This follows a statement released by Tullow Oil that oil production has dropped from a daily output of 120,000 barrels to 65,000 barrels per day (dopd) as at June 20 this year.
The drop in oil production, which is expected to last for at least three weeks, will further derail the revenue targets from the sector after it suffered a similar fate at the beginning of the year when a drastic fall in oil prices forced the Finance Minister, Mr Seth Terkper, to cut this year’s oil revenue estimates by 64.6 per cent, equivalent to GH¢2.7 billion.
It is not clear how this latest development will play out in the supplementary budget to be delivered to parliament, but experts believe the unexpected fall will impact total expected revenues, no matter how insignificant.
Although the government exceeded its revenue target by GH¢1 billion for the first quarter and is also making some strides to keep expenditures in check, there are fears that the country’s growing demand for infrastructural projects coupled with a dip in oil production would slow down the execution of some projects in various sectors of the country.
The drop in daily production had been trending since July 3 when the challenges on the floating, production, storage and overloading vessel (FPSO) Kwame Nkrumah first surfaced.
A statement from lead producers of the Jubilee Field, Tullow Oil, said the situation had since persisted, leading to a complete shutdown of gas exports from the field onto the Atuabo Gas Plant, where it is normally processed and relayed to power producers for electricity generation.
Beyond the negative impact the situation has had on power supply to businesses and the country as a whole, Tullow Oil said in its July 20 statement that the development had constrained oil production to approximately 65,000 bopd.
“Tullow has mobilised a team of experts to rectify the fault within the gas compression system and estimates that it will take approximately a further three weeks to reinstate gas export and full oil production,” the statement, which was copied to the GRAPHIC BUSINESS, added.
A drop in oil production will translate into corresponding drop in revenues from the sector in 2015, which was revised to GH¢1.5 billion in March, this year, from the GH¢4.2 billion initially announced in the budget.
Implications on economy
Revenue from the petroleum sector is fast becoming an anchor to the economy after the country’s first commercial production of the commodity took off in late 2010.
Within the first five years of production, revenues from the sector has risen by more than US$5 billion in taxes, export earnings and other revenues that the country is entitled to under the various oil agreements.
As a result, a drop in revenues from the sector will serve as a blow to the budget, which government’s expectation is to reduce the deficit to 7.5 per cent by end of year.
A drop in oil sector revenues would also reduce statutory transfers into the Ghana Stabilisation Fund (GSF), which serves as a buffer to the budget, and other funds such as the Heritage, and Petroleum Holding and the Ghana Infrastructure funds.