Setting Up A Downstream Petroleum Company In Ghana 

June, 2024

  1. REGULATION OF PETROLEUM DOWNSTREAM INDUSTRY IN GHANA

The petroleum downstream sector in Ghana encompasses all in the petroleum value chain which concern importation, (re-)exportation and refining of crude oil as well as the sale, shipment, transportation, processing, marketing, storage and distribution of petroleum products in the country.

The National Petroleum Authority was established by NATIONAL PETROLEUM AUTHORITY ACT, 2005 (Act 691) to regulate, oversee and monitor activities in the petroleum downstream industry.

  1. LICENSING REQUIREMENTS FOR BUSINESSES IN THE DOWNSTREAM PETROLEUM SECTOR

The law provides that no person shall engage in a business or commercial activity in the downstream industry unless that person has been granted a licence for that purpose by the regulator.

2.1. Qualification for Licence[1]

To qualify for a licence to engage in a business in the petroleum downstream sector, the applicant must belong to one of the following categories:

  1. a citizen of Ghana; or
  2. a body corporate registered under the laws of Ghana
  • a partnership registered under the Incorporated Private Partnership Act, 1962 (Act 152); or
  1. a foreign individual or foreign company in a registered relationship with a citizen of Ghana or a Ghanaian company

There are however some licences that are issued to only Ghanaian entities such as the Bulk Distributing & Export Company Licences.

2.2. Minimum Local Participation

While some licences are reserved solely for Ghanaian entities, foreign participation is allowed in some of the activities along value chain in the downstream sector.

 Below is a list of the level of local participation required in respect of some licences:

  • A Bulk LPG Distributing Company Licence – at least 50% shares to be held by Ghanaian citizen(s)
  • A Bulk Road Vehicle (BRV) Licence – no minimum local participation requirement
  • Permit To Construct A Wharf & A Tankfarm – at least 50% shares to be held by Ghanaian citizen(s)
  • A Bulk Distributing & Export Company Licence – 100% equity interest held by a citizen or citizens of Ghana.
  • A Bulk Import, Distributing & Export Company Licence – at least 51% shares to be held by Ghanaian citizens
  • Licence to Operate Petroleum/Petroleum Product Inspection Company – at least 51% shares to be held by Ghanaian citizens
  • An LPG Marketing Company Licence (LPGMC) – 100% equity interest held by a citizen or citizens of Ghana
2.3. Conditions of Licence

A licence shall not be granted to an applicant unless the applicant has complied with all requirements specified by law. A licence granted by the Regulator is subject to the conditions specified in the licence.

The Regulator may request from the applicant where necessary:

  1. a clearance certificate or an appropriate permit from the Environmental Protection Agency and Ghana Standards Board
  2. evidence of financial viability for the ownership or operation of the business or commercial activity and adequate training, qualification and experience to engage in the business or commercial activity.
2.4. Application for Licence
  1. A person may apply to the Regulator for a licence in the prescribed manner and upon payment of the prescribed fees. The form of the application and specific requirements depend on the type of commercial activity proposed to be undertaken.

The following are the application requirements for grant of a Bulk Distributing & Export Company Licence:

  1. The Applicant shall be a corporate entity registered under the laws of Ghana with 100% equity interest held by a citizen or citizens of Ghana
  1. The applicant shall submit the following documents as proof of its identity and status:
  • Certificate of Incorporation;
  • Company Constitution
  • Forms 3 & 4 from the Registrar General’s Department
  • Tax Clearance Certificate
  • Annual Returns as filed at the Registrar General’s Department (where applicable)
  • The applicant shall also provide a comprehensive Business Plan for a minimum of five (5) years containing the following:
  • business description including the company’s trading activities, history and capabilities where applicable
  • organization, corporate structure and management
  • risk analysis
  • market analysis
  • regulatory regime
  • project strategy
  • financial and economic analysis
  • environmental and social analysis
  • corporate social responsibility plan.
  1. A corporate environmental policy culminating in the grant and issue of an environmental permit by the Environmental Protection Agency (EPA) is also required to be provided.
  1. An applicant shall prove that it meets the minimum capital requirement of GH¢15,000,000.00 with the following:
  • Cash or cash equivalents (e.g. government bonds, treasury bills etc.) serving as equity capital.
  • Equity stake in an industry relevant fixed asset (e.g. service stations etc.) must be proved by an independent accounting firm to be appointed by the NPA
  1. A minimum trade facility equivalent of US$ 15 million. An Applicant is required to submit evidence in writing from a reputable financial institution licensed by the Bank of Ghana and in good standing in support of their application stating their willingness to provide funding not less than US$ 15 million or its Ghana Cedi equivalent to the applicant
  • Installation of the front-end of the GCNet in the offices of the applicant and subsequent declaration of all petroleum imports and exports to customs through the Ghana Customs Management System/Ghana Customs Network (GCMS/GCNet) prior to the delivery of the cargoes
  1. Within thirty (30) working days of the receipt of an application, the Regulator shall acknowledge its receipt and inform the applicant in writing of its decision.
  1. If the Regulator is satisfied that the applicant has met all the preconditions including payment of the prescribed fee, it shall enter the applicant’s name in the Register of licences.
2.5. Issuance/ Renewal/ Revocation/ Suspension of Licence
  1. Where an applicant meets the required conditions for a licence to engage in a business or a commercial activity in the downstream industry, the NPA shall approve the application and issue the applicant with the licence.
  1. The regulator may for reasons such as public interest, public safety or public security, refuse an application for a licence and notify applicant accordingly.
  1. A licence issued is valid for the period specified in it and may be renewed upon satisfying all the conditions for renewal as specified in the licence and the payment of prescribed fees

 

  1. An application for the renewal of a licence shall be made to the Board not later than sixty days prior to its expiry and in the manner determined by the Board

The Regulator may revoke, suspend or refuse to renew a licence issued in respect of any activity in the petroleum downstream sector where:

  1. the continued operation of the business or commercial activity poses a risk to public health, safety and security
  2. the services provided by the licensee have deteriorated below the required standard
  3. the licensee has not complied with any of the conditions of the licence or the provisions of the NPA Act

It is important to note that any entity issued with a licence cannot transfer the licence to another person without the prior approval of the National Petroleum Authority.

 

  1. FURTHER REGULATORY & LICENSING REQUIREMENTS

Some commercial activities in the downstream petroleum industry require additional requirements.

An example is a licence to establish a Floating Storage Unit (FSU) which requires the applicant to satisfy these additional requirements:

  1. A permit from the Ghana Ports and Harbours Authority approving the installation of the facility within Ghana’s territorial waters at the allocated site showing clearly the coordinates of the proposed location.
  1. A Letter of Consent from the Ghana Navy.
  • A Letter of Consent from the Ghana Maritime Authority

In addition to the above, for a licence to construct a Wharf & A Tankfarm, the applicant must submit the following documents with the application:

  1. A permit from the Ghana Ports and Harbours Authority approving the installation of the facility within Ghana’s territorial waters at the allocated site showing clearly the coordinates of the proposed location
  1. A letter from the Ghana Free Zones Board, if applicable, attesting that the Company has indeed been registered and permitted to establish and operate as a Free Zone Enterprise.
  1. STARTING BUSINESS IN THE PETROLEUM DOWNSTREAM INDUSTRY

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A person, other than a person licensed under NPA Act, shall not

  • sell or offer for sale a petroleum product, or
  • be in possession of a petroleum product in quantities unreasonably in excess of that person’s immediate requirement, or
  • receive a petroleum product for sale.

This however does not apply to petty trading in kerosene.

Where the Regulator grants a licence to an applicant for the bulk transportation of petroleum products, the charge for the bulk transportation of petroleum products through pipeline systems, by barges, by rail tanker wagons, and bulk road vehicles, shall be subject to the approval of the NPA.

[1] Section 12 of National Petroleum Authority Act, 2005

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