The Integrated Social Development Centre (ISODEC) has bemoaned the 2011 budget’s silence on key issues and policies related to the petroleum sector as Ghana prepares for first oil in two weeks.
Among the concerns are the budget’s failure to provide a basis for determining the revenue estimate from oil, the lack of clarity on the intended hedging of petroleum prices as well as the current state and shape of local content policy for the industry.
“Petroleum revenue expected to accrue to the country in 2011 is estimated at GH¢ 540 million; however, the budget fails to tell Ghanaians the target price used to arrive at this estimate,” the Centre observed in a statement.
“We also know the government is embarking on petroleum price insurance, as in hedging; however, the budget is completely silent on this very important financial instrument that will have effects on the country’s petroleum resources,” it continued.
Revenue estimate from oil, which came in at significantly less than earlier projected, will constitute just 6% of total government revenue. Initially, an amount exceeding GH¢ 1 billion had been anticipated as revenue from oil and gas production.
Information from Finance Ministry officials reveals that the lower estimate is based on new data from the Ghana National Petroleum Corporation (GNPC) that forecast production capacity significantly below what was expected.
From a previous estimate above 90,000 barrels-per-day of oil output on the average for 2011, this was later revised to less than 80,000 barrels-per-day with further uncertainty, thus necessitating the lowering of expectations.
The average expected price of crude oil in the year is also a key factor in determining the revenue-earning potential from oil production.
On the petroleum bills, ISODEC observed despite the budget citing other laws, adequate emphasis was not placed on the Local Content and Participation Bill, which will clarify the role that indigenous private sector and businesspeople will play in fully utilizing opportunities from the oil find.
“It is regrettable that government does not put same premium on the Local Content, Local Participation and Value-Addition Policy and Law. It is our considered opinion that converting our petroleum resources into lasting benefits rests on how we design, implement/enforce local content, local participation and value-addition if we are not to repeat the dismal performance in the solid mineral and timber sectors,” it stressed.
ISODEC also registered its displeasure at the proposal for the increment of the TOR Debt Recovery Levy, warning it will cause hardship for the poor since it has the likelihood of increasing transport fares.
“We therefore request the government to rethink the decision to increase the levy.”
“Without a detailed and comprehensive account on what had accrued in the fund since its introduction in 2003, and the expenditure to which the fund had been put to, this will be unfair to citizens.”
First oil, according to the Jubilee partners, is due on December 15 and will be marked with a ceremony to be hosted by the President, John Atta Mills.
An initial production capacity of 55,000 barrels of oil per day is expected, the partners announced; but as new wells are completed over a three to six-month period, production will increase to 120,000 barrels of oil per day.