The Chamber of Petroleum Consumers Ghana, COPEC, has asked government to immediately review all petroleum agreements and possibly consider the subsequent annulment of non-performing contracts in the interest of the country.
According to COPEC, the evidence of non-performance from some of the existing contracts does not paint a sustainable picture for the industry as the novel Coronavirus pandemic is also having a ravaging impact on upstream revenues.
Executive Director for COPEC, Duncan Amoah, told Citi Business News the Mid-Year Budget Review to be presented on Thursday, July 23, should provide an opportunity for government to reconsider its position on oil contracts to mitigate all associated risks.
“It has to be a review of our petroleum agreement. We cannot continue to play the ostrich. COVID is having dire impact on our upstream revenues. It is also having a dire impact on our downstream revenues. Where you used to probably consume 330 million prior to COVID, now you will probably be consuming about 250 million. Every litre of petroleum consumed in Ghana attracts some taxes and so while we lose upstream, we are also losing downstream revenues.”
“We will be happy to see his policy direction that says they are going to review a lot of these contracts and the round of licensing that we are probably going to have to see during the second round. We should see Ghana get a lot more stake in our oil. A lot more returns for our oil than what has been the practice some five to ten years where we signed off and we retain just a little by way of taxes and royalties,” he said.
Mr. Amoah also suggested that there was the need for the government to consider some level of investment from GNPC if it wants to make larger returns in the exploration and production of oil.
“We should have a situation where we are in a better position with GNPC possibly throwing in some investment also to ensure that we take a critique and we are able to at least get a larger return on our hydro carbons. Any other thing aside from this I am quite certain that it will take years as he has indicated earlier for the economy of Ghana to rebound,” he added.
The 2020 budget pegged petroleum prices for export at 60 dollars per barrel. However, a disruption of the oil sector by the COVID-19 pandemic and a price war between Russia and Saudi Arabia saw the price drop to 20 dollars at a point, the lowest in years.
Currently however, it has risen to 28 dollars per barrel.
Already, the Institute of Energy Security, IES, has advised government to benchmark expected revenue from petroleum receipts around 35 dollars per barrel.
ACEP pushes for supplementary budget to manage impact of low oil prices, COVID-19
In the wake of the outbreak of the COVID -19 pandemic, the African Centre for Energy Policy, ACEP, appealed to government to prepare a supplementary budget that will help manage the effects of low oil prices on the market.
According to ACEP, the impact of revenue shortfalls from the oil and gas sector due to price volatility on the international market, has severe implications for the budget particularly physical infrastructure and debt servicing as in the 2020 budget, Ghana’s infrastructure development programme is heavily dependent on oil revenues.