Assessing the Influence of Petroleum Pricing and Deregulation on Ghana’s Downstream: A Case Study of Selected OMCS and BDCS
The price liberalization of petroleum products was considered a good policy direction years ago, but it seems to be losing its relevance today. Thus, the study assessed the influence of petroleum pricing and deregulation on Ghana’s downstream in current times. The specific objectives of this study were to; examine the current nature of Ghana’s petroleum retail price deregulation policy in the downstream sector; assess the current overall implications of petroleum price deregulation on OMCs and BDCs in Ghana and explore profitable business operations adopted by OMCs and BDCs after post deregulation. The study employs descriptive methods research design. The research approach used mixed research which employs both quantitative and qualitative approaches. The study population is made up of 116 Oil Marketing Companies (OMCs) and 33 Bulk Distribution Companies (BDCs) which sums the study population to 149 companies. In determining the sample size for administering the questionnaire confidence level of 95% with a margin of error of 5% of the population was calculated to result in 108 respondents representing the population. The sample size for the interview was 3 respondents as officials from the National Petroleum Authority, Association of Oil Marketing Companies and the Ministry of Energy were interviewed. Thus, the total sample for the study was 111 respondents. The study concludes that the current nature of Ghana's petroleum retail price deregulation policy in the downstream sector is more centered on taxation and revenue generation for the country. Also, the implications of price deregulation policy on OMCs and BDCs are increased market competition, improved services, increased cost of operations, reduced profit margins, customer complaints about prices, no shortages of petroleum products, inability to generate adequate funds, political interference, more taxes, stricter monitoring, and boost of economic recovery. Further, the study concludes that the profitable business operations OMCs and BDCs have adopted are buying cheaper products on the market, buying, and selling quality petroleum products, providing additional services to clients, advertisement, and promotions.
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Developing the Downstream Petroleum Industry for a Sustainable Market in Ghana.
The government of Ghana realizing the significance of fuel products, founded the Tema Oil Refinery (TOR) in 1961 to pursue the sole objective of processing crude oil into refined products for the indigenous market. Moreover, appreciating the increasing demand for finished petroleum products all over the country, there was some level of product circulation ineptitudes and threats in the midst of low capacity utilization of domestic refinery, deprived network of storage and pipeline structures. The government further brought into being the Bulk Oil Storage and Transportation Company (BOST) with depots facilities all over the country. The research adopted the case study technique to discover the elements hindering the smooth operations within the petroleum downstream industry in the distribution of petroleum products all over the country. The targeted units of analysis were key players within the petroleum downstream industry such as Tema Oil Refinery (TOR), BOST, Oil Marketing Companies (OMCs) as well as the Bulk Distribution Companies (BDCs). The study revealed certain ineptitudes hampering the development of the petroleum downstream sector for market sustainability in Ghana. Recommendations such as complete utilization of the domestic refinery, increase storage capacity of the petroleum depot, complete utilization of the various modes of product transfer and other recommendations were made. These were intended to develop the operations of within the downstream, in the distribution of petroleum products to all over the country in an effort to develop the industry for a sustainable market.
Analyzing the Effect of Oil Price Fluctuations on the Performance of Petroleum Marketing Companies in Nigeria: A Case Study of Total
The work analyzes Oil price effect fluctuations on performance of Petroleum products Marketing Companies in Nigeria. Trends of Oil price fluctuations and performance of Petroleum products Marketers are described here. The work further examines the effect of the fluctuation in Oil price on the performance of Petroleum products Marketers, and further checks the causal relationship between fluctuation of Oil price and the performance of Petroleum products Marketers in Nigeria between 1970 and 2018. Secondary data was employed for the analysis. The data was sourced from CBN Annual Report. Graphs were used to describe the trends of variables while the ARCH-GARCH analysis, granger causality test, and Vector Autoregressive analysis were employed in the analysis. Unit root test and the Co-integration test were also used to check for stationarity and long-run relationship, respectively. Jarque-Bera statistic for crude oil price (3.509752) with a probability of 0.172929 indicates normality, while that of Profit after tax is 6.370729 with probability value of 0.041363 indicates that there is no normal distribution. The stationarity test shows that all variables are I(1). Cointegration test showed the existence of one co-integrated equation at 5 per cent level of significance. The Error Correction Term (ECT) has a coefficient of -0.316976 with probability value 0.0184, which is significant at 5%. This indicates that in the short run, performance adjust to about 31% of the price fluctuation, while the remaining 69% is accounted for in the long-run. The F statistics of the ARCH LM test results also indicate that there is no ARCH effect. The F value of 2.02960 for causality from COP to LPAT and with probability value of 0.1564, shows that Oil price fluctuation does not granger-cause Performance of Petroleum products Marketers in Nigeria. Similarly, there is the absence of causal relationship from LPAT to COP, with F statistic and probability value of 0.95211 and 0.4020 respectively, thus there exist no causality between COP and LPAT. The study recommends that Oil marketers should move from just describing or forecasting oil price volatility as high or low to understanding the dynamics of the oil market.
Assessing the Concept of Local Content in Ghana’s Upstream Oil and Gas Sector.
The study sought to present an assessment of the concept of local content in Ghana’s upstream oil and gas sector. It employed the mixed method Research Approach using both semi-structured interviews and questionnaires to collect data with study population being actors in the upstream oil and gas industry in Ghana. The mixed method was used with questionnaire and interview used to collect data. The purposive sampling was applied. to select 25 employees and 5 experts in the oil and gas industry. The study revealed that the local content policy was being implemented and monitored for effective compliance to be achieved. However, it is more effective with non- technical activities as compared to technical activities. The reason being that unlike other business sectors, the upstream technical environment needs a suite of qualification to fit in owing to its risky environment. Again it was revealed that most Ghanaians do not have the appetite to work in the technical environment. It was recommended that there should be more strategic alliances among local firms to enhance their capacity for contract award and execution. Also, compliance to the local content fund should be intensified while local institutions and universities should be given the necessary accreditations to train and provide the needed certifications required to work in the upstream industry. Local banks Ghana should be encouraged to provide financial support to indigenous Ghanaian.
Comparative Analysis of Ghana’s Fiscal Regime and Petroleum Agreements.
The upstream oil sector the major source of government revenue for natural resource rich countries. Though the sector is a highly lucrative one, which plays a key role in the growth and development of a country, the sector is a highly capital intensive one. Thus, most developing countries are unable to raise the required investments to develop these resources. These developing must thus engage International Oil Companies (IOCs) in developing the resource. Existing literature suggests that most fiscal systems/ regimes do not enhance state’s take in the agreements drawn because they are liberal to encourage the FOCs/IOCs to invest their scarce but huge capital in this capital-intensive activity. The study reviewed theories concepts and findings from prior studies in the subject area. Prior studies revealed that Ghana has employed a hybrid fiscal regime comprising of product sharing and a concessionary system to regulate petroleum projects. Key instruments adopted in Ghana’s fiscal regime include royalties, carried interest, additional oil entitlements and corporate income tax. The study further reviewed petroleum regulations governing petroleum activities in the country. The study delves into the methods and instruments used in analyzing the data gathered for the study. Financial models including the Net Present Value method, payback period, internal rate of return and return of investments were used in assessing the efficiency of Ghana’s fiscal regime. The study revealed the weakness of Ghana’s fiscal regime in yielding optimum returns from the nations’ oil resource. The analysis of Net Present Value and the Internal Rate of Return of cashflows for a ten year period (from 2008 to 2017) from the jubilee field generated according to the terms of Ghana’s fiscal regime, was the least when compared to the Net Present Value and the Internal Rate of Return, when the terms of fiscal regimes of Equatorial Guinea, Norway and Nigeria. The Payback period for Ghana’s fiscal regime was found to be among the regimes with the lengthiest payback countries among the selected fiscal regimes. The results reveal that Ghana is realizing only a small portion of its potential revenue from oil production. The study recommends that Ghana’s government must embark on an exercise to review legislations regarding upstream petroleum activities and pass necessary amendments to suit current trends in upstream petroleum activities. The review and amendments of these regulations should be focused on optimizing the returns from oil exploration, development and production.
The Impact of Local Content on Ghana’s Oil and Gas Economy: Global Perspective A Case Study of Local Content: L.I.2204
Following the discovery of Ghana’s oil and gas in 2007 of larger and commercial quantities, the expectations of Ghanaians and communities where the exhaustible natural resource “black gold” was found, went high thereby compelling Policy makers in the country “Government of Ghana” (GOG) and other key stakeholders who are equally anxious to obtain the greatest benefits of the exhaustible natural resource. This triggered, the initiation and subsequent implementation of the L.I.2204 in 2013 to help impact positively on the Ghanaian economy and global impact as well. The rational of conducting this qualitative and quantitative (crossed sectional research) was to determine the extent of the impact local content has had on Ghana’s oil and gas economy: and the global perspective of the L.I.2204, the local content requirement of L.I. 2204 of the petroleum upstream sector. The prospective implications of this research is for bringing about social positive changes which includes; the organization of lectures and seminars by the petroleum commission of Ghana aimed at informing indigenous Ghanaians and local companies about the various opportunities of the local content L.I.2204. The local content L.I.2204 has what it takes to alleviating poverty in the Ghanaian economy and also the enhancement of the broader economic growth and development. Finally, it is for this reason the research was focused on the impact of local content L.I.2204 of oil and gas on the Ghanaian economy and the global perspective; how the world views the L.I.2204. It is my hope and believe that the petroleum commission and its key stakeholders will do more in generating jobs as a requisite requirement of the L.I.2204, doing more in generating revenue for government and engaging more in dialoging with multinational petroleum companies which will give Ghana a competitive edge in attracting more investors in to the Ghana oil and gas upstream industry.