Article: BOST abandons pipeline infrastructure at the expense of the state
In meeting the growing demand of petroleum across the globe, oil and gas pipelines will continue to play vital roles in safely, reliably and efficiently transporting the energy commodities over long distances from their sources to end-users or consumers.
Of the various modes of bringing petroleum products to the market (e.g. ocean, road, pipeline and rail), each carries its own set of risks; suggesting there is no perfectly risk-free way of moving the commodity, or anything else for that matter. While pipelines may leak, trains and trucks can crash, hurting individuals, as we saw in Lac-Mégantic in July 2013, and barges can sink (Furchtgott-Roth and Green, 2013).
However, pipelines have been identified as representing a much safer means of transporting oil and gas as compared to other modes of transportation, even though pipelines have the potential to cause harm to public health and the environment because of the hazardous materials they carry and the proximity of some pipelines to highly populated areas (Parfomak, 2019).
Advantages of Pipelines
According to the U.S. Association of Oil Pipelines (AOPL), of the total 16.2 billion barrels (nearly 680 billion gallons) of petroleum products delivered by crude and refined products pipelines in 2014 in the United States, an amazing 99.999 percent of these products delivered by pipeline reached their destination safely. Also a study by the Manhattan Institute compared the safety of road, rail, and pipeline hydrocarbon transportation and found that transport of oil by roadway had the highest rate of incidents with 19.95 per billion ton miles per year. This was followed by rail with 2.08 per billion ton miles, and oil pipelines were found to be the safest with 0.58 serious incidents per billion ton miles.
Aside its safety records, pipelines have the advantages of being able to handle large volumes, having good continuity with 24-hour uninterrupted transportation, being unaffected by weather conditions in the transportation process, and having a low unit freight transportation cost (Wang et al, 2019).
Rail may convey economically very large volumes of goods over long distances to remote places, experiencing relatively low variable operating costs, but in general incur high fixed costs because of expensive equipment (i.e. railways must maintain their own rail track meant exclusively for them), switching yards and terminals. Motor carriers also bear relatively small fixed investments in terminal facilities and operate on publicly maintained highways. However, the variable cost per mile for motor carriers is high because a separate power unit and driver are required for each trailer or combination of tandem trailers. Labor requirements are also high because of driver safety restrictions and the need for substantial dock labor. The use of motor carriers also creates added strain on publicly maintained roadways (Shanmukha 2016, Goodin 2016).
Today, through advanced technologies pipeline companies and operators are able to harness new capabilities such as data analytics and remote monitoring to stay on top of pipeline leaks, thefts and third-party damages, thereby increasing operational efficiency and reliability.
In spite of the many advantages including safeness, reliability, efficiency, and cost competiveness relative to other modes of transporting petroleum, Ghana’s Bulk Oil Storage and Transportation Company Limited (BOST) have abandoned the use of its primary distribution pipeline infrastructure, substituting it with Tankers/Bulk Road Vehicles (BRVs); thus impacting negatively on the public purse.
Incorporated in 1993 as a private limited liability company with the government as the sole shareholder, BOST has the mandate to develop a network of storage tanks, pipelines and other bulk transportation infrastructure throughout the country, and to keep Strategic Reserve Stocks of fuel for Ghana. BOST has an additional mandate as the Natural Gas Transmission Utility (NGTU) to develop the Natural Gas infrastructure throughout the country, and provide transmission and interconnection services for natural gas without discrimination.
Ghana’s Fuel Transportation Systems
Petroleum product transportation in Ghana is regulated. Distribution to the end consumer involves two stages of transportation, namely Primary transportation and Secondary transportation.
Primary transportation refers to transportation from the BOST Depot (Accra Plains Depot) in Tema to other BOST inland depots i.e. Kumasi, Buipe, Bolgatanga, Mami Water and Akosombo. This activity is delivered under the mandate of BOST who employs the services of both state and private petroleum product transporters.
Secondary transportation refers to the transportation of petroleum products from the bulk supply points (depots) to retail outlets and bulk customer sites. This activity is carried out by licensed Oil Marketing Companies (OMCs) who engages the services of private Transporters (owners of BRVs) to cart from the depots to the retail outlets or bulk customer sites.
Primary transportation to BOST inland depots are carried out using pipelines owned by BOST (i.e. Tema to Akosombo/Mami Water and Buipe to Bolgatanga), River barges owned by BOST and the Volta Lake Transport Company (VLTC), also a state agency (i.e. through the Volta Lake from Akosombo to Buipe), and Tankers/BRVs owned by private individuals who are contracted by BOST (BRVs from Tema to Kumasi, Tema to Buipe).
BOST’s Pipeline Infrastructure
BOST has three pipeline systems. First an 18-inch multi-product pipeline, used to transfer refined products (Gasoline and Gasoil) from ocean vessels into the Accra Plains Depot located in the south-eastern part of Ghana. Same pipeline can be used for ocean exports because of its reverse-flow mechanism.
The two other pipelines, being the 6-inch 93km Tema-Akosombo Pipeline (TAPP) System and the 8-inch 268km Buipe and Bolgatanga Pipeline (B2P3) System are used for Primary transportation to move products to BOST inland depots.
The TAPP System installed in 1993 is meant to facilitate the transportation of petroleum products for the local distribution and shipment via river barge to Buipe in the Northern Region of Ghana. The System comprised of three sections, i.e. the Tema Oil Refinery (TOR) to Accra Plains Depot (APD), APD to to Mami-Water Depot (MWD), and the MWD to Akosombo Depot (AKD). And the 268km Buipe to Bolgatanga Pipeline System (B2P3) was constructed and commissioned in 2005 to facilitate the transportation of products to the in Northern Region of Ghana and the Sahel countries.
For some years now, the Tema-Akosombo Pipeline (TAPP) and the Buipe- Bolgatanga Pipeline (B2P3); being the two Primary Transportation pipelines, have been abandoned by BOST in favour of Tankers/BRVs; to the detriment of the State.
The TAPP System have been out of service for close to 10 years due to lack of proper maintenance. In mid-2016, BOST set out to refurbish the TAPP System which has been out of service for many years. The Works were to be completed in ten and one-half (10½) i.e. from July 2016 to June 2017. However the works has stalled due to funding challenges, thus having to rely on road Tankers to cart products to Akosombo at a much higher cost, compared to the pipeline.
The B2P3 System was operated for 3 years after commissioning and shutdown, leaving the pipeline full of Gasoil for almost 6 years. It was re-commissioned in 2015 and operated till end 2016. Although the pipeline is in a good working condition, it has not been deployed since it was last shutdown in 2016. This means that fuel to the Northern region are moved by Road Tankers too.
Below is the summary of volume and freight cost associated under primary transportation for 2017 and for 2018 in Ghana.
The figures from the Ministry of Energy (MoE) shows that on the average, about 92 percent of petroleum product transfer under the BOST Primary transportation network is carried out using Tankers (BRVs). The 8 percent is via river barges and specifically from Akosombo to Buipe.
It clearly show that for the past few years, not a single pipeline under BOST’s Primary transportation network have been deployed even though pipelines are known to be safer, reliable, efficient, and cost-effective, relative to other modes of petroleum product transportation.
BOST rather seem comfortable with the use of Tankers (BRVs), the most expensive and risky transport mode to cart products across its inland Depots.
A report submitted to the MoE in September 2018 by a Committee put together to review Ghana-Burkina Pipeline Proposals, identified that using Tanker (BRVs) for Primary transportation is fraught with high cost of operations, transit losses, damage to road, health and safety concerns, delays in delivery of products to various destinations, et cetera.
The report suggest that the current mode of transportation of export products (via Tankers/BRVs) creates the opportunity for all forms of illicit trading activities such as dumping these products on the Ghanaian domestic market leading to high revenue loss to the Government of Ghana. And that between 2016 and 2017, illicit fuel trading activities Infractions, cost the country over US$200 million per annum in lost direct petroleum tax revenue.
For these reasons, BOST have a duty to save the country of the needless costs associated with the extensive use of Road Tankers (BRVs) by reactivating its Primary distribution pipelines for a safe, reliable, efficient, and cost effective transmission of products within its network.
Written by Paa Kwasi Anamua Sakyi, Institute for Energy Security (IES) ©2019
The writer has over 22 years of experience in the technical and management areas of Oil and Gas Management, Banking and Finance, and Mechanical Engineering; working in both the Gold Mining and Oil sector.
He is currently working as an Oil Trader, Consultant, and Policy Analyst in the global energy sector. He serves as a resource to many global energy research firms, including Argus Media and the CNBC Africa.