Contaminated fuel generates controversy

Reports of the purported release of five million litres of contaminated fuel onto the market by the Bulk Oil Storage and Transportation (BOST) Company Limited have stirred intense controversy among stakeholders in the oil industry.

While the Ministry of Energy has taken steps to investigate the claim, BOST has denied that there is contaminated oil on the market and rather defended its decision to sell the contaminated fuel to a private company.

The Minority in Parliament, which has joined the fray, has accused the Managing Director of BOST, Mr Alfred Obeng Boateng, of causing financial loss of  GH¢14.25 million to the state through the contamination of five million litres of fuel and the subsequent sale of the product to a private company.

In an interview with the Daily Graphic, the Minister of Energy, Mr Boakye Agyarko, said: “The ministry, from a policy perspective, is immediately setting up a committee to investigate the process and transaction of this matter.”

He said the National Petroleum Authority (NPA) had already submitted its interim report, which would feed into the investigation.

Mr Agyarko did not indicate when the committee would be set up but said a statement to that effect would be issued soon.

Contaminated fuel

 Mr Boateng is alleged to have evacuated five million litres of the contaminated product in Tank 121 at the Accra Plains Depot (APD) to Movenpinaa/ZUPOIL without recourse to due process or duty of care to the consumer.

Analysts have pegged the revenue loss to the state as a result of the transaction at GH¢12.57 million.

This is because BOST had stated that it sold the product at GH¢1.30 per litre, implying that at a pump price of GH¢3.85 per litre on the market, GH¢12.57 million has been lost by the state.

Preliminary investigations

Preliminary investigations conducted by the Daily Graphic indicate that the NPA has directed BOST to immediately cease the evacuation of the said contaminated product.

Sources close to the Daily Graphic claimed that about two million litres of the contaminated product had been released onto the market, with Tema and its environs being the largest recipients, but a highly placed NPA source said “records available to it indicate that 851,000 litres were released to the APD for onward lifting by Movenpinaa”.

The company at the centre of the storm, Movenpinaa, lifted the product with ZUPOIL as it’s off taker but checks by some officials of the NPA indicate that ZUPOIL paid for two million litres and has so far received 851,000 litres from Movinpinaa.

According to the NPA source, 54,000 litres had been unaccounted for.

NPA directive

A letter dated June 22, 2017 and addressed to the Managing Director of BOST and signed by the acting Chief Executive of the NPA, Mr Alhassan S. Tampuli, said the authority’s attention had been drawn to a letter issued by BOST on its decision to evacuate five million litres of contaminated product.

 “Movenpinaa/ZUPOIL, the company which is currently lifting the contaminated product from BOST, is not licensed by the NPA to engage in any petroleum downstream related activity.

“The authority has, therefore, not ascertained the capacity of Movenpinaa/ZUPOIL to handle and process products from a depot (APD BOST Depot,” the letter said.

It directed BOST to formally apply and seek authorisation from the NPA prior to the release of contaminated products to any company.

Minority in Parliament

At a press conference in Accra yesterday, the Minority in Parliament said in view of the apparent financial loss to the state caused by BOST, there was the need for Mr Boateng to be interdicted, while a full-scale investigation was carried out into the deal.

The Minority Spokesperson on Energy, Mr Emmanuel Armah-Kofi Buah, said the Minority in Parliament had noted with grave concern the sale of contaminated fuel products to the tune of five million litres to a company known as Movenpinaa by the managing director of BOST "under very dubious and bizarre circumstances”.

He said even more disturbing was the explanation offered by BOST to justify the sale of the contaminated product, as well as the circumstances surrounding the sale, which clearly lacked transparency and integrity.

Mr Buah said petrol was sold at GH¢3.85 per litre, but BOST sold the contaminated product on credit at GH¢1 per litre to the private company, Movenpinaa Company Limited, which in turn sold it at GH¢1.30 per litre.

He said the accumulated loss to the state was in the region of GH¢14.25 million.

Other demands

He said the financial loss estimated at GH¢14.25 million be retrieved by surcharging the offending officials at BOST, in line with the recent Supreme Court decision.

He called for the immediate withdrawal of the contaminated product from the market to protect consumers and assurances that it would not recur.

Level of contamination

Mr Buah said under proper regulatory and supervisory protocols, under no circumstance should the country experience such high levels of contamination as it was currently witnessing. 

He said the justification by BOST that the contaminated product was sold for use by manufacturing companies was untenable.

He said the norm and practice was that when such contamination occurred, corrective treatment of the product was undertaken by the Tema Oil Refinery (TOR) through blending.

No competitive bidding

He said the claim by BOST that the contaminated product was sold at a competitive ex-depot price was false and could not be justified.

He said incontrovertible evidence available confirmed that Movenpinaa Company was the only company BOST dealt with in the sale of the contaminated product in a sole-sourced transaction.

"It is, therefore, erroneous to suggest that the sale was done under a competitive process," he said. 

Mr Buah said further information available indicated that Movenpinaa Company put in a proposal to purchase the fuel on May 19, 2017.

Interestingly, he said, checks from the Registrar-General’s Department suggested that the company was incorporated to trade in and transport fuel on May 29, 2017, which clearly suggested collusion on the part of the actors.

BOST responds

In its response to the accusations, BOST has challenged anyone with information on the illegal sale of contaminated fuel products at fuel stations to report such action to the appropriate authorities for immediate action.

In a statement, the company said its technical team carried out due diligence, inspected the facility of the off-taker and was satisfied that the product released was going to be scheduled to reflect the capacity at any point in time.

“BOST deploys the use of only bulk road vehicles (BVR) that have tracking devices installed and have duly met the requirements of the NPA to haul products, thereby rendering BOST extremely responsible. Anyone who has a contrary view should provide a credible laboratory report and detailed analysis,” it said.

Revenue

Responding to a call by the Africa Centre for Energy Policy (ACEP) for Mr Boateng to step aside for a full-scale investigation into the alleged sale of contaminated fuel, BOST defended its decision to sell off the contaminated or off-spec product to Movenpinaa, saying the move was the most prudent, considering the potential loss in revenue.

“BOST sold the off-spec product at GH¢1.30 per litre, as against the normal ex-refinery rate of GH¢1.75 for normal products. That is 26 per cent discount off the normal product and this is normal and acceptable practice in the industry.

“The assertion that the off-spec product should have been sold at GH¢2.50 per litre is misleading because ex-refinery price and pump price are completely different. BOST only sells products at ex-refinery rate; BOST does not sell its products at ex-pump price and so those who are quoting same should move away from that assertion,” the statement said.

Status

Touching on the status of Movenpiina in the whole deal, BOST said nothing prevented an entity from having business discussions with a company which was at a business promotion stage.

It said at the time Movenpiina was engaged by BOST in respect of the off-spec product sales, it had been duly registered with the Registrar-General’s Department.

Options

BOST said the product in question was declared off-spec after going through an in-house technical assessment and a laboratory test by TOR, adding that after the realisation of the state of the product, BOST, after a thorough analysis and consultation, had three options to deal with the situation.

“The first option was to have a corrective treatment of the off-spec product at TOR, but that option was not possible because TOR is not refining at the moment.

“The second option was to gradually inject about 70,000 litres of the off-spec product into 10 million litres of normal product over a period which will take about 10 solid months for BOST to accomplish. The implication of this option is, however, the opportunity cost of losing the commercial value of over GH¢5.7 million. This arrangement would have deprived the bulk distribution companies (BDCs) of getting space to store their products. The capacity of the tank holding the off-spec product is 20 million litres.

“The third option involved the selling of the off-spec product at a competitive ex-depot price. Comparatively, the possible revenue loss here cannot outweigh the loss in options one and two.

“Clearly, option three was the ideal from a business point of view,” the statement added.

Visit

To confirm that there was contaminated oil on the market, officials of BOST led a team from the NPA, the Consumer Protection Agency (CPA) and the National Security to visit the premises of ZUPOIL, the company that took final delivery of the contaminated oil from Movenpiina after the latter bought five million litres of the product from BOST.

When the team got to the premises of ZUPOIL in Tema yesterday, it was observed that three 500,000-litre tanks believed to be containing the contaminated fuel had been cordoned off from interference, while its valves had also been locked with unique seals.

Africa Centre for Energy Policy (ACEP)

For its part, ACEP  said the transaction was extremely worrying, especially at a time when, following ACEP and Public Eye’s clean fuel campaign, there was stakeholder consensus to change the regulated sulphur content from the current 3000ppm to 50ppm, effective July 1, 2017.

“ACEP can confirm that the reported off-spec product is an accidental blend of petrol and diesel which occurred when a petrol flow-line was misdirected into a diesel tank during a discharge of petrol cargo into the Accra Plains Depot.

“This obviously contaminated the petrol and made it unfit to run in any automobile engine,” a statement signed by the Executive Director of ACEP, Mr Benjamin Boakye, said.

“The usual remedy in such situation would have been to further blend the product with more petrol or diesel, depending on the ratio of the two products, to achieve an acceptable standard and clean the tank. This blending could be done at TOR without the need for fractional distillation or running the catalytic cracker units, which are down at the moment,” it noted.

The centre, accordingly, disagreed with BOST’s official position that it would have taken more than 10 months to blend the product.

“ACEP disputes that this is only an attempt to justify why the product was hurriedly disposed of. Five million litres of diesel is just about one and a half days of national consumption. Therefore, if BOST was minded about protecting the consumer, the product could have been blended and sold as a normal product in less than a month. In fact, BOST recently imported a shipload of off-spec products which it sent to TOR for blending,” the statement revealed.

ACEP’s concerns

One of the concerns raised by ACEP was the qualification of the companies involved.

It said its checks revealed that Movenpinaa/ZUPOIL got registered as a company on May 29, 2017 but initiated the transaction with BOST on May 19, 2017, some 10 days before it became a legally recognised company in Ghana.

“Also, it has not obtained the requisite licence from the NPA to trade in the industry. ZUPOIL, another company which was named in the statement released by BOST as ‘the off-taker’ whose ‘storage facility could accommodate the volume of product’ is also not known in Ghana’s petroleum industry.”

The statement said ACEP was, therefore, of the opinion that it was illegal for BOST to have engaged Movenpinaa and ZUPOIL in the sale and storage of the off-spec petroleum product.

COPEC

Meanwhile, the Chamber of Petroleum Consumers (COPEC) has condemned BOST for not working in the interest of the consumer.

“One would have thought a company like BOST would, at all times, work with the public interest as the primary objective, but the selfish interests and greed of some management persons, including the MD, seem to have taken the best part in this cruel transaction without any proper prior or post-sale and discharge impact assessment done,” a statement issued in Accra and signed by Mr Samson Adade, an officer in charge of Research, Pricing and Monitoring at COPEC, noted.

It urged Ghanaians to help track and arrest any fuel station dealer found to be selling the contaminated product by reporting such action to the NPA and the other authorities.