Government to lose GH¢800m as oil slides to 11-year low

Government runs the risk of losing GHC 800 ($200M) million due to the fall in crude oil prices to about $32 per barrel, the Business and Financial Times (B&FT) reported Friday.

Finance Minister Seth Terkper budgeted US$53.02 as price per barrel as his benchmark price for this year.  Since the presentation, crude prices have dropped to 11 years low.

Read more: Oil slides to 11-year low

Global Brent crude benchmarks were at $34.93 a barrel at 12300 GMT, down 1.5 percent from the day before and the lowest since 2004 on Wednesday. US crude futures subsided 46 cents to $35.95 per barrel, continuing their slide from Tuesday.

Government is expected to cut its petroleum revenue projection.

The times quoted unnamed source as saying “it has become a question of when government will act to cut its losses, rather than whether such a move is prudent.”

Terkper scaled back revenue projection last year from GH¢4.2billion to GH¢1.5billion after crude prices fell by more than half.

The economy’s bright prospects -- largely anchored in the expectation of an expansion in the oil sector -- could be jeopardized by the decline in crude oil prices, the Institute of Fiscal Policy has said.

Read more: Uncertainty about the future of oil prices

Its Executive Director said that the persistent fall in price of black gold could act as a disincentive to oil exploratory activities -- and to some extent ongoing works such as the Tweneboa, Enyerra and Ntomme (TEN) oilfields.

“The implication is that the medium-term prospects are completely undermined because the medium-term prospects are based on these new oil projects. Of course, some of these projects will slow down due to the low prices. The TEN Project [expects its first oil in mid-2016], though they have started, may not have the enthusiasm they had.

“Also, this price fall means that investment in new exploration is not likely to come,” he said.