West African countries are piloting regional price benchmarks for petrol and diesel as part of efforts to develop a more reliable basis for pricing petroleum products within the sub-region, the National Petroleum Authority (NPA) has disclosed.
Abass Tasunti, Director of Economic Regulation and Planning at the NPA, said discussions on establishing a West African petroleum products price benchmark had been ongoing, with the pilot already covering petrol, diesel and some other petroleum products.
He said the initiative was intended to eventually provide the sub-region with its own pricing reference, reducing reliance on international benchmarks used to determine the cost of imported petroleum products.
“We’ve had a lot of discussions with them about establishing a West Africa price benchmark. We’ve started doing that. We are piloting it,” Mr Tasunti told Ghextractives.com at a days media training on Petroleum Pricing and Downstream Sector Operations organized by the Chamber of Oil Marketing Companies (COMAC) in Accra on Tuesday(29 September).
He said the emergence of the Dangote Refinery in Nigeria and the continued role of petroleum trading hubs in the region had strengthened the basis for developing a regional benchmark.
According to him, the ports of Lomé in Togo have traditionally served as an important hub for petroleum product distribution in West Africa, with large vessels supplying products for onward distribution across the sub-region.
Mr Tasunti, however, identified transparency in petroleum product transactions as a major requirement for establishing a reliable regional benchmark.
He explained that international price assessment companies rely on transaction data submitted by buyers and sellers to determine daily reference prices.
“What the price assessment companies do is that this guy says, I bought 10,000 metric tons of petrol from him today at this price. He reports it. He says, I bought this quantity from this person. I report it. I sold this. I report it,” he said.
He said the data from such transactions is then used to determine the prevailing price based on actual purchases and sales.
“That is lacking in West Africa,” Mr Tasunti said, adding that limited disclosure of transaction information had made it difficult to establish a sufficiently transparent and reliable regional benchmark.
He said the availability of adequate petroleum supply was another factor affecting the development of the benchmark.
Mr Tasunti said the continued dependence on imported petroleum products means West African countries remain exposed to price movements and economic developments in other parts of the world.
“We are importing the products. We are importing and inheriting their problems as well,” he said.
He said increased domestic refining capacity in the sub-region could eventually support the development of a more robust regional pricing mechanism.
Mr Tasunti said Ghana still imports a significant proportion of the petroleum products it consumes, despite the operation of domestic refineries.
He indicated that Ghana was importing close to 80% of the petroleum products it stores, making it difficult at present to rely entirely on a West African benchmark.
He said the regional benchmarks for petrol and diesel are already being piloted but have not yet reached the level of transparency and reliability required to replace the international benchmarks currently used.
“When we get to the point where it becomes reliable, we will shift from the professional benchmarks we use and use our West African benchmarks,” he said.
Mr Tasunti said the NPA expects the pilot to develop further as petroleum supply and transaction transparency improve across the region.
The development comes as West African countries seek to strengthen domestic refining and reduce their exposure to international petroleum price movements and external supply disruptions.
