Liquidity crunch stares at GNPC -CSR, non-core expenses drains cash flows - PIAC

A liquidity scare is staring the Ghana National Petroleum Corporation (GNPC) in the face after increased spending on corporate social responsibility and other non-core expenses reduced the firm’s ability to smoothly take up its share of expenses in the country’s producing fields.

A report by the Public Interest Accountability Committee (PIAC) showed that the GNPC in 2019 lifted only one cargo instead of three due to its inability to mobilise the needed resources to fund the activity.

The two remaining cargoes were used to defray the development and production expenditures incurred by the Sankofa Gye Ntomme (SGN) partners.

PIAC blamed this development on the quasi fiscal expenditures of the GNPC which it said had increased in recent years and now posing a threat to the finances of the corporation.

Despite the numerous concerns raised over the years about the quasi fiscal financing of the GNPC, PIAC pointed out in its 2019 report that the corporation continues to engage in this act and still finances the Western Corridor roads.

The committee also noted that GNPC’s expenditure on corporate social initiatives still remained high, increasing from GH₵41.49 million in 2018 to GH₵49.98 million in 2019.

The corporation also continues to provide guarantees for other state-owned enterprises (SOEs), amounting to US$ 645,511,405.40 in 2019. This is about double that of 2018, and also outweighs the corporation’s total equity financing expenditure of US$164.79 million for 2019.

The PIAC believed these expenditures were beginning to affect the cash flows of the corporation, making it difficult for it to honour its cash calls.

The committee, therefore, called on Parliament to consider placing some restrictions on the proportion of GNPC’s budget on CSI and guarantees to state institutions, particularly in the light of its inability to respond to some of their cash calls.

PIAC also indicated that its assessment did not support the GNPC’s assertion that it had achieved its set objective of becoming an operator.

Petroleum production and sales

They reported that the country recorded a 15 per cent increase in crude oil production, from 62,135,435.07 bbls in 2018 to 71,439,585 barrels in 2019 due to increased production from the Jubilee and SGN Fields.

The 2019 output also exceeded the benchmark crude oil output of 63.4 million bbls.

Gas production also witnessed its greatest boost since the inception of natural gas production in the country with a total of 169,508.61 MMSCF of Associated Gas (AG) and Non-Associated Gas (NAG) produced from all producing fields in 2019, representing an increase of 85 per cent over the 2018 volume of 91,459.30 MMSCF.

While the Jubilee Field has produced the highest volumes since 2014, this trend was reversed for the first time in 2019 with the SGN Field’s contributing the highest volumes.

Revenue collection and management

The average achieved price by the GNPC on behalf of the Ghana Group reduced to US$ 63.496/ bbl in 2019 from US$ 68.487/bbl in 2018 for all three producing fields which was also below government’s 2019 estimated benchmark price of US$ 66.670/bbl.

For 2019, the Jubilee Field contributed about 50 per cent of the total receipts of US$ 925,035,879.84 that accrued to the Petroleum Holding Fund (PHF).

The first lifting of the SGN Field in November in respect of the state’s equity interest in the field, yielded US$ 57,487,673.93 in revenue with proceeds of two other liftings used to defray the state’s indebtedness to the partners in the field.

The revenue derived from carried and participating interest (CAPI) constituted about 55 per cent (US$ 505,987,937.41) of total revenues accruing from all three fields, demonstrating the revenue yielding potential of this aspect of the revenue stream.

A total of 20,805.71 MMSCF of gas was delivered to the Ghana National Gas Company (GNGC) for 2019, at an invoiced amount of US$ 86,733,078.02, but no payment was made to GNPC to be deposited into the petroleum holding fund (PHF) bringing the total gas indebtedness to US$ 668,118,346.04.

Distribution of petroleum revenues

An amount of US$ 925.04 million was disbursed from the Petroleum Holding Fund for the period under review. This constitutes a decrease of 5.33 per cent from that of 2018, and is 14.41 per cent less than what was projected for 2019.

The GNPC received US$260.56 million which is 14.65 per cent less than the US$305.27 million received in 2018, while the ABFA received US$ 395.47 million which was 68.21 per cent higher than the disbursement for 2018.

The Ghana Stabilisation Fund (GSF) and the Ghana Heritage Fund (GHF) received US$188.30 million and US$ 80.70 million respectively, representing 38.41 per cent decrease from the respective 2018 figures.

Performance of the Ghana Petroleum Funds

The total reserves of the GPFs as at the end of 2019 was US$ 968.20 million, comprising the GHF with US$ 579.61 million and the GSF with US$ 388.59 million.

The accumulated net profit on investment of the GPFs since November 2011 to the end of 2019 was US$ 65.92 million.

An amount of US$189.13 million was withdrawn as excess over the cap of US$ 300 million placed on the GSF. The excess was withdrawn into the Sinking Fund.