Fuel smuggling hits OMCs

By: Fred Yaw Sarpong

sarpong007@gmail.com

Some Oil Marketing Companies (OMCs) in Ghana are losing huge sums of revenues as a result of smuggling of fuel into the industry while others are gaining.

The Chief Executive Officer (CEO) of PETROSOL, Mr. Michael Bozumbil said some OMCs have team-up with some of the tank owners and drivers who are eventually smuggling fuel to these OMCs.

According to him, the oil industry in Ghana is suffering from "illegal fuel galamsey" which is coordinated by cabals within the industry. 

“This is very serious than the main galamsey in mining we are all talking about. It has more security implications and its rippling effects unmatched. We are operating from a system where you suffer to do the right thing while others are benefiting from doing the wrong things. If you cannot beat them then you must definitely join them has been the message from these cabals,” he stated.

He spoke to the Daily Express after the Energy Media Group (EMG) team called on him to present a copy of the Energy Magazine to him. The team was led by the CEO of the EMG, Mr. Henry Teinor. 

The magazine is about 60 pages which deal with issues confronting the energy sector in the country, Africa and the world at large.

Mr. Bozumbil argued that the cabals in the industry bring fuels vessels with substandard products and flood them on the Ghanaians market to compete with the quality ones to which the average consumer is unaware. 

“Pricing is very important in our business. These cabals bring substandard products and sell them cheap on the market. How do u expect us to compete in this same environment with someone who is not paying taxes and selling substandard product,” he asked.

“National security is loosed or broken as far as this menace is concerned. We thought change in government will bring an end to this but it rather escalating. We are not selling but yet we are paying our staff at the end of every month. We are appealing to the government to bring an end to this before things get out of hand,” Mr. Bozumbil called on the government to come to their aid.

Mr. Bozumbil mentioned that in 2016 export of petroleum products increased for about 400%, compared with about less than 200% recorded in 2015.

“The industry players do not understand while this could happen. What economic change has taken place in Mali, Burkina Faso, Togo and others where an export volume can increased significantly,” he asked.

The OMCs are very worried and blaming the National Petroleum Authority (NPA) for allowing this to happen. “We are disappointed in NPA for not taken initiative to investigate this but rather happy that there was growth in the petroleum export sector,” he added.

He argued that what was meant for export was actually smuggled or diverted into the domestic market. He pointed out that some industry operators are enjoying while those doing the genuine business are suffering. 

“Officials of the government in this sector are aware of these issues in the industry because the industry players have briefed them. He asked the government to be vigilant and seal the loopholes in the industry, if the government really needs more revenues,” he reiterated.

He categorically stated that the fuel smuggle is happening especially in the capital-Accra and Tema. “This is seriously going on and it’s escalating.”

He said that the average margins for OMCs is hovers around 5% to 6% maximum. But added that some of operators especially those into smuggling are getting as high as 40% margins.

“As a country, Ghana is breeding of oil pirates and I will call on National Security to act quickly.  If the government and the industry players allow the cabals to operate, Ghana will soon become lawlessness country.”

“Profits on petroleum business are not much, so if you create a situation that allows people to smuggle huge sums of volume of fuel into the sector, you allow those persons to control the sector and they can destabilize the peace of this country and they can also buy the security with their money. The government must sit up and prevent these things from occurring.”

Meanwhile, the 2016 CBOD Annual Report states that activities of product ‘round-tripping’ and inward smuggling, were rampant during last year. The report said this negatively impacted fair pricing and deprived Government of needed taxes and the industry continues to face risks which threaten the survival of the private sector.

“Among these include unfair regulation, GoG indebtedness to BDCs, trade credit risk, currency risk, the anti-competitive use of public infrastructure by parastatal companies, unhealthy rivalry and illegal products (‘round-tripping’, inward smuggling and off-spec products),” the report noted.

The CBOD 2016 Annual report said the developing trends from 2016 are unsustainable and require industry to revise its business models and operations to survive and thrive going forward. “A change in current fortunes will require policy interventions by Government and operational restructuring by the major stakeholders (Banks, BDCs and OMCs). It is hoped that the recent change in political leadership will provide industry with an opportunity for new, fair and progressive thinking,” it added.

According to CBOD 2016 report, despite receiving GHc1.071 billion in payments, an estimated GHc1.78 billion remains outstanding in Government of Ghana (GoG) debt to Bulk Distribution Companies (BDCs).

It said “the combined effect of the covert subsidies and illegal products forced private industry players to reduce margins beyond economic levels. In some cases, margins were not just uneconomical; they were nominally negative. In a given case, supplier premiums from which margins may be realized were negative, indicating major trading losses.”

Total petroleum imports (Crude and Products) for the petroleum and power sectors increased from 3.7 million (mn) metric tons (mt) in 2015 to 4.4mn mt in 2016, representing an 18.27% increase.

The share of imports by the government sector increased from 14% in 2014 to 28% in 2015 and 45% in 2016, culminating into a total loss of 31% in private sector share. Export of petroleum products increased by about 400% compared to the 2015 fiscal year.

The private sector’s share of exports was 53% compared to 47% of the parastatal companies. Local petroleum product consumption however reduced by about 5.64%. The private sector was responsible for 75% of the product distribution which represents a 4% drop compared to 2015.

Meanwhile, Gasoil with a share of 53% represents the most consumed product on the market. The demand for Gasoil and Gasoline however saw a drop in actual terms whilst LPG rose marginally by 0.88%.

Mr. Teinor called on the industry players to take up the mantle and fight rather than relying or waiting for the government to solve this menace.

He said fuel smuggling poses more dangerous than even activities of galamsey in the mining sector. He cited the cartels that have raided the Nigeria oil industry.

He called on the OMCs to have an independence body in place to monitor and check some of this situation, make available data to fight the menace.

Chief Executive Officer (CEO) of PETROSOL, Mr. Michael Bozumbil thanked the team for the visit and subscribed to the magazine.

The team was led by the CEO, Mr. Henry Teinor.