Glencore accused of engaging in ‘illegal’ activities

The United Kingdom-based commodities giant, Glencore, is allegedly involved in activities reserved for operators in the petroleum downstream sector, and has been doing so without the required licence.

It has not been licensed by the National Petroleum Authority (NPA) to receive petroleum products for sale, yet has allegedly been doing brisk business in the downstream sector using some Bulk Distribution Companies (BDCs) and others as decoy.

To make matters worse, there is no indication at both the Ghana Revenue Authority (GRA) and the Social Security and National Insurance Trust (SSNIT) that Glencore Energy is fulfilling its tax obligations, DAILY GUIDE checks at both institutions confirmed.

NPA Chase

In June, the acting Chief Executive of NPA, Alhassan S. Tampuli, wrote a strongly-worded letter to Glenacore warning the British firm to desist from its engagements after it had detected that the company was actively engaged in the downstream petroleum activities without licence.

According to the NPA, it had information that Glencore Energy had been importing petroleum products for storage which are subsequently sold to the BDCs, Oil Marketing Companies (OMCs) and bulk customers in the power sector.

No Licence

“We wish to advise that the importation of petroleum products into the country is carried out by companies licensed by the authority (i.e. Bulk Distribution Companies and Oil Trading Companies),” the letter pointed out, adding, “Our records indicate that Glencore has not been licensed by the authority to operate in Ghana’s petroleum downstream industry.

“On the basis of the above, you are hereby advised to suspend any such activities with immediate effect, failing which the authority will have no choice but to take necessary legal action against your company,” the letter concluded.

Glencore’s Reply

The company hit back, denying its engagement in the importation of petroleum products for storage and subsequent sale to the BDCs, OMCs and Bulk Customers.

Its director, Andrew Gibson, said in a response to the NPA’s letter, “Contrary to the information you have received, we do not sell (and have not sold) petroleum products direct to Oil Marketing Companies or Bulk Customers in the power sector in Ghana. We only sell to BDCs in Ghana.”

According to Mr. Gibson, the NPA “seems as though” it had been provided with “inaccurate information” regarding its (Glencore’s) involvement in the Ghanaian petroleum industry.

NPA Act

DAILY GUIDE understands that the letter the NPA wrote to Glencore Energy was also given to other players like Vitol and Trafigura and the authority had indicated clearly that Glencore’s actions were in contravention of Section 11 of the NPA Act which states that ‘a person shall not engage in a business or commercial activity in the downstream industry unless that person holds a licence for that purpose granted by the NPA.’

In a follow-up interview yesterday with the NPA boss, he claimed the authority had referred the Glencore case to a technical committee, saying that two other companies – Vitol and Trafigura, two foreign entities allegedly involved in the downstream business – were equally written to.

In Glencore’s response to the NPA, it admitted that it sells products to BDCs by way of In Tank Transfer (ITT) at the Tema Fuel Company’s (TFC) tank farm but DAILY GUIDE checks showed that Section 32 (1) of the NPA Act prohibits sale of petroleum products, possession of petroleum products in excess quantities rather than for immediate requirements and receiving petroleum products for sale by any person except that such person is licensed under the Act.

BDC Importers

It emerged that Glencore is using the BDCs as the importers but an NPA source insisted that “title to the products at all times remains with Glencore.”

It indicated, “Contrary to Glencore’s position, it is very relevant who holds title. Standard practice is that the products would be held under the buyers/importers throughput contract with the unpaid seller retaining a lien and the storage company issuing a holding certificate.

“If BDCs were indeed the importers, then title should pass to them at the point of discharge at the port and there would be no need for Glencore to store the products in Ghana.”

Throughput Agreement

DAILY GUIDE found out that Glencore’s dealings in Ghana can be traced to the Throughput Agreement it executed with TFC sometime in October 2013; and the preamble provided that ‘Glencore is committed to using a proportion of the tankage capacity at the Terminal for a period of five years for the receipt, storage and throughput of the products…”

TFC is obliged under Clause 5 of the Agreement to make available a certain capacity in terms of storage at the Terminal for the benefit of Glencore and all related infrastructure, support and facilities.

In Glencore’s letter, it admits that it has received petroleum products for sale but Section 27 of the NPA Act shows that storage providers should only provide services to bulk customers and persons licensed for transport and marketing.

Storage Tanks

Further investigations revealed that under Section 26(1) of the NPA Ac, it is only bulk customers and persons licensed under the Act to market petroleum products who can store products in storage tanks and as it is, Glencore is not licensed to market petroleum products and therefore should not store petroleum products with TFC.

There is also no indication that Glencore incorporated a local company in Ghana, even though the BDCs pay at least $300,000 every year in licensing fees.

There are concerns being raised that Glencore might be profiting illegally from Ghana without paying licensing fees, taxes, registration fees, employing Ghanaians or renting offices in the country.