Ghana: Benjamin Nsiah Writes On Gold For Oil Policy

A petroleum downstream Analyst, Benjamin Nsiah, has shared his opinion on the Gold for Oil Policy by the Akufo-Addo administration.

Media reports earlier this week revealed that the amount of 40,000 metric tons of fuel under the policy was received and delivered into the storage tanks of BOST.

This portal brings our readers to the observation by Mr Benjamin Nsiah on the policy.

 Observations On Gold For Oil Deal

1. If Government imported 40,000Mt of only diesel which is equivalent of 47,337,200 litres, it will last only 6 days because Ghana consumes about 44,785Mt (53,000,000 litres) per week.
2. If government imported 40,000Mt of only petrol which is equivalent of 52,980,000 litres, it will last about 7 days because Ghana consumes about 36,995Mt (49,000,000 litres) per week.
3. If government imported 20,000 Mt of diesel and 20,000mt of petrol, both products will last only 4 days.

4.BOST products to BDCs is about only 10% of Petroleum products imported into the country. This is too inadequate to set lower prices of Petroleum products in Ghana

5. Now, BOST as an Oil Trader could decide to sell these products in dollars or cedis to BDCs. But in each scenario products will be sold using the commercial dollar rate quoted by the universal banks as their benchmark for price quotation.

6.Petroleum price indicators published by NPA indicates that, BDCs are expected to use US$780.33/mt to set price of petrol in this window so assuming US$40m was used to import only 40,000mt of petrol, Petrol from BOST in this window will cost US$1000 per metric which is US$219.67 more than the current indicative. If BOST sells it at current indicative price, then the company loses US$219.67 on each metric, totaling US$8,786,800 on the whole 40,000mt

7.Petroleum price indicators published by the NPA indicates that BDCs are expected to use US$894.18/Mt to set price of diesel in this window so assuming US$40million was used to import all the 40,000mt of diesel, the diesel from BOST will cost US$1000/Mt, which is US$105.82/Mt higher than this window’s indicative price. Assuming BOST sells their product at the current indicative price, BOST will lose US$105.82/Mt, totaling US$4,232,800 on all the 40,000Mt.

9. NOTE: BOST will have to reserve these products and sell at prices that will reflect profitability. 
10. If BOST decides to sell to BDCs at current indicative prices published by the NPA which is likely to lead to losses, BDCs will still use a forward FOREX rate which is higher than prevailing Universal Bank forex rate, reflective of anticipated risks factors.

10.Lastly, I can only tell you to manage your expectations

Prepared by

Benjamin Nsiah

Petroleum Downstream Analyst