Oil Marketing Companies reeling under pressure

BY: Jessica Acheampong
Mr Emmanuel Pobee, Managing Director, Radiance Petroleum Limited, dispensing fuel at the newly opened Darkuman Service Station
Mr Emmanuel Pobee, Managing Director, Radiance Petroleum Limited, dispensing fuel at the newly opened Darkuman Service Station

The Managing Director of Radiance Petroleum Limited, Mr Emmanuel Pobee, has said indigenous oil marketing communities (OMCs) are currently operating under a lot of financial  pressure, a phenomenon which is threatening their continuous existence.

According to him, while OMCs continued to operate with what he described as stagnant commissions, their operational costs continued to soar, stressing that many of the players were unable to withstand the pressure and would, therefore, go out of business simply because they would not be able to match their cost against profit.

In an interview after the company opened its new fuel service station at Darkuman in Accra on August 31, Mr Pobee said as a result of the deregulation of the petroleum sector, which allowed companies to fix their own prices at the pumps, OMCs seemed to have been made to operate for about two years without an increase in the margins they received. However, in their quest to remain competitive on the market, they had endured the effect which was now taking a toll on their operations.  

“Right now, it looks like OMCs are just cannibalising themselves. For competition and survival, we are giving away a lot of our commission so we can get businesses at our various service stations,” he said.  

He explained that the current approach was not sustainable because with time, the ones which were not able to compete would be pushed out of business.

“Truth is ,it is not sustainable, interest rates have not gone down; workers are asking for increased salaries, insurance and any other expenses are going up yet your source of income which is received from the commission is stagnant.”

“This whole idea of deregulation is great but it is most likely that if we continue on this path for long, we will see some indigenous OMCs under a lot of pressure and if care is not taken, most of them will fall apart,” he added.

Assess policy

The National Petroleum Authority (NPA), which is the regulator of the downstream petroleum sector in Ghana, in 2015 announced that OMCs would now announce their own ex-pump prices for petroleum products in the country as part of the petroleum deregulation policy.

Mr Pobee stated that it was important for the regulator to take stock of the implementation of the deregulation policy to ensure that the indigenous OMCs did not sink.
He said the regulator was aware of the challenges that the OMCs were facing and hence, there was the need to take a second look at the policy.

“The regulator is aware of the challenge and the whole deregulation process is being looked at. I think we have to take an inventory of where we are. Let us take account of the benefits from where we came from and where we are and address the key challenges that are solvable to make sure that we don’t sink the indigenous OMCs with this approach of deregulation,” he said.

Darkuman station opened

Meanwhile, the opening of the new fuel service station at Darkuman in Accra, brings to 36, the total number of stations owned by the company. It is currently operating in six regions in the country.

The company, which originally operated along the highways, is now extending its services to the inner cities to reach more clients.

The General Manager of Radiance Petroleum Limited, Mr Joseph Addae, said the decision to extend the services to the inner cities was in response to customer demands to extend their services to reach more clients.

“We have been in the Greater Accra Region for some time and being in the heart of the city has been one of our major goals. We are five years and that is an important milestone and we want to come to the city to serve more of our customers.

“We want to have closer access to most of the customers who patronise our services and we tried elsewhere and got a positive feedback so we decided to extend our services,” he added.

Staying competitive

Responding to how the company intends to fight competition in the inner cities, Mr Addae said the company would continue to serve its clients as they remained critical to the success of the business.

“We have been trying since day one to come in and thankfully we are here. Our key secret to success is that our customers deserve better. We will always make sure that our customers get the best fuel in terms of the quality and also give them the best prices. As a result of deregulation, we have to make sure that our prices are very competitive enough,” he said.