The decision by Sentuo Oil Refinery to refine crude oil from Ghana’s Jubilee Field for the first time has been hailed as a major milestone, but an industry expert says expectations of its economic impact should be tempered.
The expert with considerable experience in the industry is cautioning that the direct impact on ordinary citizens may be more limited than many anticipate.
Speaking to The High Street Journal on condition of anonymity, the expert described the development as a positive step towards strengthening Ghana’s downstream petroleum industry and reducing dependence on imported crude for local refining.
However, he argued that the scale of the refinery’s operations significantly constrains the extent of the benefits that can be passed on to consumers and the broader economy.
According to him, one of the most obvious advantages of refining locally produced crude is the elimination or substantial reduction of freight and transportation costs associated with importing crude oil from abroad.
He was quick to add that the savings generated from that advantage will largely accrue to the refinery itself and not to the general petroleum consumers.
The expert explained that Sentuo’s current refining capacity of about 40,000 barrels per day remains relatively small by international standards. In comparison, many refineries in Europe operate at average capacities of around 200,000 barrels per day, allowing them to spread operational costs over larger volumes and achieve significant economies of scale.
He explained that the relatively low throughput means the refinery cannot generate the level of cost efficiencies needed to substantially lower fuel prices or deliver widespread economic gains across the country.
“The transport advantage will be offset by the capacity disadvantage,” he stated.
In his view, while the refinery’s use of local crude represents progress for Ghana’s energy sector and contributes to efforts aimed at increasing local value addition, expectations of dramatic reductions in fuel prices or major nationwide economic benefits should be tempered.
The expert stressed that for Ghana to fully maximize the benefits of its crude oil resources through local refining, the country would need larger refining capacities capable of processing significantly higher volumes at lower unit costs.
Nevertheless, he acknowledged that Sentuo’s move marks an important milestone in Ghana’s industrial development and could serve as a foundation for future expansion of the country’s refining industry.
