Business News of Sunday, 22 January 2017
The Public Interest and Accountability Committee (PIAC) has expressed concerns about the growing indebtedness of state institutions, especially the Volta River Authority (VRA), to the Ghana National Gas Company (GNGC).
PIAC fears that the failure of VRA to pay for gas supplied it for power generation could affect the ability of Ghana Gas to commence the scheduled amortisation of the China Development Bank (CDB) loan used to construct the Atuabo Gas Processing Plant.
Total payment owed Ghana Gas had hit US$340.49 million as of June 30, 2016 with VRA, the country’s largest power producer, alone accounting for US$306.10 million (89.9%) of the outstanding balance.
In its semi-annual report for 2016, the committee recommended that “The VRA should, as a matter of urgency, be prevailed upon by the ministries of Finance and Energy to settle its indebtedness to the GNGC in order to prevent its debts from spiraling out of control; thereby compromising the financial integrity and viability of GNGC.”
Total interest payable by VRA on its outstanding debts amounted to US$2.86 million in the first half of 2016.
PIAC also noted that the ever-growing indebtedness of state institutions to GNGC was also depriving the Petroleum Holding Fund (PHF) of the much-needed inflows.
“In drawing conclusions from the key findings, PIAC has expressed concerns about the ever-growing indebtedness of state institutions to GNGC, which is not only depriving the Petroleum Holding Fund (PHF) of much-needed inflows but is also beginning to compromise the ability of the GNGC to commence the scheduled amortisation of the approximately US$1 billion CDB loan facility that was contracted by the Government of Ghana (GoG) for the construction of the Atuabo Gas Processing Plant,” the report said.
Slump in oil production
According to the half-year report, crude oil production from the Jubilee Field declined by 40 per cent from 19.08 million barrels in mid-year 2015 to 11.44 million barrels over the same period in 2016.
The decline in production was caused by a combination of scheduled shutdown of the Floating Production Storage Offloading (FPSO) Kwame Nkrumah for routine maintenance and a faulty turret bearing which led to the suspension of oil production for up to 50 days.
According to PIAC, the 2016 half-year production volumes were the lowest since 2011. It said the Ghana Group lifted 1.95 million barrels of oil, representing 18.48 per cent of total liftings, from the Jubilee Field between January and June 2016. Liftings carried out by the Ghana Group declined by 39 per cent when compared to the liftings done during the same period in 2015.
In terms of revenue, a total of US$126.41 million was received from the Jubilee Field in the first half of 2016, which translates to a 55 per cent reduction in revenues when compared to total petroleum receipts of US$274.47 million during the same period in 2015.
The report stated that approximately 69 per cent amounting to US$87.15 million of the total petroleum receipts of US$126.46 million was distributed during the period under review. The undistributed balance of US$48.47 million remains in the PHF awaiting distribution in the second half of the year.
“Approximately US$45.07 million (52%) was allocated to the Annual Budget Funding Amount (ABFA), US$22.78 million (26%) to the Ghana National Petroleum Corporation (GNPC), US$13.52 million (16%) was lodged in the Ghana Stabilisation Fund (GSF), with the remaining US$5.79 million (6%) going into the Ghana Heritage Fund (GHF),” it said.
In terms of the distribution of the allocations to the four priority areas, the report noted that approximately GH¢123.25 million (71%) of the ABFA allocation during the period under review was used to fund capital expenditure in the roads and other infrastructure priority areas.
“Further, GH¢10.97 million (6%) and GH¢38.08 million (22%) were spent on the Agricultural Modernisation and Capacity Building priority areas, respectively. For the first time, GH¢600,000 (0.35%) of the ABFA was allocated to the Public Interest and Accountability Committee (PIAC) in accordance with the PRMA as amended by Act 893,” the report said.
There was, however, no disbursement to the expenditure and amortisation of loans priority area. The report explained that the non-disbursement of any portion of the half-year ABFA to the expenditure and amortisation priority area was due to the fact that the GNGC was fully operational and is expected to take over the amortisation of the China Development Bank (CDB) loan.