Minister admits TOR windfall

Outgoing Energy Minster, Albert Kan Dapaah has admitted that the Tema Oil Refinery (TOR) is currently making a windfall but would not say how much this amounts to. Determining how much this amounts to would depend on the newly reconstituted National Petroleum Tender Board's calculation, he told Public Agenda last Thursday. He however admits that this could be up to 100 per cent. Dapaah explained that TOR's profit is the result of the estimated price of crude as well as the exchange rate used to calculate last February's fuel price increases. The government used the price of $32 per barrel for crude oil and an exchange rate of ¢8,800 to a dollar to arrive at the price hikes. However, the current price of crude is around $26 per barrel and the exchange rate is around ¢8,400 to a dollar. He denied that the prices of petroleum products were going to go up with the introduction of the TOR debt recovery levy. What the levy seeks to do is to ensure that in times when the refinery over recovers more than 100 per cent, up to ¢640 per litre would be collected from the refinery and used to defray the TOR debt, Dapaah said. Beyond the ¢640, any extra windfall would translate into a reduction of the ex-pump prices of petroleum products he added. Dapaah's admission has confirmed suspicions from certain quarters that government was over recovering from the fuel price increases. The National Democratic Congress, the Socialist Forum and the National Reform Party have challenged the basis for the nearly 95 per cent increase in prices. “Official information on fuel pricing policy has been full of holes and contradictions,” the National Reform Party said in a communiqué issued at the end of its recently held congress. “In 2001 when Government increased prices by 60% the minister claimed we had achieved full cost recovery. Since then cumulative cedi cost increases (crude oil and Cedi depreciation) have only been in the region of 30% and not 100%,” said the communiqué signed by the party's chairman, Peter Kpordugbe. Government is also said to have agreed with the IMF in an Aide Memoir published in September 2002 that a 25% increase in pump prices would achieve import parity.

“There is every reason to believe that the new prices are a means of increasing government revenue without imposing VAT increases demanded by the IMF,” Kpordugbe said.

Dapaah explained to Public Agenda that the over recovery is not automatic as during certain periods like sometime in February the price of crude oil rose to as high as $36.

With the unstable situation in the Gulf as well as problems in Nigeria's oil rich region, there are growing fears that the price of crude oil could go soaring.

Finance Minister, Yaw Osafo Maafo, told Parliament on March 18 that 4.6 billion cedis had so far accrued as surplus income after the increment in petroleum prices in January.

That government is making some gains from the current prices of petroleum products is not in doubt. How much this windfall amounts to, is still a big secret.