- Ghana’s Refining Capacity is Yet to Shield Fuel Market From Global Shocks — CEMSE
Ghana’s expanding petroleum refining capacity is not yet sufficient to shield consumers from international fuel-price shocks, according to Benjamin Nsiah, Executive Director of the Centre for Environmental Management and Sustainable Energy, who argues that greater local processing must be accompanied by reliable crude supply, competitive refinery economics and stronger strategic planning.
The warning comes as the government pushes to increase domestic refining through the revival of the Tema Oil Refinery and expansion of the privately owned Sentuo Oil Refinery. Energy Minister John Abdulai Jinapor has said the two facilities could eventually meet about 70% of Ghana’s domestic demand for refined petroleum products once planned expansion programmes are completed.
Sentuo currently operates at about 40,000 barrels per day and is being expanded towards a planned capacity of 100,000 barrels per day. Government has presented the investment as part of a wider strategy to reduce dependence on imported finished petroleum products, strengthen energy security and retain more value from Ghana’s crude oil resources.
But Mr Nsiah’s argument is that installed refining capacity should not be confused with insulation from global oil markets. Ghanaian refineries will still require crude oil priced largely against international benchmarks, meaning movements in global crude prices can continue to feed into the cost of locally refined petrol, diesel and other petroleum products.
That distinction is important because the public debate around refinery expansion can easily create the impression that producing fuel locally will automatically translate into substantially cheaper and more stable pump prices. Local refining can reduce freight costs, improve supply security and retain more economic activity domestically, but it does not eliminate the underlying commodity cost of crude oil.
Ghana therefore faces two related but different objectives. The first is reducing dependence on imported finished products, while the second is reducing exposure to international price volatility; achieving the first does not automatically deliver the second.
Mr Nsiah has previously argued that Ghana needs a more reliable mechanism for supplying domestically produced crude to local refineries, particularly TOR. In May, he called for changes to the petroleum framework to ensure a more consistent allocation of local crude, warning that restoring refinery capacity without securing feedstock could leave facilities underutilised.
Government has since moved in that direction. TOR received one million barrels of Jubilee crude in July as part of efforts to restore consistent refinery operations and increase domestic petroleum production, with officials presenting the allocation as an important step towards deeper local value addition.
The economic case for domestic refining remains substantial. Importing finished products means Ghana pays not only for crude oil but also for refining margins, shipping and other costs embedded in the international supply chain, while domestic processing can potentially retain some of that value through employment, taxes, logistics and associated industrial activity.
It can also improve physical energy security. A country importing most of its refined fuel is vulnerable not only to prices but to shipping disruptions, refinery outages abroad and geopolitical events capable of interrupting international supply chains.
Yet local refining introduces its own commercial risks. Refineries require consistent throughput to spread fixed costs efficiently, meaning a plant with high nameplate capacity but irregular crude supply may struggle to compete with large international facilities operating at scale.
TOR’s financial position therefore remains an important part of the equation. Mr Nsiah has previously questioned whether the state refinery possesses sufficient cash-flow strength to finance large crude purchases independently, suggesting that simply restoring technical capacity will not resolve its underlying commercial challenges.
Sentuo presents a different model because it is privately operated, but its success will similarly depend on crude availability, financing costs, operational efficiency and the ability to sell products competitively into Ghana’s deregulated downstream market.
Government’s ambition to have TOR and Sentuo meet about 70% of national demand is therefore a capacity target rather than a guarantee of actual output. Refineries must have crude, financing and functioning equipment before installed capacity translates into physical barrels supplied to the market.
The distinction between capacity and utilisation is crucial. A 100,000-barrel-a-day refinery running substantially below capacity contributes considerably less to national energy security than its headline specification suggests.
There is also the question of pricing. Ghana’s downstream petroleum market remains connected to global product and crude benchmarks, exchange-rate movements, taxes and statutory margins, meaning locally refined fuel must still operate within an international pricing environment.
This is why Ghana can expand refining and still experience pump-price increases when crude oil rises sharply or the cedi weakens. Domestic refining may reduce some components of the final price but cannot completely isolate consumers from changes in the underlying global commodity.
The case for expanding refining should therefore be framed less as a promise of permanently cheap fuel and more as an industrial and energy-security strategy. The economic gains would come from retaining refining margins locally, creating jobs, lowering some logistics costs, strengthening supply resilience and reducing dependence on imported finished products.
A complementary strategic fuel reserve could provide a more direct buffer against short-term global price spikes. Consumer advocates have already argued that holding adequate stocks purchased before major price increases could allow Ghana to moderate the speed at which international shocks are transmitted to domestic consumers.
That suggests refining and strategic storage should be viewed together rather than as competing policies. Local refineries increase the country’s ability to produce fuel, while strategic reserves create flexibility over when available products are released into the market.
For Ghana, the deeper issue is therefore whether the country can construct an integrated downstream petroleum strategy linking domestic crude production, refinery capacity, storage infrastructure, foreign-exchange management and competitive retail pricing.
Without that integration, expanding refinery capacity could become another case of infrastructure existing without the financial and supply systems required to use it fully. Ghana would have larger plants but could remain vulnerable to many of the same international shocks affecting the market today.
The government’s current strategy nevertheless represents a significant shift. Supplying Jubilee crude to local refineries and expanding Sentuo towards 100,000 barrels per day could materially reduce the volume of finished fuel that must be imported if the facilities operate reliably.
But Mr Nsiah’s warning places an important qualification around that ambition. Refining more petroleum at home can strengthen Ghana’s energy security, yet energy security is not synonymous with price immunity.
The real measure of success will therefore not be the number of barrels Ghana can theoretically refine, but whether those barrels are produced consistently, competitively and with enough strategic flexibility to reduce the economic damage caused by international supply and price shocks.
