TOR breaks down; $37.7m needed to resolve problem

The Tema Oil Refinery (TOR) has shut down due to a major fault in the regenerative unit situated in the Residue Fluid Catalytic Cracking (RFCC) plant.

As a result, the refinery cannot process crude until the problem is fixed. The development could have serious implications on current supply of products on the market as TOR supplies about 30% of the petroleum products on the market since January this year.

TOR urgently needs the remaining $37.7 million in government funding to fix the problem and begin a second phase of stabilisation and enhancement projects designed to ensure the reliability of operations at the refinery.

Public Affairs Manager of TOR, Mrs Aba Lokko told The Finder that unreliable power supply by the Electricity Company of Ghana (ECG) and failure to carry out maintenance were the cause of the problem.

She noted that frequent shutdown and restart of the machines as a result of the rolling power cuts was not good for the operation of the refinery.

According to her, the USA company which gave TOR the license to operate the plant is in consultation with TOR, and the company has indicated that such an incident has “never happened anywhere in the world before.”

Crude processing at TOR restarted on December 29, 2014 after Nigeria’s Access Bank PLC provided TOR financial support to secure about 800,000 barrels of crude oil feedstock from a subsidiary of Nigeria-based Sahara Group.

Mrs Lokko told The Finder that TOR completed the processing of the 800,000 barrels of crude oil before the RFCC broke down on March 13, 2015.

According to her, the refined products have been sold to Bulk Oil Distribution Companies (BDCs).

She explained that every two years, TOR shuts down completely for turnaround maintenance.

According to her, the last time general shutdown turnaround maintenance was carried out was in 2009.

She explained that general shutdown turnaround maintenance for 2011 and 2013 were not carried out because of lack of finance.

Government in 2010 promised TOR $67 million for plant stabilisation and enhancement projects.

Consequently, TOR has completed the first phase of plant stabilisation and enhancement projects on the crude distillation and residual fluid catalytic cracking units at a cost of $30 million.

Mrs Lokko said TOR is awaiting the remaining $37.7 million in government funding to fix the problem and begin a second phase of stabilisation and enhancement projects designed to ensure the reliability of operations at the refinery.

TOR’s refining operations have been inconsistent amid frequent shutdowns of processing units since 2009 mainly due to a lack of capital to procure crude oil on a continuous basis, which has impacted petroleum product supplies to the Ghanaian market.

TOR refines 45,000 barrels of crude oil per day while the national demand is about 65,000 barrels per day.

This leaves a deficit of over 20,000 barrels per day.

As a result, the BDCs were allowed into the system to import refined products to fill the deficit.

However, due to inconsistencies in TOR’s operations, amid frequent shutdowns of processing units since 2009 mainly due to a lack of capital to procure crude oil on a continuous basis, BDC were importing refined products to satisfy the 100% needs of the country.

Last year, the country suffered debilitating fuel shortage because the BDCs said they could not secure letters of credit to import because government owed them GH?1.8 billion.

The warning by BDCs last month that government owed them GH?2.1 billion and that their bankers were refusing them letters of credit suggest another possible fuel shortage.

Any fuel shortage will only compel the few companies able to buy diesel to operate in this rolling power cuts to grind to a halt.

Having experienced the challenges of relying on either BDCs or TOR for fuel supply, the best choice for the country can now be determined by policymakers.

In November 2014, then deputy Minister for Energy and Petroleum, John Jinapor, announced that the government was in talks with Petro-Saudi in a joint-venture arrangement to revive the ailing oil refinery.

The agreement, when reached, would see the Arabian Firm plug the inefficiencies that have engulfed TOR.

Per the agreement, a new marketing firm called TOR-PS (TOR Petro-Saudi) would be set up to procure crude oil and sell the finished product. Petro-Saudi is expected to control 49% of the stakes while Ghana manages the remaining 51%.

Importers and marketers of petroleum products could be allowed to fix their own prices by the end of the year, government has said.

It is an idea that will form part of a deregulation policy aimed at bringing in more private sector players.

Deputy Minister of Petroleum, Ben Dagadu disclosed this at the annual general meeting of BDCs.

However, Chief Executive Officer of the BDCs, Senyo Horsi has indicated that the government’s decision to deregulate the petroleum downstream sector will be unsustainable.

He further posited that there are some “key decisions” that will negatively influence the acceleration of the petroleum industry when it is deregulated.

Horsi believes government was compelled to take such a decision because of some circumstances it had no control over.

He said government’s decision to liberalise the petroleum sector will benefit the economy and Ghanaians.

He, therefore, suggested that various stakeholders focus on what government can