<<Print>>

The total volume of crude oil from the first three lifting amounted to 2,980,720 barrels which realized a total sum of US$337.3 million (GH� 506.0 million), Dr Kwabena Duffuor, Minister of Finance said during the Budget Hearing in Parliament on Wednesday. He explained that the total oil revenue received so far had been allocated to the various allowable sources in accordance with the Petroleum Revenue Management Act (PRMA). A total of US$112 million (equivalent to GH�168 million) has been transferred into the Consolidated Fund as the Annual Budget Funding Amount and is being utilized in the four priority areas as set out in the 2011 Supplementary Budget in accordance with relevant sections of the PRMA. Dr Duffuor reminded Ghanaians of President John Evans Atta Mills� pledge to ensure transparent and judicious management of oil revenues in accordance with provisions of the Petroleum Revenue Management Act, Act 805, 2011. He said the Ghana National Petroleum Corporation (GNPC) had on behalf of Government, lifted oil from the FPSO Kwame Nkrumah four times as at the end of October 2011 noting that the proceeds from the first three lifting had been received. The proceeds for the fourth lift, he said, were expected later in November 2011. Out of the total amount received, an amount of US$54.8 million and US$14.4 million had been transferred into the Stabilization and Heritage Fund accounts respectively in accordance with relevant sections of the PRMA. An additional US$156.1 million has been transferred to GNPC as equity financing cost and GNPC�s share of net Carried and Participating Interest. The Finance Minister noted that Ghana�s macroeconomic stability had been threatened in the past by external commodity price shocks, the key one being the price of crude oil. Expressing concern about rising crude oil prices, he said an increase in crude oil prices on the world market meant that Government has had to subsidize ex-pump price of petroleum products to the tune of GH�267.61 million as at September 30, 2011. He said the entire under-recovery of petroleum pricing for the year was estimated to be GH�364.94 million based on the assumption of crude oil price of US$110.23 per barrel. Government has therefore put in place a simple hedging mechanism to mitigate the impact of crude oil price fluctuations on crude oil receipts. �The call option is adopted to manage oil import prices whilst the put option is adopted to smoothen fluctuations in crude oil export receipts,� he said, explaining that the hedging has contributed significantly to the stability of the economy in 2011. Dr Duffuor further explained that the commencement of crude oil production had created a new price risk exposure for government revenue and in order to protect the revenue, the scope of the hedging programme was expanded in May 2011 to include petroleum revenues. �The option has been adopted under a situation which Ghana has the option to sell crude oil at a price of US$107.00 per barrel.� Currently, 100 percent of anticipated receipts of crude oil sales have been hedged to the end of 2011. He announced that the government hedging programme on petroleum had worked very well to reduce fluctuations in the oil export revenues and expenditures on imports.