By Yakubu Issahaku(PhD)
Over the years, many economists and finance experts have espoused laudable ideas and proposed various initiatives to revive and make the country’s oil refinery entity, the Tema Oil Refinery (TOR) viable.
A strong TOR has manifold benefits to the functioning of the Ghanaian economy in various aspects, stemming from energy and fuel security and sustainability, stability of fuel prices, potent weapon for mitigating foreign exchange pressures/volatility , strengthen Ghana’s trade balance. seeking multi-sectorial industrial expansion and economic diversification through to balancing of the economic fundamentals to ensure sustained economic recovery
The Current State
TOR, established in 1963, currently has a total installed capacity of 45,000 barrels per stream per day (bpsd). Over the decades, Ghana’s only petroleum refinery has been dormant because of operational and financial challenges, including maintenance issues, capacity under-utilisation, operational inefficiencies, under-investment, incoherent policies, financial mismanagement and political interference.
Currently, TOR only supports importers of finished petroleum products with its facilities. The refinery has a crude storage capacity of 1,925,348 barrels across 59 tanks, representing 44% of Ghana’s national storage capacity.
TOR is also the country’s sole producer of Premix fuel and operates the largest LPG storage facility in Ghana. Looking ahead, the refinery is seeking $25 million to support the maintenance and reactivation of an essential unit within its crude distillation unit. The goal is to enhance operational efficiency and ensure TOR’s continued role in sustaining national fuel distribution and energy security.
Ghana is poised for a significant expansion in crude production. Backed by over 1.1 billion barrels of crude oil reserves and 2.1 trillion cubic feet of natural gas, the country is said to be ramping up production. This must be backed by indigenous refinery efforts.
There is an urgent need to inject new capital and technical expertise into the refinery, open up the place to partnerships to rejuvenate the fortunes of the ailing Tema Oil Refinery (TOR) as the refinery is in dire need of partnerships to help retool, modernize and expand its capacity.
The revival of TOR is seen as critical to reducing Ghana’s dependence on imported refined petroleum products and strengthening the country’s energy security.
An OILBOARD to the Rescue?
The country is already reaping the benefits of the novel Gold-for-reserve programme which is being bolstered by the establishment of GOLDBOD. The Cedi is gaining momentum and has held ground against major currencies in the past months.
This has been attributed in part to the growing Gold reserves the country is accumulating. Considering this evidential success, can we replicate the same in the petroleum sector to rescue TOR?
An OILBOARD, just as a GOLDBOD in the mining sector, could be replicated in the oil sector through reviewing the acts that established the National Petroleum Authority (NPA) and the Petroleum Commission to envelop this innovation to help revive and revamp TOR.
In Ghana, large-scale mining firms are required to retain 20% of their gold output domestically to support the country’s gold reserves programme. This could be replicated in the oil sector to feed TOR.
An OILBOARD should be championed by reaching an agreement with the upstream Oil companies, mandating them to sell a portion of their crude production to TOR and receiving cedis at a 1% discount to international crude spot prices.
This structure guarantees a domestic market for drilling companies while providing the government cost-saving benefits including TOR’s revival. Thus, the OILBOARD will purchase 20% of the monthly output of oil firms for TOR through the Bank of Ghana.
Purchases are settled in the Ghanaian Cedi currency. This proposal will be a comprehensive turnaround strategy aimed at reviving the state-owned refinery after years of inactivity and is critical to Ghana’s economic recovery.
Every 10 barrels of oil produced from our fields, at least 1 or 2 barrels being 10% or 20% must be sold to TOR. To show good faith, the government’s share of the output should also be given to TOR.
With this initiative, foreign exchange demand for oil importation would be conserved. This collaborative effort between the public and private sectors will breathe new life into the once-thriving refinery, making a potential turning point in the facility’s trajectory a necessity
The total consumption of petroleum products is projected at 5,484.73 kilotonnes, a 5.13% increase over 2024, driven by increased demand for gasoil, gasoline, and LPG. Ghana’s crude oil production is approximately 186,000 barrels per month. The country’s total crude oil exports reached around 48 million barrels in 2023.
As of December 2024, the crude oil production capacity in Ghana stood at 188,000 barrels per day, Overall, a total of around 5.3 million metric tons of petroleum products were consumed in Ghana in 2024.
Currently, TOR only supports importers of finished petroleum products with its facilities. The refinery requires an estimated $25 million to undergo a complete revamp and resume full operations. This could be provided for in 2026 budget as a step forward to attracting strategic private sector investment to restore TOR to o
ptimal performance
Securing the necessary funds through key partnerships and the introduction of the OILBOARD would allow the refinery to function at full capacity, ensuring efficient fuel production at competitive costs.
The overarching goal of this innovative programme is to stabilize fuel prices and reduce dependency on foreign currencies for oil imports, conserve foreign exchange reserves, promote economic stability and self-sufficiency.
The OILBOARD Potential Benefits
The new oil board programme in Ghana will strategically devise means to eliminate the necessity for foreign exchange in the pricing mechanism of petroleum products. By intentionally excluding the exchange rate from the pricing formula for fuel and utilities, domestic fuel vendors are relieved of the requirement for foreign currency when importing petroleum products.
This policy shift has a benefit of lowering product prices at the pumps, offering relief to the Ghanaian population.
The innovative approach of eliminating the dollar component in pricing calculations will translate into tangible benefits for consumers, providing economic relief and contributing to a more stable domestic market.
This approach will not only sustain the positive impacts achieved but also serve as a model for responsible and innovative economic recovery and indigenization
Furthermore, currency instability remains a significant concern for the business community, as it increases the cost of doing business and surges inflation. When importers require more Cedis to obtain foreign currencies, prices inevitably go up, affecting every Ghanaian. Given the assured sources of supply of crude locally, TOR could leverage its balance sheet to raise bonds to wean itself off government support.
TOR’s rejuvenation will empower local businesses and entrepreneurs by creating opportunities in the oil and gas value chain.
By reducing reliance on imported refined products, the country can stabilize fuel prices, mitigate foreign exchange pressures, and strengthen its trade balance. It will also ensure Increase employment levels across various sectors, from skilled refinery technicians to supply chain managers and local service providers.
Financially, TOR’s revitalization is expected to contribute significantly to GDP growth. Ghana’s petroleum sector currently accounts for approximately 7% of GDP, and with improved refinery operations, this contribution could rise to over 10% within the next five years.
Moreover, efficient refinery operations will minimize fiscal losses associated with importing petroleum products, potentially saving the economy millions of dollars annually.
A rejuvenated TOR through the OILBOARD initiative will enhance national capacity by fostering knowledge transfer, technological development, and industrial expertise among Ghanaians. Local businesses involved in logistics, transportation, and petroleum retailing will have expanded market opportunities.
Strengthening indigenous capacity in the petroleum industry aligns with the vision of reducing dependency on foreign aid and fostering self-sufficiency. Technical training institutions and vocational centers can align their curricula with the industry’s evolving needs, thereby creating a skilled workforce.
The price of oil is closely tied to the world’s economy, and fluctuations in oil prices can have a significant impact on global markets. TOR when fully operational will serve as a hedging mechanism against crude oil market disruptions like wars, natural disasters etc such as the current Israel -Iran war, Russia-Ukraine war and COVID-19 pandemic
Revamping of TOR will ensure the reliability of petroleum products on the Ghanaian market and to export to the ECOWAS Sub-region.
We can as a nation and as a matter of utmost priority make TOR become the first choice for Bulk Distribution Companies (BDC) for finished petroleum products. Government must avert its mind to and explore the opportunities abound the petrochemical sector of the petroleum value chain.
This initiative will occasion a crucial step towards economic resilience and self-reliance. By prioritizing local participation, empowering indigenous businesses, and aligning with broader economic sustainability goals, this initiative will have far-reaching effects on employment, industrialization, and national energy security.
With the right approach, TOR can be transformed into a model refinery that supports national development and positions Ghana as a formidable player in the global petroleum industry. So, I say, an OILBOARD could do the rescue we have been chasing over decades.
The writer is a Development Economist
