The Executive Director of the Africa Center for Energy Policy (ACEP), Dr. Mohammed Amin Adam, said there is over reliance on oil revenue to finance capital expenditure, and unfortunately, the revenues are not efficiently applied.
“The money is not much and must be utilized efficiently,” he said.
Speaking at an Open Forum on the efficient use of Ghana’s oil revenue organized by the Institute of Financial and Economic Journalists (IFEJ) in Accra Wednesday July 5, 2015, Dr. Adam questioned the rationale in projecting expected oil revenues using the spot price instead of what is known as the seven-year moving average. He said if the government had used the seven-year moving average, it was likely to make gains, and in the instance when prices fall and the government loses, it could then fall on the Stabilization Fund.
According to him, while the government was expecting $4 billion from oil, it received $1 billion due to the fall in prices.
Dr. Adam acknowledged that even though Ghana has some of the best petroleum sector frameworks in the world, the law does not look at the efficient use of oil revenues.
“The problem in the use of the revenue is that it’s based on the Finance Minister’s priority and his priority is debt repayment and not the Stabilization Fund,” he said.
He warned that because the country is over-dependent on oil revenues, signs of the oil curse are already showing.
“Government must cease borrowing against oil revenue,” he urged.
According to the Ministry of Finance, total crude oil produced from the Jubilee Field in 2014 was 37,201,691 barrels, that is 101,976 barrels of oil per day (bopd), compared with a budget estimate of 33,955,644 barrels (i.e 93,029 bopd) and the 2013 output of 35,587,558 barrels (i.e. 99,685 bopd).
The Ghana National Petroleum Company (GNPC), the Ministry noted, lifted eight crude oil cargos of 7,681,120 barrels from the Jubilee Field. This compares with seven crude oil liftings totaling 6,793,449 barrels in 2013.
The Ministry states that the total proceeds from the sale of the sixteenth to twenty-second Jubilee liftings, which involved 6,690,798 barrels of crude oil, amounted to $691.99 million (GH¢1,982.10 million), compared with the 2013 amount of $628.58 million (GH¢1,221.97 million) from the sale of 5,876,260 barrels.
The lifting proceeds and other petroleum receipts yielded a total of $978.89 million (GH¢2774.92 million), compared with a budget estimate of $777.0 (GH¢1,709.40 million) and the 2013 amount of $846.77 million (GH¢1,645.59 million).
“The higher petroleum revenues in 2014 were mainly due to the marginal increase in production and increased Corporate Income Tax. The 2014 amount includes an undistributed Surface Rental receipt of $0.869 million (GH¢2.79 million), of which $0.802 million (GH¢2.57 million) was attributable to a 2011 receipt recovered from a Government account in December 2014,” it said.
The Ministry reports that in 2014, Corporate Income Tax contributed $284.55 million (GH¢785.67 million); Surface Rentals, including the December 2014 receipts, yielded $1.78 million (GH¢5.49 million); Carried and Participating Interest was $499.33 million (GH¢1,430.25 million); and Royalties (i.e. both Jubilee and Saltpond Royalties) also accounted for $192.81 million (GH¢552.29 million).
The GNPC, the Ministry states, received a total of $180.71 million (GH¢528.86 million) out of the total petroleum receipts by the State.
“Of this amount, $44.16 million (GHȻ127.48 million) was for its share of the Equity Financing Cost obligations in the Jubilee Field, with the remaining balance of $136.55 (GHȻ401.38 million) being its share of the net Carried and Participating Interest,” it said.Payments and Distribution
The Ministry indicates that it made the following payments and distribution. Of the total net government receipts, the Annual Budget Fund Allocation (ABFA) received $409.07 million (GH¢1,215.46 million), while the Ghana Petroleum Funds GPFs) received $388.23 million (GH¢1,123.19 million). Of the amount transferred to the GPFs, the Ghana Stabilisation Fund (GSF) received $271.76 million (GH¢786.23 million), while the Ghana Heritage Fund (GHF) received $116.47 million (GH¢336.96 million).
According to the Finance Ministry, of the total ABFA, GH¢163.08 million ($56.12 million) was disbursed for Amortisation and Expenditure for Oil and Gas Infrastructure, GH¢170.62 million ($57.43 million) on Agriculture Modernisation and GH¢215.69 million ($72.59 million) on Roads and Other Infrastructure.
“There was no spending on Capacity Building because the planned expenditure on this priority area hinged on the establishment of the China Development Bank (CDB)-tied SME Projects Incubation Facility, for which no disbursements were made in 2014.
A total of $222.93 million (GH¢666.06 million) of the 2014 ABFA was not spent in 2014. This resulted from the non-disbursement of the CDB facility to all the projects that were tied to the facility in the 2014 Budget to warrant the release of government’s 15 percent matching fund, it said.
The Ministry notes that a total of US$305.68 million was determined as the excess over the cap on the GSF. Of the excess amount transferred, GH¢50 million ($17.43 million) was used to establish the Contingency Fund, in line with Articles 175 and 177 of Ghana’s Constitution and Section 23(4) of the Petroleum Revenue and Management Act (PRMA), and the remaining balance of $288.25 million deposited into the Debt Service Account for debt repayment, in line with Section 23(4) of the PRMA.
Of the amount deposited into the Debt Service Account, approximately $179.81 million was used to retire some domestic marketable instruments, leaving a balance of $108.44 million.
Mr. Ali Nakyea Abdallah, a tax expert who also spoke at the Forum, noted that there are no regulations to make the Petroleum Revenue Act to work, he therefore urged government to pass regulations that would make the Act functional.
He indicated that to create jobs in the oil industry, the focus should be on the allied industries because opportunities in the upstream sector are limited.
By Emmanuel K. Dogbevi