Keep multinationals out of oil retail business – analysts

FuelDr Isaac Amo-Antwi, a Takoradi based Social Worker and an economics expert has cautioned that it is dangerous for multinational oil companies to be allowed to enter the downstream sector of the country’s oil industry.

He said there were various levels in the chain of operations in the oil marketing business. “Multinationals feed the Bulk Distributing Companies (BDCs) and the BDCs feed the Oil Marketing Companies (OMCs). So for multinationals to run the whole chain is dangerous and sets the ground for controlling the market”.

He noted that most African countries are moving away from what he termed ‘vertical integration’ in the downstream sector, and wondered why Ghana was embracing it.

He explained that under vertical integration operations, the ownership and control of two or more stages of a product supply chain between the production of the raw material and the sale of the finished product to a consumer was owned by one company.

It involves one company controlling the upstream, midstream and downstream oil leases, oil and gas exploration and production, processing of crude oil and sale of the refined products, he further stated.

The Upstream focuses on oil and gas exploration and production, whiles the Midstream level is the initial processing of crude oil at a field production site to remove gas, crude oil storage and the subsequent transportation of crude oil to a refinery.

Downstream sector operations include oil refining, storage of refined products and transportation of products to retail outlets where they are sold.

“The danger is that indigenous OMCs will die off, after succeeding in taking over the downstream from the local companies; then we will see the real character of multinationals”, Dr Amo-Antwi noted.

He said there was the urgent need to protect local OMCs as the multinationals will use price war to knock-out the indigenous companies.

“The downstream must be left for Ghanaian entities,” he emphasised, and challenged the NPA to enforce the local content law.

He also urged NPA to enforce the regulation which mandates that some percentage of equity holdings of companies within the sector should be owned by Ghanaians, saying that “this will help protect our national heritage and national interest”.

Dr Amo-Antwi challenged the Association of OMCs to act to protect the interest of member oil marketing companies, and said the nation spent over $200 million of the country’s foreign exchange earnings every month to import refined products and at least for once it should be left in the hands of Ghanaians.

“Why should we allow multinationals to take it through repatriation of their profits to their countries of origin? We must resist attempts by multinationals to enter into the retail market,” he said.

Dr Raziel Obeng-Okon, a Financial and Investment Management Consultant also told the GNA that it would bring about undesirable consequences if multinational companies were allowed access to the Ghanaian downstream oil and gas sector through acquisition of several OMCs.

He said the situation would lead to a reduction of local entrepreneurs in the downstream oil sector, lack of financial muzzle of the remaining local entrepreneurs to compete with foreign owned OMCs, and increased capital flight by foreign owners.

He further noted that vertical integration would negatively impact on capital flight, and pose a major problem to the stability of the Ghanaian cedi.

“On the business front, it appears our telecommunication, mining, banking, upstream oil and gas sectors are significantly foreign-owned.  If the downstream players (OMCs) have also become targets of foreign take-overs, then we need to be careful as a country,” he said.

Dr Obeng-Okon said allowing big foreign companies to take over significant numbers of indigenous OMCs may be at variance with the local content and participatory policy regarding the downstream petroleum sector.

He explained that the policy seeks to among other things, develop local capacity in all aspects of downstream petroleum value chain, as well as achieve at least 98 per cent local employment in all aspects of downstream petroleum sector.

It also seeks to increase the capabilities and international competitiveness of domestic businesses and industries, and achieve at least 60 per cent equity participation by Ghanaian providers of supplies and services in the downstream petroleum sector.

He said it was important to note that the local content policy objectives were expected to be attained through mandatory local content in the petroleum downstream sub-sector including processing, manufacturing, supply and marketing activities.

It also focuses on ensuring that those transactions are carried out by indigenous Ghanaian companies with a minimum of 60 per cent shareholding by Ghanaians.

Dr Obeng-Okon noted that currently there were about 3000 petroleum retail outlets across the country but most of those outlets were situated in the Greater Accra Region.

“I am aware that NPA is trying to ensure equity by encouraging retail outlets in the Northern part of the country but this may be difficult to achieve if foreign giants take over significant numbers of our OMCs because their model is always demand and profit driven.

“It is important that while encouraging foreign participation in the downstream oil and gas sector, we do so by ensuring that the local entrepreneurial initiative is not killed,” Dr Obeng-Okon stated.

He therefore called on the NPA to perform due diligence in situations where foreign companies were strategising to take over OMCs in Ghana.

“It is important for NPA to play the watch-dog in all joint-ventures, amalgamations, partnerships with Ghanaians in the downstream petroleum sector in order to avoid hostile take overs without recourse to laid down procedures,” Dr Obeng-Okon noted.

For his part Mr Kwaku Agyeman-Duah, AOMC Industrial Coordinator, said local indigenous companies were capable of matching any entrant into the Ghanaian oil and gas sector if the guidelines per the NPA policy were implemented properly.


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