OSP Orders TOR to Suspend Deal with Tema Energy Ltd
The Office of the Special Prosecutor (OSP) has directed the management of Tema Oil Refinery (TOR) to suspend an ongoing deal to lease the Refinery to a company named Tema Energy and Processing Limited over corruption and corruption-related offences.
The move follows a petition by the GENERAL TRANSPORT, PETROLEUM & CHEMICAL WORKERS’ UNION OF TUC (GHANA) claiming the new partner is Torentco Asset Management Limited in disguise.
Torentco was earlier introduced as the partner by TOR, however, it was revealed that Torentco was a newly established local Ghanaian company formed in January 2023 and discredited for no track record in the petroleum business.
The agreement with Torentco was classified as “shady” by stakeholders as the company was bid to pay an annual rent of $1 million for up to 8 million barrels of refined crude and $0.5 for each extra barrel if it refined more than 80 million barrels of crude for six years.
The deal was abandoned after public outcry.
In a twist of events, the TOR began a new agreement with Tema Energy and Processing Limited which has been classified as a rebrand of Torentco.
The OSP in a letter to the Managing Director of TOR said a corruption risk analysis has commenced into the proposed deal and thereby the need to halt ongoing processes.
“You are directed to immediately suspend the proposed partnership agreement, ongoing negotiations, operations, and all other ancillary activities arising out of and consequent upon the proposed partnership agreement until you are otherwise advised by the Special Prosecutor.”
Additionally, the OSP has directed the TOR to furnish them with all documents in relation to the proposed deal before December 5, 2023.
Torentco Deal
According to think tank IMANI Africa, the deal with Torentco shortchanges Ghana.
It explains that at full production limit, Torentco would have paid roughly $1 per barrel as rent to TOR for the lease, which will keep the refinery in debt.
“It has promised to also pay for utilities, clear workers’ provident fund arrears, and cover insurance payments. But all this amounts to less than $1.5 per barrel. Even TOR’s previous simple tolling contracts (with the likes of Total, Woodfields & Vitol), which were cancelled for being uneconomical and contributing to the buildup of more debts, generated $2.5 per barrel for TOR. TOR’s previous management suggests that anything less than $4.5 will be bad for TOR.
“A proper deal, that clears TOR’s debt and revamps its capacity, could generate as much as $15 per barrel or even more if current global supply uncertainties persist and as demand builds up again following the end of the pandemic.”
Additionally, IMANI believes the “shady background of the deal and the shadowy operators” behind the company would have worsened TOR’s reputation by embroiling TOR in illegal or unethical crude oil supply and offtake deals which would have subsequently scared off reputable counter-parties.
While faulting the lease period of the deal, it emphasised that the insurance premiums agreed with Torentco did not cover wear and tear while proposed maintenance (less than $8 million a year) is far lower than the tens of millions of dollars required given TOR’s current state.
IMANI has proposed an open and competitive bidding to select a partner for TOR.
“Private participation will be essential to revive TOR. But only if the private investors have serious capacity. Only a consortium with solid players that can supply working capital, crude and technical expertise must be brought on board. The Bidding Terms of Reference/Memorandum should be clear on this.”
“For investors to come on board, political risk and adverse legacy problems must be cleared. The government should strengthen the legal basis of price deregulation, ensure that all board and management appointments at TOR are based on open, competitive, recruitment, and apply the special energy taxes and levies to their true objective, which includes clearing TOR’s debts.”
