The 2015 Public Interest and Accountability Committee Report on Petroleum Revenue Management, has cited the Ghana National Petroleum Corporation, GNPC, as overspending its budgetary allocation for 2015 by 49%.
PIAC maintained the oil company overspent 63.16 million dollars more than the 126.86 million dollars allocated to it.
It was further revealed that the corporation’s 2015 allocation was however lower than that of 2014 which was 180.71 million dollars.
PIAC explains that the company spent 190.02 million dollars during 2015.
It added that the difference was financed by GNPC’s cash balance brought forward from the previous year, leaving cash-on-hand pending projects milestone disbursements of 124.06 million dollars.
About 94 million dollars representing over 70 percent of the 2015 allocation was channeled to funding the Jubilee Equity Financing Cost (comprising development, production, lifting costs and in-house costs). This was however up from the 48 million dollars spent in 2014.
Meanwhile 17 million dollars representing 14 percent was also spent on other exploration and field development projects compared to the 14 million dollars spent in 2014.
The report further noted of a 28 percent increase in GNPCs General Operational and Administrative Expenses from 13 million dollars in 2014 to 17 million dollars in 2015.
In addition, staff cost also increased by 16 percent from 9 million dollars in 2014 to 10 million dollars in 2015.
Components of budget overrun
The report revealed that about 70 percent of the overrun was incurred on cost centers that are not directly related to GNPCs core mandate.
These include 25.3 million dollars used to finance what is described as ‘Western Corridor Roads Payment’ and 19 million dollars paid to Trafigura in respect of petroleum products supplied to Bulk Oil Storage and Transportation (BOST) which GNPC had provided guarantees.
An amount of 427,411.61 (0.3%) of the over-expenditure was used to pay six month salary arrears of workers of Saltpond Offshore Petroleum Company Limited (SOPCL).
Rationale for expenditure
GNPC explained that it was prevailed upon by the government to pre-finance the construction of the Atuabo Road given that any LPG related accident on the road could affect GNGCs and by extension GNPCs operation.
GNPC explained further that this amount is being treated as a loan and that the corporation had written letters to the GoG requesting for the refund of the amount.
Similarly GNPC said they are pursuing BOST to refund the 19 million dollars payment made on its behalf to Trafigura.
Recommendations
PIAC in its recommendation noted that the continued guaranteeing of state entities/enterprises by GNPC could hamper the implementation of GNPC’s annual work programmes.
It therefore urged the immediate repayment of all outstanding advances and cessation of the practice of providing guarantees henceforth so that GNPC would be made to focus on its core mandates.
Citing instances to confirm the development, PIAC noted that the GNPC used 31.3 million dollars of its 2013 allocation to defray a debt owed BNP Paribas in respect of 10 cargoes of crude oil it had imported for refining by the Tema Oil Refinery (TOR), which refined products were sold by TOR but no payment made to GNPC.
Although there are no records of TOR having refunded the said amount to GNPC, GNPC in 2015 also provided guarantee of up to 18.75 million dollars in respect of the supply of strategic reserves of petroleum products by Trafigura to BOST and had to pay the supplier in advance pending the repayment by BOST.
Again, BOST is yet to reimburse GNPC.
GNPC was once again prevailed upon to provide the guarantee for the Karpower Emergency Power Project of up to 100 million dollars.
GNPC dismisses over expenditure reports
In response however, the GNPC has denied reports that it overspent its 2015 budgetary allocation.
GNPC rather explains that it underspent its 2015 budget.
The National Oil Company further explained that its actual revenue was 126.86 million dollars below its forecasted revenue 228.05 million dollars.
The shortfall it said was driven by the global fall in crude oil prices.
A statement issued on the matter indicated that, “Irrespective of this fall in prices, we were contractually obligated to meet our share of costs in the Jubilee Field. Meanwhile, compared to our budgeted expenditure of 291.90 million dollars, our actual expenditure of 190.01 million dollars represented a 35% underspend.”
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By: Pius Amihere Eduku/citibusinessnews.com/Ghana
