The African Center for Energy Policy (ACEP) has re-echoed the call and concerns by ordinary Ghanaian consumers, industry watchers and analysts about the utilization of taxes and levies collected as part of petroleum product prices for different purposes by government. “For instance, in spite of the fact that consumers of petroleum products continue to pay levies such as the Energy Fund Levy, Exploration Levy, Bulk Oil and Strategic Transport (BOST) Levy and Tema Oil Refinery (TOR) Debt Recovery Levy, Government is yet to account to Ghanaians how much have accumulated in the various accounts and how they have been utilized”. ACEP analyzed. The 2015 Budget does little in providing this relevant information to justify the continuous imposition of these levies or new ones on petroleum products. Using TOR Debt as an excuse? ACEP says they recall that in the 2013 Budget Statement, the Government stated that by the end of December, 2008 the total debt in the books of TOR was GHC1,678 million increasing to GHC1789 million at the end of 2009. As part of Government’s effort to find a solution to the TOR debt, Government in 2010 made a payment of GHC445 million to Ghana Commercial Bank (GCB) to help reduce the debt of TOR. “Government should publish the balances standing in the accounts of all taxes and levies collected from petroleum product sales for the period covering 2005 to 2013,” ACEP urges. ACEP continues that Government must reverse the introduction of the special petroleum tax of 17.5% on users of petroleum products in the 2015 budget it has just read. The introduction of the 17.5% new tax has generated considerable heat in the country, leading to a walkout of the main opposition party from Parliament. The tough talking Policy giants also recommends among others that Government should rather introduce a fixed amount (say 2 Ghanaian pesewas on every litre/kg of petroleum products) as price mitigation levy to help stabilize prices and to establish minimum and maximum price bands beyond which price mitigation response is required as well as privatize TOR to enhance its recapitalization to ensure that it becomes competitive, clear off government finances and is able to refine Ghana’s crude oil. Ghana Government again in March 2011 restructured the TOR debt by securitizing the TOR debt through the issue of medium term government bonds. The 2015 Budget would have been more useful in providing information on how much debt remains outstanding on TOR’s books, how much has accumulated in the TOR Debt Recovery Fund; and how much has been disbursed, ACEP reveals. Under estimating Petroleum Revenue Projections for 2015? “We think that the use of Brent dated price in the prescribed formula for computing the benchmark price under-estimates crude oil price for 2015. Jubilee price has been trading at a premium to Brent and is expected to generate a higher benchmark price if used in the estimation formula”. For instance, the 2015 Budget reports that Brent dated benchmark price for 2014 was US$93.3760 per barrel against realized jubilee price of US$107 per barrel. Such huge variations in price resulting from the estimation method only provides the government more room to transfer more petroleum revenues for debt service once the ABFA for the year and the Stabilization cap have been exceeded. The budget therefore suffers from conservatively low estimates of petroleum revenues for the year. ACEP asserts If jubilee prices were estimated, the projected benchmark price for 2015 would be higher than the US$99 per barrel estimated by government; and total expected revenues for the year would be higher than the estimated US$1.2 billion given the projected production volume. This would have corrected for the variation between Brent and Jubilee prices; and the associated effects on the management of petroleum revenues. The government has explained that there is no historical price data for jubilee oil price; and that it wants to rely on existing professional price estimates done by Platts for instance. This is understandable as a new oil producer, but the opportunity cost of denying the annual budget more fiscal space will continue to undermine government development efforts. In the 2015 Budget the Government informed of its intention to propose a review of the Petroleum Benchmark Revenue, as stipulated in the First Schedule of the Law, if there are evident indicators that prices and output will change significantly in the course of the year. ACEP recommends that there should be a shift to the use of jubilee prices in estimating the benchmark price as we get more historical data on jubilee oil prices. We are of the view that the proposal to review the Benchmark formula is unnecessary since the use of jubilee prices (actual prices for the sale of jubilee crude oil) could address the price variation problem between Brent based benchmark price and realized jubilee price. In a 13-page comment on the energy sector of the just read 2015 budget, ACEP makes a number of thought –provoking recommendations worth reading. This post will upload the paper for the benefit oy readers.
Posted on: Wed, 10 Dec 2014 10:41:22 +0000
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