Fuel traders whip BOST back on line

Wholesalers and retailers of petroleum products have reached a consensus with the government for the latter to ensure that the Bulk Oil Storage and Transportation Company Limited (BOST) operates only as a depot of strategic stock for national security purposes and for rainy days.

This means that BOST will no longer wholesale subsidised products to GO Energy, the bulk oil distribution wing of state-owned Ghana Oil Company (GOIL), but will give equal opportunities to qualified fuel traders to use its commercial facilities as and when they demand.

The Chief Executive Officer of the Association of Oil Marketing Companies (AOMCs), Mr Kwaku Agyeman-Duah, told the GRAPHIC BUSINESS that the consensus was reached earlier this year after the government and the fuel traders observed that BOST, which was incorporated 24 years ago, had been straying into areas it was originally not mandated to venture into.

“We have had discussions with the new administration and they are going to redefine the role of BOST. BOST might come back to the old role that they used to play. It will not be doing trading and it will not  even compete with the bulk oil distributors,” Mr Agyeman-Duah said in the interview.

The genesis

Given that BOST products are indirectly subsidised by the tax payers, bulk oil distribution companies (BDCs) and OMCs had complained that allowing the company to dabble into the supply of refined products to GO Energy meant that the government was indirectly subsiding the operations of the latter and as a result, elbowing them out of business.

The Chamber of Bulk Oil Distributors (CBOD) criticised the development in its 2016 annual report, describing it as a source of market distortion.

“The role of BOST to import and trade as an OTC made it a player and a referee – a key provider of services and infrastructure support – at the same time,” the report said.

“The BOST margin (accruing about GH¢100m a year) and allocations by the Ministry of Finance from the price stabilisation and recovery levy, under the guise of strategic stocks (about GH¢60m a quarter), have provided indirect subsidies for BOST to translate into low pricing for GO Energy/GOIL,” it continued.

“This, in effect, is a subsidisation of GOIL prices through BOST. This provision is not available to the private sector and is designed to suppress pump prices at the expense of the private sector, and encourage fair competitive practices in the economy,” it added.

Beyond affecting prices, the report explained that BOST was also not providing fair services to the industry. 

“It uses its infrastructural capacity and the GoG’s Zonalisation policy to reduce competition, compelling BDCs to procure products from it as against the BDCs trading their own products.

As a result, the AOMCs and the CBOD made separate complaints to the National Petroleum Authority (NPA) to help address the challenge and create a level-playing field for the players.

After studying the matter, the AOMCs CEO said the government had responded with an assurance to help deal with the matter.

“My understanding is that GO Energy will do its trading just as any other BDC and that is the parity that will come,” Mr Agyeman-Duah said, explaining that the move would help eliminate the distortions in the market.

He was confident that GOIL, which is a member of the AOMCs, and GO Energy will “come out of the new arrangement just fine.”