Outgoing Managing Director of Tullow Ghana and Executive Vice President of Tullow Oil plc., Kweku Awotwi, says government would have to work really hard to make up for the revenue shortfalls created by fallen crude oil prices.
The outbreak of the novel coronavirus has led to a limited demand for crude globally.
As a result, prices have also fallen from almost 60 dollars to nearly 30 dollars a barrel thereby affecting global economic growth and creating excess oil supply.
In Ghana, the situation has led to fuel price reductions, while government is losing revenue from its annual projections for oil revenue.
Government had projected to receive $1.567 billion from oil revenues, anchored on a price prediction of $62.61 per barrel.
However, the price on the international market, which was $66.25 per barrel at the start of the New Year, has fallen steeply to $26 per barrel as of March 21, 2020.
Speaking to Citi Business News, Mr. Kweku Awotwi said although oil prices will eventually pick up, it is difficult to tell how soon that will happen.
“Ghana like everybody in the industry is feeling the pain of reduced prices. The oil industry as a whole has been sucked up. The initial expenditures are really in our capital program product where you spend the most money but there is a big revenue gap. At the beginning of the year, I believe we thought the price of oil would be around 60 dollars, today its 30 dollars. So, anyone who is counting on the oil revenue immediately faces a deficit of 30 dollars. That is a huge gap in revenue so it affects all of us,” he said.
“…But from a country point of view, if we were depending on those funds or helping us keep our budget or maintain our budget, the government has a huge task to reach the gap that has come about. All I say is that these things tend to be cyclical. Today it’s slow, at some point it will go up again. But how long that takes and where that goes, nobody can really tell, but it’s not going to stay at 30 dollars forever. But for now, these things are really challenging for Ghana and other countries,” he noted.
The oil industry has been struggling with limited global demand driven by the novel Coronavirus economic slowdown.
Since March, a dispute between Russia and the Saudi-dominated OPEC cartel has driven prices even lower.
Demand is estimated to have dropped some 30 percent worldwide.
Measures to curb the spread of the coronavirus have strained budgets of oil producers and hammering the U.S. shale industry, which is more vulnerable to low prices due to its higher costs.
Crude oil also reached its lowest price since March 1999.
On Monday, April 20, 2020, prices on the May contract for West Texas Intermediate crude futures fell as low as $14.47 per barrel in afternoon Asian trade, just above the $14.40 price set more than 21 years ago.
The international benchmark Brent crude futures, meanwhile, fell 2.8 percent to $27.28 per barrel.
