage them to pay attention to these challenges,” ACEP’s Director of Policy and Research, John Peter Amewu said in a statement.

According to the statement, some of the challenges that Mr. Asaga will face at the NPA include low confidence of consumers in petroleum product pricing regime, the vertically-integrated industry as well as issue on product content specifications.

Mr. Amewu said that under the formula for setting up prices of petroleum products, consumers are expected to be rewarded when international crude oil prices fall and penalized when such prices rise, but such ‘symmetrical relationship’ did not apply in reality because the NPA does not compensate consumers when international crude prices fall.”

“Instead such gains in prices are used to compensate distributors for so-called under-recoveries. This undermines the confidence of consumers in the pricing formula, particularly because there is no transparency about the actual level of under-recoveries, justification for under-recoveries and the actual debt levels arising from the non-payment of subsidies by Government. The NPA must increase transparency around the price compensation regime.”

ACEP said the promotion of vertically integrated operations by upstream companies might take the benefit of competition away from the Ghanaian consumers, adding “the entry of Vitol which is an upstream company and a bulk product trader into direct domestic downstream market is in bad taste for the growth of small downstream companies.”

“In emerging markets like Ghana, the policy for consideration is for regulators to make the petroleum products market competitive. However, where an existing upstream player and bulk distribution company decides to penetrate into the downstream dominated by small domestic players, there is the possibility of a monopolistic situation arising. This situation can lead to price manipulation and anti-competitive behaviour.”

ACEP said the official sulphur and lead specifications in imported gasoline and gasoil remain a serious challenge in the sector, adding “whiles countries like Mauritania, Senegal, Sierra Leone, Ivory Coast, Benin and even Chad are doing better in their effort to limit the level of sulphur and lead content in the importation of these petroleum products, Ghana is far behind them in doing same.”

They said that currently Ghanaian consumers buy the products without any discount associated with relatively high Sulphur and lead content, stressing that the removal of subsidies on products further took price benefits from consumers.

“We expect that the NPA will tighten official specifications to reflect average standard within the Region.

This will prevent lower-specification imports into the country and therefore improve on air quality controls as well as protect public health from lead toxin exposure.”

GNPC

ACEP praised the leadership role played by Mr. Mould when he was at the helm at NPA, adding, “We note in particular that Mr. Mould has supervised important reforms in the downstream sector and successfully brought the market to a self-sustaining level. The confidence of investors has grown in the market reflecting in the increase in BDC, OTC and OMCs since the deregulation exercise began.”

“We are happy that an accomplished reformer like Mr. Mould has been appointed to the GNPC at the time the corporation is undergoing serious restructuring in line with its strategic objective of becoming a fully commercial operator. Whilst Mr. Asafu-Adjei has put the corporation on a solid footing as well as earned high international reputation for it, the transformation of the corporation to a full commercial entity remain an important task. The establishment of specialized subsidiaries in partnership with well established companies is in the right direction and must be continued.”

ACEP said that GNPC must raise its own funds to expand operations, noting that “what the GNPC needs is an assurance that Government will not hold back its funds to meet its contractual and operational obligations when the National Budget is suffering.”

The energy policy think tank also urged the corporation to increase its corporate governance, which is the criteria for awarding major procurement contracts by the GNPC and make them public.

“Major award decisions must be justified publicly according to the procurement criteria. This will save the country the current embarrassment about the probe of the sale of the GNPC’s Drillship, whose transaction documents cannot be found.”

They also called for transparency in the employment policy.

ACEP further said that publishing annual reports on financials and other activities of the corporation will increase accountability and the confidence of investors and added that GNPC should list on the Ghana Stock Exchange (GSE).