[ 2017-01-17 ]

Executive Director of IFS - Prof. Newman Kusi

IFS renews pressure to hedge Ghana’s oil
The Institute of Fiscal Studies (IFS), has made
fresh calls for Ghana to hedge its oil to protect
the country from shocks in the global price of
crude.

The Institute is warning the country risks missing
out on its 7 percent growth target for 2017 should
prevailing conditions on the global oil market
persist.


“We are not going to achieve the target; clearly
projections are made on two things; the coming
onboard of the Sankofa and TEN oil projects; if
anything happens and the production from the two
fields do not materialize, we are not going to get
the growth target,” the Executive Director of
IFS, Prof. Newman Kusi told Citi Business News.

The call also follows recommendations by the
Public Interest and Accountability Committee
(PIAC) for Ghana to hedge its oil resources.

PIAC in its half year 2016 report said, “Average
achieved price for the Jubilee Crude oil was
US$40.21 per barrel compared to benchmark price of
US$53.03, representing a negative variance of
24.21%.”

“The price obtained by the Ghana Group compares
favourably with global benchmark prices prevailing
during the period that the cargoes were sold.

The Jubilee Partners obtained higher revenues
from the liftings because of their hedging
policies.”

Though Ghana accrued about 90 million dollars from
hedging between 2010 and 2012, subsequent decision
to halt the policy has adversely affected revenue
from the oil sector following the plunge in the
price of the commodity.

The continuous drop in crude oil prices also
compelled former Finance Minister, Seth Terkper to
revise revenue projections for oil in the mid-year
budget review in 2016.

The benchmark revenue price of US$86.02 per barrel
was reduced to US$53.05 per barrel.

Total revenue from the sector was also estimated
at GH¢2.0 billion.
But the Professor Newman Kusi explains to Citi
Business News the economic prospects are enormous
should Ghana revisit the policy.

“Now the global oil price is hovering around 42
dollars thereabout; and the tendency to rise above
sixty dollars per barrel is not real but if you
look at the trend, the trend is that the price is
coming up again but I think we lost the
opportunity to maximize our export revenue from
the hedging but nevertheless we still can hedge
because we do not know the direction of the prices
in the future,”

Meanwhile the IFS boss has impressed on the new
government to consider immediate steps and adopt a
hedging plan for the country’s oil.

“Immediately the government should take action
on that if it wants to go by that decision,” he
said.

Source - citibsinessnews.com

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