TOR on course to shake off its shackles by Q4

The Tema Oil Refinery (TOR) is determined to replace its damaged furnace by the fourth quarter, which will return the refinery to the name plate capacity of 45,000 barrels per stream day (BPSD), along with other strategic steps to revitalise the company.

Contrary to recent media publications that the refinery is on verge of collapse, management of the state-owned refinery said GH¢1 billion debt that accrued between 2009 and 2016 has been paid by the government, in addition to a further US$167million. Its current debt including loans, trade creditors, sundry creditors and project creditors, is now in excess of US$400million, it added.

These developments, along with the soon to be replaced furnace, which broke down in January 2017 and led to a reduction in the refinery’s processing capacity of 45,000 BPSD to about 25,000 BPSD and its attendant reduction in revenues and loan repayments, the company said, points to very exciting times ahead.

“We hereby state categorically that TOR is not on the verge of shutdown, but has rather been positioned for its effective turnaround and re-vitalization through the support of its shareholder,” the statement noted.

Instructively, it said due to the strategic steps taken over the past four years, several potential investors and partners have in recent times expressed their interest in either partnering TOR or providing funds for the revitalization and expansion of TOR. “These are indeed exciting times for Ghana’s premiere refinery to realize its vision; to be the preeminent refinery, a pride for Ghanaians,” it noted.

Meanwhile, as a means of addressing the outstanding debt situation and to ensure the necessary capital injection, a Business and Revitalization Plan was developed to form part of required inputs for the application for recapitalization of TOR.

This is in accordance with Regulation 198 and 199 of the Public Financial Management Regulations. The application was endorsed by the State Interest and Governance Authority (SIGA) and forwarded to the Ministry of Finance for consideration in February 2021.

“The management of TOR continues with its efforts to clear all other debts by agreeing payment plans for all legacy statutory debts such as GRA, SSNIT and Tier 2. However, for the year 2021, TOR endeavours to remain current on all statutory debts when they become due,” the statement read.

It adds that management had also begun discussion with Ghana Water and other creditors to agree payment plans for settlement of legacy debts, while arrangements have also been made for payment of outstanding terminal benefits due to retired and resigned staff, as well as repayment of provident fund arrears.

Impact of COVID-19 pandemic

The COVID-19 pandemic has had a profound impact on the global refinery industry and TOR was not spared in the slightest. Restrictions on movement (via land and especially by air) greatly reduced the demand for petroleum products. Therefore, refineries all over the globe had to reduce their throughputs and in many cases refineries in America, Europe and Asia had to shut down.

TOR’s case was not helped by the fact that crude refining accounts for up to 80 percent of the revenues it receives, therefore not receiving any crude oil deliveries to refine for a period six months as a direct result of the COVID-19 pandemic had a negative impact on TOR’s ability to meet certain fixed costs and other payment obligations.

This notwithstanding, the management of TOR said salaries and benefits were paid throughout the COVID-19 period and that the company was able to retain its workforce during these extremely difficult times.

Collection of debts and pre-payment of services

To ensure that it is able to retrieve all monies owed it, TOR said it has collated details of all recalcitrant debtors and a special management taskforce has subsequently been formed by management to pursue and recover all monies owed TOR.

Consequently, in order to mitigate the accumulation of debts for services rendered and invoiced, the statement said management now insists that all storage, transfers and liftings transactions with third parties are strictly on a cash and carry basis by requiring pre-payment before TOR provides services.

Other matters

Among other things, the company said through the support of the Ministry of Energy, it has been able to obtain laycans for the import of petroleum products for blending at the refinery and also to sell to the local market to support cash flows.

When it comes to LPG, deliveries commenced in April 2021 and TOR recorded additional margins directly related to LPG sales. It is also now concluding arrangement to commence import of other petroleum products to support its cash flows and help meet its payment obligations.

In a related issue, TOR said it achieved over US$1million insurance premium reduction for 2021, this was due to prudent management and improvement in the refinery’s risk quality in 2020.