Boakoye Agyarko, the Energy Minister has recently revealed that, the government has plans to turn the beleaguered Tema Oil Refinery (TOR) into a tank farm.
This is a complete shift from the purpose for building TOR.
This news comes after the minister not long ago disclosed government’s plans to establish a new refinery in the Western Region which many energy experts see as unnecessary if the existing refinery which needs an amount of US$67 million to bring it back to life has been abandoned by the same government to build new one which will cost around US$4 billion.
Again, many Ghanaians have opposed the turning of TOR into a tank farm. This includes the Chief Executive Officer (CEO) of TOR, Isaac Osei.
“I didn’t come to TOR to preside over its demise. I have not come here to run this company by scrapping it,” the TOR CEO reportedly said.
Also, the Minority Spokesperson on Mines and Energy, Adam Mutawakilu has said, there is no need to convert TOR into a tank farm when it still has the capacity and equipment to refine crude.
“TOR is a legacy asset and it is not that it is outdated and can no more function; it is about investment and management of the asset that Dr. Kwame Nkrumah left with us. So when somebody starts talking about turning it into a tank farm, I can foresee that they want to cannibalize most of the equipment that TOR has.”
He insisted that the Minority will do everything possible to resist such moves.
“Tank farms do not need processing equipment so what happens to what TOR has? We will not agree to that as Minority [in Parliament]. We would, as Minority, resist turning a legacy project that still has the capacity to process crude for this country into a tank farm.”
TOR has been in-operational intermittently for years now due to financial constraints.
As at 2015, TOR’s debt was estimated to be in excess of 1.9 billion.
However, Alexander Mould, former GNPC boss has taken a look at the financial and management prudence of the proposal of the minister.
He believes that, to be able to tell if the proposal is right or not, then first there is the need for a comprehensive process audit to understand how to debottleneck the refinery and make it run profitable(that is, at what costs and over what period).
He adds, “after the audit then look for the financing from shareholder and financial institutions and if not, then from a strategic investor. But, the issue as I see it now is that all what the strategic investors want to do with TOR is turn it into a tank farm rather than investing US$300 million.”
The returns on TOR, if operating profitably (and without servicing the current debt) should be about 2-3% on every cargo (that is, about US$1.5-2 million a month); a trader who brings in an equivalent 3 cargoes a month (using the same LC lines as a 1m bbl crude import) makes almost the same.
With this, he asked, “So why should an investor invest an additional US$300 million when he can make the same amount or more with less hassle?”
He therefore suggests that, a competent board and management team are needed and trim down size of staffs and workers to make refinery efficient.
He further suggested that, the new Board and management must seek the pledge of government, the sole shareholder, that there will be no interference from the minister and any other government machinery.
The Convention People’s Party (CPP) has also vowed to resist attempts by government to convert the Tema Oil Refinery (TOR) into a tank farm.
A tank farm is a facility used mainly for the storage of liquid petrochemical products.
In 2010, TOR requested for US$67.7 million for plant stabilisation and enhancement projects.
In response, the government in 2012 released $30 million, which was used to complete the first phase of plant stabilisation and enhancement projects on the crude distillation and residual fluid catalytic cracking units.
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.
A second phase of stabilisation and enhancement projects designed to ensure the reliability of operations at the refinery has been delayed.