The main benefit of a domestic refining industry is that value is maintained in country, reducing the need to import expensive refined products from elsewhere. This benefit is particularly pronounced with complex refineries, which produce high-value products, such as petrol, and middle distillates, such as home heating oil for the domestic market. Over recent decades, advanced economies have been weighing up the advantages and disadvantages of domestic refining against importing from abroad, taking into account local opposition to unsightly refining infrastructure and an increasingly prohibitive regulatory framework surrounding refining activities. In emerging markets, where regulation tends to be lighter and the demand for refined products is growing at a faster pace, refinery capacity is rapidly building up. According to the UK-based data and analytics company GlobalData, global refining capacity is expected to expand by more than 15% between 2018 and 2022, with Asian countries planning to add the largest amount of crude distillation unit (CDU) capacity, followed by Africa and the Middle East. In West Africa, Nigeria is currently leading the way in terms of planned CDU capacity, expecting to add more than 2m barrels per day (bpd) to its total, at a cost of $57.6bn.
Tema Oil Refinery
In Ghana, the path forward for midstream activity is not as clear. The nation’s single refining facility, Tema Oil Refinery (TOR), located 15 km east of the capital, has been operational since 1963 but is facing considerable challenges. Although it has a design capacity of 45,000 bpd, poor maintenance and operational inefficiencies have meant that its output has been considerably less for much of its history. The most serious operational failure in recent years came in early 2017, when the refinery was temporarily shut down after a damper failure caused a furnace at the CDU to explode. While the refinery resumed operation shortly afterwards, its maximum capacity was reduced to 30,000 bpd.
Further production interruptions have come as a result in feedstock shortages. In June 2018 TOR was closed once again when it ran out of crude oil and failed to secure funding to purchase more. The refinery requested credit guarantees from the ministries of energy and finance to allow it to access $70m in bank loans but failed to reach an agreement. According to TOR’s former CEO, Kingsley Awuah-Darko, the refinery’s debt to banks already stood at $199m in August 2016, an obligation large enough to make securing funding from the private sector difficult. The shutdown followed an announcement by then minister of energy, Boakye Agyarko, that Ghana would build a new 150,000-bpd refinery by 2022, a development which would meet the country’s domestic demand and allow it to become a significant exporter of refined products to the rest of the region.
TOR was revived once again in October 2018 after receiving a consignment of 947,000 barrels of crude oil from BP Oil International. The managing director of the refinery, Isaac Osei, plans to bring the refinery back into operation with improved efficiency and standards, positioning the facility “to take advantage of the discovery of crude oil in Ghana to expand our infrastructure be able to meet and exceed the market demand for petroleum products”. Considerable investment will be needed for these plans to come to fruition.
The current refinery is incapable of producing the sweet light crude produced by Ghana’s Jubilee oil field, having been designed for heavier grades, and updating the facility will be an expensive process. Whether the government will be willing to channel large-scale investment towards TOR, or would prefer to start afresh with a new refining facility, remains to be seen. The only certainty for Ghana’s midstream oil segment is that large amounts of capital will be needed if the nation is to establish itself as a successful regional centre for exporting refined products.