Mr John-Peter Amewu, Minister of Energy, said this had been necessitated by the financial recklessness uncovered by a Presidential Committee tasked to look at the financial position of the company.
The Committee recently presented its report which spoke of the poor state of the company’s finances and blamed this on financial indiscipline and recklessness.
It cited the unprofitable tolling arrangement with the Tema Oil Refinery (TOR) Limited between year 2015 and 2016, under which the refinery processed crude oil on behalf of BOST at a fee
Mr Amewu told a press briefing in Accra, attended by Mr. Kojo Oppong Nkrumah, the Information Minister designate that per the arrangement, BOST procured its own crude oil and shipped it to the refinery for processing into refined petroleum products – gasoil, gasoline, LPG and then sold the products to the domestic and export markets.
He said the tolling of $5.5 per metric tonne (M/T) was on the high side compared to the international average tolling fee of $3.5 per MT.
Added to this was the higher than normal imported crude oil premium.
Mr. Amewu said the cost of processing the crude oil with all associated expenses in its procurements did not make the transaction profitable.
He added that during the tolling arrangement with TOR, yields received from the processed crude oil were lower than expected, thereby the sales (Gross Product Worth) from the refined products was far less than the cost of crude oil purchased.
The company therefore incurred losses from this transaction.
Again because of the BOST/TOR alliance, some traders dealing with BOST were deducting some of TOR’S old liabilities from proceeds of the exports BOST undertook during the period.
Mr. Amewu also spoke of trade losses resulting from under-recoveries and said it had a take or pay agreement with Trafigura and other traders, which far exceeded BOST’S capacity to sell to the market.
The net effect was that in times of price drops BOST incurred far more losses because it always held high stocks of petroleum products in its storage facilities, creating under-recoveries.
He touched on repayments of existing loans from trade receivables and said funds expected to be used for payment of product purchasers were used to repay loans.
BOST overheads were paid from trade receivables due to insufficient funds from its margin.
Mr Amewu said about 60 per cent of the funds from BOST margin payments was pledged for the repayment of the Standard Chartered Bank loan, adding that it was using part of its trade receivable to fund its daily operations (overhead cost of about GH¢300 million per annum).
This situation created a hole in its trade receivables.
Recent payments to Springfield Energy Limited, was one of many claims made by 16 Bulk Distribution Companies (BDCs) to BOST for product losses occurring between 2013 and 2016.
He said the total claims on BOST in respect of product losses by BDCs amounted to $44 million.
The causes of such product losses needed to be established to determine records of the storage of those products, those responsible for loading the products, the financial receipts in respect of the products and utilization of the funds.
He said since 2013, BOST had been faced with serious financial crises due to mounting debts and financial indiscipline.