Oil companies to secure guarantees as condition for licence renewal

Ghana’s National Petroleum Authority (NPA) is to come out with a new condition for oil marketing companies (OMCs) to retain their trading licences. The OMCs are now to secure bank guarantees from reputable banks that will pay their bills when they default in paying the bulk distribution companies (BDCs).

Moses Asaga, chief executive officer of the NPA, said the directive, which would come into force immediately is aimed at ensuring sanity and improved liquidity in the petroleum trading sector adding that commercial banks were no longer willing to provide letters of credit (LCs) for the BDCs as a result of the OMCs huge indebtedness. The situation, he explained, had led to the introduction of a cash and carry system by the BDCs, leading to the shortage of products in some parts of the country, with the hinterlands being the most affected.

Asaga said that the BDCs were facing the liquidity crises because majority of them were fighting for market share, as a result of which they were giving out products to the OMCs without the necessary bank guarantees and any reasonable market recovery plans.

He said majority of the OMCs were thus taking advantage of the BDCs’ scramble for market share by failing to pay back after the expiration of the 90-day credit rolled out to them.

Majority of the OMCs, had over time, invested monies belonging to the BDCs after the sale of products into micro-finance and contract businesses, resulting from the relaxed manner in which the BDCs treated their credit covers.