Today, the website of Ghanas Association of Oil Marketing Companies claims 57 licensed members. Of these, Ghana Oil, Shell Ghana Ltd. and Total Petroleum Ghana Ltd. (formerly Mobil Oil Ghana Ltd., which merged with Total Ghana Ltd. in 2006) dominate all product segments with the exception of liquefied petroleum gas.

Ghanas Lube Market

Total demand for lubricants in Ghana stood at 30,710 metric tons per year in 2005, according to Ghana Oils 2007 Prospectus. The country is home to two lubricant blending plants – Tema Lube Oil Co. and Nigerias Lubcon – and one grease manufacturing plant, which is owned by Lubcon. While Tema blends lubricants for the domestic market, Lubcon, located in the Ghana Export Processing Zone, produces mainly for export to countries within the subregion.

Automotive lubricants dominate Ghanas market. Engine oils account for about 70 percent of the market, hydraulic fluids 20 percent, gear oils 6 percent, and industrial and marine oils 4 percent, Amos Donkor, managing director of Tema Lube Oil Co., told LubesnGreases during a recent visit.

The same oil marketing companies that dominate Ghanas petroleum sector (Ghana Oil, Shell Ghana and Total Petroleum) also dominate the countrys lubricant market. However, their market share has declined in recent years from 95.6 percent to 67.9 percent, according to the Ghana Oil IPO prospectus.

Robert Nunoo, managing director of Finnexx Energy Ltd. concurred with this evaluation. In a presentation at the ICIS African Base Oils & Lubricants Conference in Cape Town in November, Nunoo said that Tema Lube Oil Co. is owned by the major oil marketing companies that also control a fair share of the lubricant market in Ghana. Even though the blending plant appears to be independent, it is really owned by the oil majors, he said.

This assertion is borne out by the companys stockholder statement, which lists the shareholding structure of Tema as Social Security and National Insurance Trust, 24 percent; Ghana Oil, 10 percent; Total Petroleum Ghana Ltd., 1.5 percent; Shell Petroleum Co. Ltd. U.K., 16 percent; Total (Africa) Ltd. of France, 16 percent; Total Outre-Mer SA, 20.5 percent; and Eni International BV, 12 percent. So, what the company does is blend for the major oil marketing companies, Donkor said.

Nunoo indicated that the hold on Ghanas lubricant market by the major companies makes it difficult for independent blenders to thrive. Nigerian-owned Lubcon is the only independent lubricant blender in Ghana and is finding it difficult to make an impact in the domestic market.

Lubcons plant was established as an export entity; therefore, under that agreement it is allowed to sell only 10 to 15 percent of its products in the domestic market while exporting the rest to neighboring African countries, Nunoo said. So, it is quite difficult for Lubcon to penetrate Ghanas market.

Taiye Williams, managing director of Lubcon International Ltd., agreed. Our plant in Ghana is in the export processing zone and was so located to service the subregional market, not the domestic market.

Nunoo said the fortunes of independent blenders are further complicated by the recent licensing of 17 oil marketing companies that will import lubes and greases to Ghana. However, these companies will have to deal with the import duty tariff on finished lubricants, which stands at 20 to 25 percent and makes it difficult for imported lubes to compete in Ghana.

Amoko-Attah Edmond of LubeCo Ghana concurred that it is difficult for independents. If you want to produce locally, it will be difficult to compete with the oil majors, and if you import it will be more expensive because of the import duty. It is a Catch-22 situation, he said. Donkor added, We dont have [real] competition in Ghanas lubricants market.

Independents Respond

A visit to Lubcon Ghana in the countrys Export Processing Zone provided a firsthand look at its operation and how it responds to the competition. General Manager Adeyemi Abiona said that despite suggestions to the contrary, its business in Ghana is thriving.

We are in discussions with our partners in Dubai and other parts of the world for base oils and other manufacturing materials, Abiona told LubesnGreases at his office in Tema, Ghana, in February. He supported this contention by displaying a number of purchase orders for equipment and material to expand their business. Abiona said the policy within the Export Processing Zone requires more than 70 percent of Lubcon production to be exported to other West African countries, which is the main reason Lubcon does not do more in the domestic market.

Lubcons Williams explained that the company built a plant in Ghana because we were getting orders for our products from countries such as Benin, Togo, Burkina Faso and Liberia, but we had difficulty shipping the products to those locations because of border issues and customs [between Nigeria and those countries]. Fixing the cost for each consignment became a big problem, and we moved to blend in Ghana to make it easier.

Abiona emphasized that Lubcon Ghana has distributors that pay in advance for its products in countries such as Togo, Ivory Coast, Liberia, Burkina Faso and Nigeria. We also have an understanding to send a minimum of 10 containers of grease, consisting of 1,000 cartons, to Nigeria. Abiona noted that Ghanas Customs Authority maintains an office on Lubcons premises that certifies its production and shipment to ensure compliance with Export Zone policy.

The Lubcon plant is semiautomated and comprises one filling line for the grease plant that can fill two cartridges at a time, and one filling line for the lubricants plant that can fill 10 bottles at a time. According to Abiona, the plant has about 20 employees with a 25 million liter capacity for producing lubes and greases. He added that they collect waste and recycle it, so that no petroleum waste is generated. We filter the waste and reblend it, he said.

LubesnGreases also visited Tema Lube Oil Co.s lubricant blending plant in Tema, Ghana. The company was organized in 1990 when the government decided that oil marketers should own their own blending plant, and the group purchased a facility from Agip Petroleum.

Donkor said that Tema Lube Oil produces mainly for Ghanas domestic market but also sells about 10 to 15 percent of its output to West African markets, including Nigeria, Togo, Niger and Burkina Faso, which it supplies through the mother companies of major oil marketers such as Total Burkina, Total Niger, Shell Togo and Shell Nigeria. Tema also blends for smaller lubricant companies that are licensed by Ghanas National Petroleum Authority.

The Tema blending plant has a capacity of 36,000 metric tons per year but is producing at only 80 to 90 percent, said Donkor. The companys market share in Ghana is about 70 percent while Lubcon and some fringe players account for the remainder. Donkor said Tema hopes to consolidate its market share and grow at 10 percent per year through good customer service, strategic planning in terms of base oil and raw materials importation and staff training.

The plant has a semiautomated production line and employs more than 100 people. Donkor said that Tema sources its base oils from refineries approved by the major oil marketing companies, but added that its base oils are mostly from European suppliers.

The blending plant is ISO140001-2004 (environment) and 90001-2008 (quality) certified. We also strive to comply with the National Petroleum Authority and other bodies that regulate our environmental issues, Donkor said, adding that the company takes environmental responsibility seriously. Safety is very high on our agenda. We have a staff member who watches over health, safety and environmental issues, and we have worked for five years continuously without an accident.

The coordinator submits a report on health, safety and the environment every two weeks. We also have weekly talks on these issues in every section of the plant, Donkor added.

Tema has implemented a program called Potential Incident Report that mandates workers to report potential health, safety and environmental risks to management. If workers notice any issues that they think are risks, they have to report them, and management rewards people who make these reports, Donkor said. In addition, he said, The major oil manufacturing companies make periodic safety checks to ensure that we comply with global safety trends.

The blending plant also scores high on waste collection. We are one of a few lubricant blending plants in Africa that has an effluent treatment plant, where waste material is treated before it is further separated and disposed, Donkor said. So, the water that comes from the plant is safe to drink.

Market Challenges

Industry observers share the opinion that the biggest challenge facing the Ghana lubricant sector is the importation of substandard finished lubricants, which has resulted in inferior products flooding the country.

Lubcons Abiona added that the cost of energy and fuel to run its operations are rising, making it difficult to compete. Also, taxation rates discourage manufacturers, he added. We pay heavily for the 30 percent we supply to the local market.

Finnexxs Nunoo said the main challenges confronting the lubricant industry in Ghana include, but are not limited to, the influx of low-quality, low-cost products from Asia and the Middle East, lack of manpower in standards enforcement agencies to check and control lubricant quality, and duty and tax evasion through under invoicing by local lubricant importers, leading to unfair prices in the market.

To address these issues, Ghanas National Petroleum authority recently launched aPetroleum Product Marking Scheme to deal with the adulteration of petroleum products and to ensure that subsidized petroleum products reach the target group. The scheme involves the introduction of a biochemical liquid (fuel marker) into petroleum products at the loading depots prior to delivery to retail outlets. The marker creates a fingerprint and provides a secure, tamper-proof method of authentication.

Moses Asaga, the authoritys acting chief executive, said that violations will result in punitive sanctions such as fines, imprisonment or both to send a signal to the industry that the age-old practice of adulteration and diversion of subsidized petroleum products will no longer be tolerated.