DECLINE IN OIL PRODUCTION THREATENS GNPC'S PLANS TO DEVELOP THE VOLTAIAN BASIN

• With oil production set to decline for the fourth consecutive year, experts are expressing worries about the potential impact on the financial stability of the Ghana National Petroleum Corporation (GNPC). 
• The reduced output in existing oil fields is raising concerns, particularly regarding the hindrance it may pose to the development of the Voltaian basin. 

source: ResearchGate

In the 2024 budget presentation, Finance Minister Ken Ofori-Atta disclosed a 9.54 percent decrease in crude oil production during the first three quarters of 2023, down to 35.42 million barrels from 39.15 million barrels in the same period of 2022. 

The Greater Jubilee field contributed 21.94 million barrels, the TEN field produced 5.02 million barrels, and the Sankofa-Gye Nyame field yielded 8.46 million barrels. 

This decrease in production has impacted the earnings of the country's oil and gas sector from January to September 2023. Consequently, it has affected the total funds directed to the Petroleum Holding Fund (PHF), the primary account for all revenues generated from crude oil lifting, from which subsequent disbursements are made. 

The decline in petroleum revenue raises significant concerns about the financial well-being of the national oil company and its ability to invest in the development of the struggling sector.

Nana Amoasi VII, the Executive Director of the Institute of Energy Security (IES), warned that a shortfall in revenue could lead to cutting back on essential infrastructure projects and pose a threat to the long-term viability of GNPC. 

Amoasi emphasized that the uncertainty in cash flows might compel GNPC to decrease investments in crucial activities, affecting its standing as an independent operator and limiting job opportunities, as reported to the B&FT. 

The revenue from crude oil amounted to US$509.68 million, contributing to a total of US$751.32 million, a significant decline from the US$1,168.99 million reported in 2022 by Ofori-Atta.

From the total distribution of US$750.69million, the national oil company GNPC - received US$184.45million. This allocation includes an equity financing cost of US$117.63million and GNPC's share of the net Carried and Participating Interest (CAPI), amounting to US$66.82million.

"For the Voltaian basin in particular, a dent in GNPC's financial health might be a major constraint to its development," the energy expert and traditional leader said.

 Total petroleum receipts are influenced by both the volume of oil production and average unit price per barrel achieved. Unfortunately, Ghana faced challenges in both aspects from January to September 2023, prompting concern from industry experts.

Restoring Confidence

Amoasi advocated an urgent "uptick in upstream activities and investment" with the right policies and regulations. This, coupled with the hope that international oil prices will be favourable in the long-term, he said, will help reverse this worrying trend and restore confidence in the sector.

"Sound and favourable policies are key to attracting investment into the broader petroleum space. Policies and actions that assure equal access to opportunities, improve predictability and provide certainty are necessary to give cause for the investment community to respond positively. It is such market attractiveness that will restore confidence in the sector," he said.

 

Additionally, Amoasi called for comprehensive consultation with sector players and the uptake of alternative views in the framing of policies and regulations: "This will prompt some level of certainty and settlement to sector policies. If there are any constraints imposed on the sector, government must consider removing same to spur investment and growth in the dwindling sector".

Time For Deliberate Investment  

 David Ampofo, Chief Executive Officer- Ghana Upstream Petroleum Chamber, attributed the decline primarily to a shortage of investment.

"Right now, the fields we are producing from - the Jubilee partners -are the same people who discovered oil in 2010. The key is to consistently replace reserves. This is crucial for sustaining production," he said.

Development Economist and Resource Policy Analyst, Abdul Karim Mohammed, on his part said: 

"This is the time for us to speed up production of our fossil resources and cash-in".

He said more needs to be done in opening up the sector for more investors advocating transparent and competitive bidding processes.

This, he explains, will allow capable institutions with the requisite financial muscle and technical knowhow to explore the resources. 

"We need to open up. We need to invite more investors."

source: Ghanaweb.com 

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