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Crude oil export to ease Ghana’s worsening trade deficit

By Toma IMIRHE
Senior officials in the Government of Ghana are now looking up to lifting of crude oil from the Jubilee oilfield by the Ghana National Petroleum Corporation scheduled for the second week of March, to ease the rising pressure on Ghana’s balance of payments position. It is anticipated that the first lift by GNPC proposed to take place on March 12 or 13 will give Ghana crude oil sales revenues which can compensate in part for the country’s rising oil import bill.

The price of benchmark Brent light crude oil has, in recent weeks, risen to nearly US$100 a barrel, significantly increasing Ghana’s oil import bill and stemming the improvements in Ghana’s foreign reserves position achieved over the past 18 months.
By October 2010, Ghana’s gross international reserves stood at US$3,973 million, up from US$2,036.2 million about two years earlier. However while the country’s balance of payments registered a surplus of US$101.66 million during the first three quarters of 2010, because of capital account inflows, the balance of trade for the nine month period recorded a deficit of US$2,173.18 million (18.9% of Gross Domestic Product) as against a deficit of US$1,763.35 million (15.4% of GDP) in the corresponding period of 2009. The growth in the trade deficit was primarily due to a 59.9% surge in the oil import bill, which compared with just 29.6% growth in non-oil imports.

Officials in both the finance and the trade industry, ministries are now hoping that commencement of GNPC’s Jubilee oil lift will ameliorate the situation. GNPC will be the fourth partner to lift after lead operator Tullow Oil and two other partners. According to the schedule agreed amongst the partners, the lifting will be done according to the partner’s equity interest in the oilfield. It is planned that GNPC’s second lifting will take place possibly on May 30 or 31 this year, although lifting dates could change depending on production, stocks and terminal operations.

Government has projected revenues from oil of Gh¢584 million this year (about US$390 million). Although this only amounts to 6% of the total anticipated public revenues for 2010, it would be enough to plug the increase in the merchandise trade deficit for the 12 months up to September 2010 thus allowing favourable developments in Ghana’s capital accocunt to ease pressure on the overall balance of payments.

GNPC is currently evaluating proposals from world class oil traders and consumers as well as leading Ghanaian bulk distributors of refined petroleum products in order to select a suitable partner to obtain the best price for its crude. The corporation expects to sell it at a price slightly higher than Brent crude which as of the end of last week was selling at US$99.42.

However, industry analysts expect GNPC to begin selling its crude directly to Tema Oil Refinery as existing crude oil import contracts with neighbouring Nigeria expire. When phase one of the Jubilee oilfield development reaches its targeted output of 120,000 barrels per day (bpd) expectedly by the middle of this year, GNPC’s 13.75% equity stake will give it over 17,000 bpd, enough to meet a third of current domestic consumption.

This may prove crucial over the coming months; at the end of last week, uncertainty over government’s considerations with regards to whether or not to issue new debt sent foreign exchange traders scurring with the result that the cedi fell to a new all-time low of 1.5575 against the US dollar, the first major depreciation against that currency since mid 2009.

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