Ghana: NPA Issues Petroleum Products Guidelines…Sets Price Floors For BIDECs, OMCs

Ghana’s petroleum downstream regulator – National Petroleum Authority (NPA) – has amended its petroleum pricing guidelines to, among other things, prevent oil marketing companies (OMCs) and liquefied petroleum gas marketing companies (LPGMCs) from selling products below benchmark price.

The petroleum downstream sector of the West African nation is deregulated, that is, fuel prices are determined by factors including the cost of finished products on the global market and exchange rate.

However, the regulator, in a letter to industry signed by the Deputy Chief Executive, Curtis Perry Okudzeto, for the chief executive officer, said beginning from April 1, it shall set and communicate price floors for the deregulated products, namely gasoline (petrol), gasoil (diesel), kerosene, liquefied petroleum gas (LPG) and marine gas oil for each pricing window, which is 1st to 15th of each month and 16th to 30th of each month.

For the regulated products, namely premix fuel, residual fuel oil (RFO), aviation turbine kerosene (ATK), gasoil mines, gasoil rig and marine gasoil (MGO) foreign, the regulator said it shall determine their prices and communicate to stakeholders prior to the start of every pricing window.

The move is part of efforts to deal with concerns from industry players about serious price undercutting in the industry by some oil marketing companies in the country.

The National Petroleum Authority promised that it shall periodically furnish Petroleum Service Providers with the full pricing formula stating the specific taxes, levies, and margins applicable for each pricing window in excel format.

“Bulk import, distribution and export companies (BIDECs) will independently
determine suppliers’ premiums and exchange rates used in setting their ex-refinery prices, while Oil/LPG marketing companies (OMCs/LPGMCs) will
independently determine the marketers’ and dealers’ margins used in setting their ex-pump prices.

“The applicable pricing benchmarks are to be used as the reference for the FOB prices as well as the conversion factors for each product,” the letter said.

“OMCs and LPGMCs shall ensure that all retail outlets operating under their sponsorship always have a uniform ex-pump price, and that these prices are the same as those that have been communicated to the NPA.

The letter mentioned that notwithstanding the above, a retail outlet may offer discounts to consumers. However, this discount shall not exceed 2% of the prevailing ex-pump price of its sponsoring OMC or LPGMC.

“OMCs shall not sell products that are regulated above the prices communicated
by the NPA,” it said.

The NPA cautioned that Oil Marketing Companies that fail to comply with the guidelines could be fined from 5,000 to 20,000 Ghana Cedis thousand for violating any of the specific guidelines.

The National Petroleum Authority has given the firm assurance that it will not hesitate to sanction any Oil Marketing Company, Bulk Oil Distribution firm and Liquefied Petroleum Gas Marketing Company if they fail to comply with these new guidelines as they were based on recommendations from the various players in the industry.

Mechanism For Setting Ex-Refinery And Ex-Pump Price Floors

Ex-Refinery Price Floor:

1. Average FOB price for the window.
2. All known fixed costs that apply to imports (excluding IOTC premium and BIDEC margin).
3. BoG FX rate from the auction for the window.

Ex-Pump Price Floor:

1. Ex-Refinery price floor for the window.
2. Taxes, levies and margins in the PBU for the window (excluding OMC/LPGMC margin).

Notes:

1. IOTC premiums and BIDEC margins vary for each BIDEC hence they are considered as variable costs which they will independently determine. This allows for competitive pricing amongst them.
2. The BoG FX rate for each window is to be used because its can easily be referred to and is general to all BIDECs. It is also mostly the least FX rate for each window.
3. OMC/LPGMC margins are excluded to allow them to determine their own margins, and allows for competitive pricing amongst them.

Source: https://energynewsafrica.com