Govt cuts down oil revenue projections
Government has cut down its anticipated revenues from oil in 2016 from an earlier GH¢2 billion to GH¢1.4 billion, showing a decline of about 30 per cent.
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The revision has become necessary as a result of falling global crude oil prices and challenges with the Floating Production Storage and Offloading (FPSO) on the country’s Jubilee Field, which is expected to slow down production.
Presenting the mid-year review of the 2016 Budget to Parliament in Accra, Finance Minister, Mr Seth Terkper said the initial Benchmark oil price of US$53.05 per barrel used in the 2016 Budget was not achievable hence the need to revise it to US$45.35 per barrel.
“Mr Speaker, based on prevailing market conditions and consistent with the 2016 average crude oil price projected by the IMF’s World Economic Outlook and other traditional sources of Brent crude oil pricing data, the Ministry proposes a revision in the average crude oil price to US$45.35 per barrel for 2016,” he said.
According to him, it was obvious that going by earlier projections, the Benchmark price estimated for 2016 will not be realised and in addition, the FPSO challenges will result in lower than projected crude oil output.
“Crude oil prices witnessed a significant decline to as low as US$28.0 per barrel in January 2016. Since March 2016, crude oil prices started to increase and have increased consistently to US$46.04 per barrel as at July 20, 2016. With the revised Benchmark price and volume, total petroleum receipts for 2016 is now estimated at GH¢1,400.8 million, down from the 2016 Budget estimate of GH¢2,008.4 million,” he said.
He said although crude oil prices were showing signs of recovery in recent times, it is estimated to average within a wide range of US$40.0 and US$52.0 per barrel for 2016, lower than the average of US$53.05 used for 2016 Budget.
“These developments will obviously have negative implications for the 2016 Budget execution, particularly expenditures to be funded from the Annual Budget Funding Amount (ABFA) allocation in the Budget,” he said.
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Revised allocations
With a projected price of US$53.05 per barrel and quantity of 38.73 million barrels assumptions used for the 2016 Budget, the estimated total petroleum receipts for 2016 amounted to GH¢2,008.4 million.
Of this amount, GH¢1,009.0 million was allocated to the Annual Budget Funding Amount (ABFA) to finance specific projects and programmes in the Budget; GH¢432.5 million was estimated to be transferred into the Ghana Petroleum Funds; and GH¢567.0 million to the National Oil Company.
Per the revised estimates from petroleum receipts, Mr Terkper said GH¢524.5 million (0.3 percent of GDP) will be transferred to the National Oil Company in line with the PRMA, GH¢262.9 million (0.2 percent of GDP) will be transferred to the Ghana Petroleum Funds and GH¢613.5 million (0.4 percent of GDP), as ABFA for specific projects and programmes in the Budget.
First half revenues
The Minister said that as at the end of May 2016, only one crude oil lifting had been undertaken by the Ghana Group, owing to the low production as a result of the shut-down of the FPSO in March.
That notwithstanding, the Government of Ghana (GOG) had received two lifting proceeds from the 30th (undertaken in December 2015) and the 31st (undertaken in February 2016) lifting.
“The lifting proceeds, which involved 1.90 million barrels of crude oil, amounted to US$66.23 million. Additional petroleum revenue (corporate tax, surface rental, gas receipts, etc.) amounted to US$20.92 million, taking the total petroleum receipts to US$87.15 million against a first half-year target of US$484.79 million,” he said.
Out of this amount, US$22.77 million was allocated to GNPC as Equity Financing Cost (US$12.05 million) and its share of the Carried and Participating Interest (US$10.72 million). The balance of US$64.38 million was transferred was transferred to the ABFA (70%) and Ghana Petroleum Funds (30%), in line with the Petroleum Revenue Management Act (PRMA).— GB