Oil receipts up 93% in first quarter but outlook grim

Government received US$170.3m in petroleum revenue for the first quarter of the year, an increase of 93 percent over earnings of US$88.3m in the first quarter of 2019.

The receipts came from the sale of crude oil by the Ghana National Petroleum Corporation (GNPC) as well as payments from the oil companies, the Finance Ministry revealed in the Petroleum Receipts and Distribution Report for the first quarter of 2020.

During the period, GNPC sold 1.9m barrels of crude oil produced from the Sankofa and TEN oilfields, but there was no lifting of cargo by the corporation from the Jubilee field.

The government received an average price of US$63.5 per barrel for the crude oil sold, a price which is now out of range as the impact of the coronacrisis on global oil demand has more than halved international crude oil prices in the last two months.

Government in its 2020 budget projected a crude oil price of US$62.6 per barrel and petroleum revenues of US$1.6bn for the year.

However, following the fall in oil prices, Finance Minister Ken Ofori-Atta said preliminary analysis shows that at an average crude oil price of US$30 per barrel, the government would register a shortfall in crude oil receipts amounting to US$1bn.

He further explained that the shortfall corresponds to a projected shortage in Annual Budget Funding Amount of GH?3.5bn, while shortfalls in the Ghana Stabilisation Fund and the Ghana Heritage Fund are GH?1bn and GH?453m respectively. It also implies transfers to GNPC will experience a shortfall of GH?642m.

Last year, Ghana made US$937.6m in petroleum revenues, a 4 percent decline from the 2018 figure of US$977.1m. This was due to a 10.2 percent decline in the achieved price of US$63.2 per barrel in 2019 compared to US$70.3 per barrel in 2018.

The drop also occurred at a time the operator of the Jubilee field, Tullow Oil, underwent a restructuring process amid production challenges at both Jubilee and TEN.

The challenges at Jubilee related to re-injection of gas into oil wells, which Tullow said had led to a 30 percent cut in production. At the TEN fields, a production well at Enyerra had to be suspended, leading to a cut in production.

In the wake of the weaker oil prices, all the multinational oil companies and GNPC have reduced planned capital investment in 2020, which could negatively affect output this year.