The Institute for Energy Security, IES, says the drop in Ghana’s oil revenue in 2019 could be attributed to the movement of crude prices on the world market and the challenges faced by Tullow Oil in the TEN Fields.
Oil revenue dropped by 5 percent to 925 million dollars in 2019 from 977 million dollars in 2018, even though oil production in the period under review went up by 15 percent.
Speaking to Citi Business News, the Executive Director of IES, Nana Amoasi VII, (The seventh), explained that Ghana’s oil revenue forecast in the national budget was also over-projected comparing to global benchmark prices.
“One of the factors was that, the international crude price that was achieved by GNPC was far lower compared to 2018. Then we had low production from some key sales. For example, the TEN Field had to cut back on production because of loss of man hours induced by some prolonged fishing activity especially the production well. They also recorded some low production rate from the reservoir because there was high water coming in. So, this mechanical and operational challenges contributed to the low oil production in the TEN field,” he said.
Government in the 2020 budget projected to receive US$1.567billion from oil revenues, anchored on a price prediction of US$62.6 per barrel.
However, oil prices dropped drastically so far; selling on an average of US$40 per barrel, which means that US$743 million – about 53 percent – of the expected amount will not be met.
Right from the beginning of the year 2020, international oil prices took a nose dive as a result of the spread of the Coronavirus, emanating from China and spreading to other parts of the world, and causing a massive slow down in economic activity across the globe.
Also, since March, a dispute between Russia and the Saudi-dominated OPEC cartel has drove down prices.
Earlier this year, Tullow Ghana, which is the operator of the Jubilee and TEN oil fields in Ghana, disclosed that due to production shortfalls in Africa and South America, it has had to downsize its workforce by at least 25 percent due in its global operations.
Ghana, being one of the key markets for the Anglo-Irish oil company, was also affected by the restructuring process.
Tullow Ghana faced production challenges in its Jubilee fields where it was forced to reinject gas because there was no immediate means of offloading gas to buyers. The gas re – injection reportedly led to nearly 30 percent cut in oil production in Jubilee.
Also, the Tweneboah Enyerra Ntomme (TEN) oil fields faced its own challenges as one of the oil production wells suddenly had to be suspended due to what is described as a sudden increased ‘water cut’ — a situation described as the ratio of water to oil in a production well. More water means less oil and loss of revenue.
ACEP pushes for supplementary budget to manage impact of low oil prices, COVID-19
The African Centre for Energy Policy, ACEP, has called on government to prepare a supplementary budget that will help manage the effects of low oil prices on the market.
According to ACEP, the impact of revenue shortfalls from the oil and gas sector due to price volatility on the international market, has severe implications for the budget particularly physical infrastructure and debt servicing as in the 2020 budget, as Ghana’s infrastructure development programme is heavily dependent on oil revenues.