Editorial: Sanitise downstream petroleum sector for better efficiency

NPA develops robust regulations to sanitise lubricants market
Chief Executive (CE) of the National Petroleum Authority, Dr. Mustapha Abdul-Hamid

The National Petroleum Authority’s CEO, Dr. Mustapha Abdul-Hamid is approaching his new appointment with an amazing intent to see the downstream petroleum sector sanitized.

Dr. Abdul-Hamid is resolute in supervising and ensuring that the right thing is done and the legacies he inherited from his predecessor, is protected.

There are 170 Oil Marketing Companies (OMCs) currently operating in the sector with many in consistent breach of industry regulations.

According to the NPA CEO, who recently addressed the board of Association of Oil Marketing Companies (AOMCs), as part of his familiarization visit to petroleum downstream players; about 80 dormant OMCs on the books of the National Petroleum Authority, will soon have their operating licenses revoked.

“Many OMCs, currently fall short of the requirements for holding their operational licenses and remain an affront to the industry.” The situation has been leading to revenue loss for a long time which the NPA itself is worried about.

“If I have 100 or even 70 OMCs who are all efficient, and are playing by the rules and are paying their revenues to the government, we will be fine,” Abdul Hamid added.

After 16 years of operation, the NPA Act is set to be reviewed to ensure that those who acquire OMC licenses, really do have the capacity to operate in the industry.

Apart from the consistent breach of industry regulations, the authority is also confronted with challenges including illegal bunkering, third-party supplies and the non-payment of taxes and levies due government by most of these OMCs.

Kwaku Agyemang-Duah, CEO of the AOMCs, gave impetus to the NPA’s resolve by appealing to the body to urgently take steps to check activities of some new entrants who are taking advantage of loopholes in the system to make huge monies.

He said the failure of the NPA to check such culprits is a disincentive to OMCs who play by the rules and we couldn’t agree with him more. Why should some OMCs endeavor to observe industry regulations while others breach same with impunity?

Therefore, Abdul-Hamid has the support of industry players, as well as, the entirety of the broader population who yearn for a more sanguine downstream petroleum sector. The stamina and sense of purpose Dr. Abdul-Hamid is approaching his new appointment is very impressive and we pray that he sustains the momentum so as to better its fortunes.

Closely related to the above topic is the revelation by Dr. Abdul-Hamid that government is in the process of reviewing the price deregulation regime of the petroleum sector, which has been in effect since 2015.

“Even before I took office as CE of the NPA, plans were already in place to review the deregulation policy which has been in effect since 2015” Abdul-Hamid said.

This in response to concerns by the energy sector CSOs, that after six years of the operation of the deregulation policy, it has not been reviewed to tell us if it is a policy that has had a positive or negative effect on the downstream petroleum industry and the economy as a whole.

The process to deregulate the pricing of petroleum products had been evolving from 2005 when the NPA was set up, until June 15, 2015, when complete deregulation was achieved.

The introduction of the deregulation policy by government was also meant to reduce the huge losses incurred by BDCs and OMCs which deprived them of the needed capital to make their businesses viable.

“I have duly signed off on the decision and the review committee will begin sitting soon” he added.

The 12-member committee has representatives from the Ministry of Energy, the Chamber of Bulk Oil Distributors (CBOD), the Association of Oil Marketing Companies (AOMCs), the LPG Marketing Companies (LPGMCs) and the NPA.

However, while commending government for the initiative to review the petroleum deregulation policy, CSOs lament their exclusion from the committee. They wonder why the beneficiaries of the policy, that is, CBOD, AOMC and LPGMC are the same people being asked to review it.

That said and done, this paper believes that after six solid years of operating the deregulation policy, a review is most demanding now to be able to assess whether it is a policy that has had a positive or negative effect on the downstream petroleum industry, and the economy as a whole.

Particularly when the lifting of government control was anticipated to allow for the forces of demand and supply to dictate the prices of the commodity. How has it fared thus far?

Since the policy has been in place, hardly has the unit price of petroleum products gone down significantly when world price of crude falls, but whenever there’s an increase in the global price, it reflects automatically at the pumps!

This needs to be explained convincingly.


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