Business News of Wednesday, 20 March 2013
Source: Daily Guide
The Africa Centre for Energy Policy (ACEP) has once again punched holes into oil production projections made by government in its 2013 Budget Statement.
According to the Centre, the projected production volume of 83,341 barrels per day made by government is highly conservative considering the fact that Jubilee’s peak production of 120,000 barrels has been rescheduled to the middle of 2013 with the year’s production starting at about 111,000 barrels per day.
It also said there is a wide variation between government’s crude oil projection and that of Kosmos Energy, which put the expected average production between 105,000 and 115,000 barrels of oil per day in 2013, with the midpoint of the range representing an increase of greater than 50 percent from the 2012 average.
“Thus, government’s projection is grossly understated. We also estimate that crude oil price for the year will average a little above US$100 per barrel on account of the estimated global economic growth at 3.5 percent for the year (World Economic Outlook) compared with 3.2 percent in 2012,” ACEP stated in a press statement issued recently and signed by Mohammed Amin Adam, the Executive Director.
“We found that the non-realisation of corporate taxes from petroleum companies in 2011 and 2012 were largely responsible for lower than expected petroleum revenues. Consequently, about $40.2 million was received as corporate taxes for 2012, lower than the target of $239 million.”
Government has projected in the 2013 Budget Statement said the total receipts from oil will be US$581.7 million based on projected oil production of 83,341 barrels per day and a crude oil price of US$94.36 per barrel. Thus, an estimated crude oil volume of about 6 million barrels will be lifted by the government and the GNPC as the country’s share of petroleum.
ACEP further criticized government for problems associated with corporate taxes, which have been attributed to accelerated capital allowance and carry-forward losses. This exposes an important weakness in Ghana’s Petroleum Income Tax Law (PNDC Law 188), which does not provide cost recovery limits on the capital cost of petroleum companies.
Apart from accelerated capital allowance and carry forward losses, the problem also reflected in poor budgetary planning. ACEP says government’s inability to adhere to the advice of the Ghana Revenue Authority (GRA) in establishing the tax-paying position of operating companies accounted for its poor budgetary planning.
“This practice led to a self-inflicted deficit of about 0.5 percent of GDP in the budget. Also, the use of production decline from Jubilee as the cause of the losses as pointed out in the Budget Statement is unacceptable because the decline in production was more than compensated for by higher-than-expected crude oil prices (a US$19 gain per barrel of crude oil) whilst government also exceeded its target for carried and participating interests.”
It however said the 2013 projections of corporate taxes at US$55million is the most reasonable so far, and a significant improvement in forecasting considering that GNPC’s equity financing requirement in Jubilee has considerably reduced from US$124.63 million in 2012 to US$71 million in 2013.
“In fact, the capital cost of GNPC in Jubilee is expected to be fully retired this year, consistent with the other Jubilee partners unless an unexpected loss carry-forward occurs.”
It said some major issues raised in the 2013 Budget Statement needed to be addressed to protect the sanctity and spirit of the Petroleum Revenue Management Act 2011 (Act 815).