Ghana’s downstream petroleum sector is at risk of collapse due to inefficiencies following partial deregulation. Since the removal of fuel subsidies in 2015, competition has increased, but average sales across OMCs remain stagnant. The financial burdens on service providers and a high number of companies compared to Kenya and Tanzania further illustrate these concerns.
Civil Society Organisations (CSOs) in Ghana are warning that the country’s downstream petroleum sector is at serious risk of collapse without immediate policy reforms. The shift from a regulated to a partially deregulated market since fuel subsidy removal in 2015 has not improved efficiency in the sector, according to these groups.
The partial deregulation has led to a surge in the number of Petroleum Service Providers (PSPs), placing additional pressure on the market. Despite competition, the resulting instability has raised concerns about the overall system’s sustainability and its impact on Ghanaian consumers, who bear the costs of high credit and ineffective debt management.
A joint statement from the Centre for Environmental Management and Sustainable Energy (CEMSE) and the Institute for Energy Policies and Research (ITEPR) indicates that while Bulk Distribution Companies (BDCs) have increased from 31 to 53 since deregulation, the average annual sales per Oil Marketing Company (OMC) have remained stagnant, at approximately 24,990 metric tonnes since 2015.
Financial burdens also weigh heavily on BDCs, requiring annual license renewal fees of around US$300,000 and over US$750,000 for new entrants. The CSOs highlight the toll this regulatory framework takes on the sector’s operation.
Additionally, a comparison with Kenya and Tanzania shows a stark inefficiency in Ghana’s market structure. Ghana’s 213 OMCs contrast significantly with Kenya’s 106 and Tanzania’s 60, even though all three countries report similar annual petroleum sales of about 5 million tonnes.
The current state of Ghana’s downstream petroleum sector is precarious, marked by rapid growth in service providers but stagnant sales and inefficiencies. Without urgent policy reforms, the system risks collapse, impacting consumers and the market stability. Key financial barriers challenge new entrants, aggravating existing issues within this vital sector.
Original Source: www.gbcghanaonline.com
