COVID-19 Blues: Ghana’s Oil Production Drops After 3 Years of Consecutive Increases 

PIAC Chairman, Noble Wadzah

Accra, Ghana//-The volumes of Ghana’s oil production have declined significantly after three years of consecutive increases due to the devastating impact of the Coronavirus Disease 2019 (COVID-19) pandemic.

According to the recent Annual Report on the Management and Use of Petroleum Revenues released by the Public Interest and Accountability Committee (PIAC), “The year 2020 marked a reduction in annual oil production volumes after three years of consecutive production increases”.

The report indicated that the production of crude oil declined by 6.3 percent from the 2019 volume.

“There was a general decline in revenue, attributed to lower production volumes and unfavourable international crude oil prices, exacerbated by the COVID-19 pandemic”.

Surface Rental payments remain in arrears

The report also revealed that surface rental payments remain in arrears to the tune of $2.1million in 2020, representing a 34.71 percent increase over the 2019 arrears of $1.5 million.

The non-payment of this stream of income according to the report denied the country’s Petroleum Holding Fund (PHF) the necessary funds for development projects.

It further revealed: “The 2020 – 2022 Priority Areas selected for the Annual Budget Funding Amount (ABFA) disbursement were not presented to Parliament for approval in the 2020 Budget Statement and Economic Policy, as required by the PRMA”.

Huge indebtedness

In spite of the implementation of the Cash Waterfall Mechanism, cumulative indebtedness of over $843 million to the Ghana National Gas Company (GNGC) is still high, the report added.

Contrary to the PRMA, an unutilised amount of GH¢827.60 million from 2017 – 2019 was spent to partially meet the shortfall in ABFA receipts caused by the impact of the COVID-19 pandemic and its associated effects on crude oil prices globally, it noted.

Recommendations

 The report therefore recommended that the ABFA should not be used to serve the purpose of filling expenditure gaps in times of revenue shortfall in the Budget, as this is the purpose of the Ghana Stabilisation Fund (GSF) under Section 9(2) of the PRMA.

It asked the Ghana Revenue Authority, as a matter of urgency to initiate action to recover the surface rental arrears with the appropriate interest, as provided for in the PRMA.

The report tasked the Ministry of Finance should ensure that Priority Areas selected are approved by Parliament before implementation, as required by Section 21 (5) of the PRMA.

“As detailed in the Committee’s 2019 Annual Report, the Committee reiterates that the ABFA should not be spread thinly, in accordance with Section 21 (1-3) of the PRMA.

PIAC reiterates the need for a Long-term National Development Plan, as stipulated in Section 21(2)(d) of the PRMA to guide the spending of petroleum revenues instead of resorting to the fallback position of Ministerial discretion in selecting of the Priority Areas”.

The 2020 Annual Report which covers the period January to December encompasses a broad range of issues associated with petroleum revenue management such as information on production, liftings, total revenues accrued and allocation by government, and the management of the Ghana Petroleum Funds (Ghana Stabilisation Fund (GSF) and the Ghana Heritage Fund (GHF)).

It also examines other issues pertinent to the performance of various institutions charged with responsibilities in the Petroleum Revenue Management Act (PRMA).

Instructively, since its establishment in September 2011, PIAC has exercised its oversight responsibility of monitoring and evaluating the management of Ghana’s petroleum resources by the government and stakeholder institutions.

In compliance with provisions of the Petroleum Revenue Management Act (PRMA), 2011, PIAC prepares statutory Annual and Semi-Annual Reports, which aim at keeping Ghanaians and other interested stakeholders regularly informed about how the country’s petroleum revenues are managed and utilised.

So far, the Committee has published a total of 19 Reports – 10 Annual and nine (9) Semi-Annual Reports – covering the period 2011 to 2020. This is the full report: 2020 Annual Report – Final.pdf.

African Eye Report