Strong infrastructure and stable prices in GhanaJanuary 23, 2019
George Mensah-Okley, the managing director of the Bulk Oil Storage and Transportation Company (BOST), talks to TOGY about the outlook for oil storage in the country, the role of natural gas in the energy basket and oil product trade in the country. BOST was set up to manage Ghana’s strategic oil reserves and develop the infrastructure for petroleum products and natural gas distribution throughout the country.
• On petroleum hub plans: “We are buying other tanks in the Western Region so BOST will be a driving force behind the the hub vision. Storage will not be part of the expenditure for any refinery coming to set up.”
• On export plans: “I want to automate the eastern corridor from Tema to Buipe and have products transported by pipeline. The barges can go up the Volta in the east of Ghana, and the pipeline will connect from that stage. I want this within four years.”
• On expansion: “We want to expand our infrastructure, so the question is: Should we go greenfield or brownfield? We want to adapt the brownfield approach first before we go on to greenfield.”
• On natural gas: “Natural gas is the transition between the high-carbon-density fossil fuel to renewables. For now, it will play a key role in power generation. Depending on the volumes that we have, we will export to neighbouring countries.”
Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find an abridged version of our interview with George Mensah-Okley below.
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What do you want to achieve for BOST as its new managing director?
In the short and medium term, I aim to set up a world-class trading department and form a strategic partnership with GO Energy and GOIL to ensure a stable and long-term price outlook at the pump. We also want to have co-operation with the private sector. We want to leverage our current strength and infrastructure to ensure that the cost of doing business in the downstream will be as low as practicable. We want to expand our infrastructure, so the question is: Should we go greenfield or brownfield? We want to adapt the brownfield approach first before we go on to greenfield.
Brownfield means acquisition. I want to approach the various BDCs in place who have storage infrastructure in Ghana to acquire that infrastructure and storage. Then we’ll lease out our tanks so we will have a lease agreement with a BDC or any player for storage for maybe five years. If it is 20 million litres, we will look for maybe two companies to lease the terminal and split it. It is a store, we’ll use the take-or-pay model because of the cashflow. Whether you bring or do not bring products, you pay us.
In so doing, when we buy the tank, we pay up front so there is no more debt on their books. That also provides them some working capital and liquidity. If you look at capex and opex in the cashflow analysis of the economies, it changes the rate. In so doing, the operational costs, the total value chain of doing business, will be cheaper because there is always value in all sections of the value chain.
Is your aim to have BOST more of a monopoly, as it used to be, but with a relationship with the private sector?
Yes, that is how things should be. We can maintain an equilibrium. Doing things like that is right, as currently there are a lot of distressed tanks. The second point is that they want to look at an export market to a neighbouring country and they want to avoid dumping. Because of the tax differential between the local and export markets, people will say they want to export but they do not, they dump it. If you are a Ghanaian company exporting, there are lower taxes, and some taxes in-country are not applicable to exporting, so companies prefer to load and then sell abroad to get arbitrage in the differential.
Furthermore, as part of a brownfield project for us, the VRA imports a lot of crude into the country and also there is some gas that comes in, so those tanks will become redundant. We want to acquire them and if we can reconfigure and refurbish some into products storage, we will do that. We will still maintain and expand them and use them as storage for crude oil. We are buying other tanks in the Western Region so BOST will be a driving force behind the the hub vision. Storage will not be part of the expenditure for any refinery coming to set up. They will build the refinery and we have storage for tanks, so it is just pipeline commission.
To what extent is BOST exporting products?
I want to automate the eastern corridor from Tema to Buipe and have products transported by pipeline. The barges can go up the Volta in the east of Ghana, and the pipeline will connect from that stage. I want this within four years. We want to have barges that can go to the lake and then have a pipeline to Burkina Faso. Where the barges end, the pipelines take over the Buipe, so we will be more or less the export terminal for loading into Mali, and it will also create additional storage in the Western Region.
BOST is hoping for project financing and for partnerships to raise long-term capital to restructure. We are targeting pension funds. That is our long-term goal. There is a grace period before that happens, so we are hoping for business and want to create infrastructure for all petroleum products that are used in the country.
Do you think natural gas will play a much bigger part in the energy landscape of Ghana?
That is the reason they set up Ghana Gas. Natural gas is the transition between the high-carbon-density fossil fuel to renewables. For now, it will play a key role in power generation. Depending on the volumes that we have, we will export to neighbouring countries. That is why we have the WAGP [West African Gas Pipeline]. It should go beyond Takoradi to the Ivory Coast. We have time to bring our strategy to Senegal and monetise Senegalese natural gas in Ghana.
For BOST, however, we want to be focused. We do not want it to be a distraction. When we finish building our empire on the liquid side, then we can tackle diversification. Our focus going forward is on oil storage and transportation more than the gas, also LPG and condensate: liquids.
Do you compete with some international companies?
Yes, and that is the role our trading department wants to play. That is where the competition will come in. We are more or less competing in that area, but we want to create a space. The volumes that we want to bring might be 50%-plus of the market shares. If GOIL is doing about 30%, we want to bring about 55% of imports as an oil trading company to give to GO Energy and the rest. Other BDCs can also buy from us, so we can still leave space for Trafigura and other international companies to bring product. We are ready to collaborate.
Do you benefit from Ghana’s being on the coast?
Certainly. We want to drive development of long-term, key infrastructure. I want to bring in a vessel to do bunkering so we can break big parcels into smaller ones offshore. We are looking into a conventional bay mooring system where big vessels will come offload it, and smaller vessels will come and discharge. Vessels that will come into Ghana will be huge leverage on an economical scale.
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