80% drop in oil revenue
The Ghanaian economy faces tougher times ahead as it continues to be exposed to revenue volatilities, especially in the oil sector.
Government’s supplementary budget statement presented recently to Parliament has revealed a huge drop in oil proceeds.
According to the statement, out of an estimated $484.79 million in petroleum revenues for the first half of this year, government bagged only $87.15million, the lowest Ghana has ever realised since oil production started in 2010.
The drastic fall in revenue (80 per cent) has been attributed to the low price of the commodity on the world market as well as persisting production challenges on Ghana’s FPSO Kwame Nkrumah.
As things stand, the expected $1 billion revenue from oil for this year may not be achieved even as commercial production of crude from the Tweneaboa Enyenra Ntomme (TEN) fields commences. TEN will, according to Tullow oil start with an initial production of about 23,000 barrels a day.
Indeed, due to the faulty turret bearing component of the FPSO which occasioned a reduction in volumes from 100,000 barrels to as low as 33,000 barrels of crude a day, Ghana’s total production of oil could be in the neighbourhood of 63,000 barrels a day.
Tullow Oil Ghana, operators of Jubilee Oilfield say it will cost the five partners as much as $150 million to repair the damaged component of the FPSO.
Should the price of the commodity remain below $50 per barrel ($44.47 on Monday), for the rest of the year, proceeds from the sector will be subdued.
Government has had to continuously revise the national budget on account of oil revenue shortfalls, a development oil experts say could have been avoided if the revenues were invested as capital to aid economic diversification.
According to the Africa Centre for Energy Policy (ACEP)” this is what happens when government plays the ostrich with the boom period.”
“In the absence of a strategic diversification, Ghana’s budget will continue to depend on oil revenues and be subjected to extreme unpredictability as a result of commodity price volatility as was seen in the first half of the year and in 2015,” ACEP said in a statement.
The Think-Tank expressed concerns over the situation where the expenditure of oil revenues thrives on the discretionary powers of the Minister of Finance. This has resulted in oil revenues being expended on too many projects at a time.
It recommended that Parliament should demand an investment plan for oil revenues from the Minister of Finance to ensure that the economy is made to withstand cyclicality associated with petroleum revenues.
Head of Policy at ACEP, Dr Ishmael Ackah told this paper that priority areas for use of oil revenues should be limited to two instead of the existing four to make monitoring of impact much more workable.
Oil experts are not only worried about the mismanagement of oil revenues but have also questioned the failure of oil companies a failing to honour their tax obligations.
According to the Public Interest and Accountability Committee (PIAC), Nine out of 16 oil companies failed to pay a total of $721,000 in surface rentals to government last year.
Licensed upstream companies paid $465,920 in 2015 compared to about $907,501 in 2014, representing 49 per cent drop, according to the Ghana Revenue Authority and Bank of Ghana 2016 report.