The Chamber of Petroleum Consumers (COPEC) is urging the government to introduce a cedi-based payment system for crude oil supplied to local refineries, warning that dollar-denominated transactions could increase pressure on Ghana’s foreign exchange market and contribute to further depreciation of the cedi.
The proposal comes amid efforts to strengthen Ghana’s domestic oil refining capacity, reduce dependence on imported petroleum products and improve stability in the local energy market.
Tullow Oil, an upstream oil producer operating in Ghana, has been supplying crude oil to local refineries under an arrangement designed to support domestic refining. Sentuo Oil Refinery received the first crude oil cargo under the initiative earlier this year.
COPEC Wants Crude Oil Transactions Settled in Ghana Cedis
COPEC Executive Secretary Duncan Amoah believes local refineries should be allowed to purchase crude oil in Ghana cedis instead of dollars, particularly because the refined petroleum products are sold on the domestic market in the local currency.
According to him, aligning crude oil payment arrangements with the currency used for local petroleum sales could help reduce additional demand for foreign exchange and ease pressure on the cedi.
Mr Amoah stressed that any commercial agreement must protect the interests of crude oil producers, the government and domestic refineries to ensure that all parties benefit from the arrangement.
He explained that the commercial terms should allow Jubilee field partners, Tullow Oil and the Government of Ghana to receive their expected returns without unnecessarily increasing foreign exchange challenges for local refiners.
He noted that maintaining a commercially sustainable arrangement would be essential to the long-term success of Ghana’s domestic petroleum refining initiative.
COPEC Says Dollar Payments Could Increase Pressure on the Cedi
The COPEC executive secretary argued that requiring local refineries to pay for crude oil in dollars could force them to compete with importers and other businesses for limited foreign exchange.
He explained that refineries generate revenue from selling petrol, diesel and other petroleum products to Ghanaian consumers in cedis. Requiring dollar payments for crude oil, therefore, creates a currency mismatch that could increase their demand for foreign exchange.
Mr Amoah warned that this additional demand could make it more difficult for businesses that depend on imported goods, raw materials and equipment to access the dollars they need.
He said such pressure could contribute to cedi depreciation if demand for foreign currency rises without a corresponding increase in supply.
The concern comes as Ghana continues to pursue measures aimed at strengthening the local currency, improving foreign exchange availability and reducing vulnerabilities associated with imported petroleum products.
President Mahama Reportedly Directs Ministers to Consider Flexible Payment Terms
Mr Amoah also stated that President John Dramani Mahama had instructed the Energy Minister and the Finance Minister to ensure that local refineries receive flexible trade terms that would allow them to pay for crude oil in the domestic currency.
According to the COPEC executive secretary, such an arrangement could help refineries manage their operating costs while reducing their direct exposure to foreign exchange pressures.
The proposed policy would require discussions among the government, crude oil suppliers and refinery operators to determine commercially acceptable payment conditions.
The final arrangement would also need to account for the foreign exchange requirements of upstream petroleum producers and other parties involved in the crude oil supply chain.
Tullow Oil and Sentuo Refinery Arrangement Supports Domestic Refining
The supply of locally produced crude oil to Ghanaian refineries forms part of broader efforts to increase domestic processing capacity and reduce reliance on imported refined petroleum products.
Sentuo Oil Refinery is among the facilities expected to benefit from access to crude oil under the supply arrangement.
Increasing domestic refining could create opportunities for local industry, improve the utilisation of refinery infrastructure and reduce some of the country’s exposure to international petroleum product markets.
However, the overall economic benefits will depend on crude oil pricing, refinery operating costs, production efficiency and the commercial terms governing the supply arrangements.
Could Cedi-Based Crude Oil Payments Help Ghana’s Economy?
Allowing local refineries to settle crude oil purchases in cedis could reduce their direct demand for dollars and potentially ease pressure on Ghana’s foreign exchange market.
The proposal could also help address the currency mismatch between crude oil procurement and domestic petroleum product sales.
However, the actual impact on the cedi would depend on how suppliers use the cedi proceeds, their foreign exchange requirements and the structure of the final commercial agreements.
For Ghana to achieve a sustainable solution, policymakers and industry stakeholders would need to balance the interests of local refineries, upstream oil producers, the state and businesses that rely on foreign exchange.
COPEC’s proposal has therefore brought renewed attention to the relationship between crude oil pricing, domestic refining, petroleum imports and exchange rate stability in Ghana.
Source: newsthemegh.com