industry news /upstream impact of covid-19 on ghana's petroleum upstream sector the fangs of the new corona virus, low oil prices & development financing since its appearance in late 2019, have cut through all sectors of various economies leaving noth- ing unscathed. for the global energy sec- tor, it has resulted in a historic dive in oil prices, way below projections of many oil- based entities and budgets of national gov- ernments. consequences, thus, emerge for revenues, debt financing, development and production. for africa including ghana, wood mackenzie predicts that about 33 per cent of upstream investments will not take place due to the current pandemic which have implications for small businesses al- lied with or subsisting on the oil and gas value chain. though ghana is not as dependent on crude oil as her sub-saharan counterparts, nigeria and angola, effects of the drop in global oil prices on the country’s finances have, nonetheless, been dire. by dint of covid-19, west africa’s second-biggest economy is predicted to grow at its slowest pace in 37 years, as it is being impacted in the short to long term. revenue from the oil sector had for three consistent years, more than doubled to fuel annual growth of 6.3 per cent. for the short-term, the government has already secured us$1bn out of the imf’s fiscal package to support the econ- omy against the impact being felt on ac- count of the pandemic. meanwhile, the country’s projected us$1.5bn revenues from oil is two-thirds short as the finance minister announced not less than a billion decrease in that amount, thus a significant shock to the 2020 national budget. this may result in further borrowing to close such gap. in the medium to long term, the antic- ipation of the us$4bn investment from aker energy for its pecan field in ghana, located offshore the deepwater tano cape three points block, scheduled to have commenced this year 2020, has been put on hold, thanks to covid. further, tullow ghana has also suspended some invest- ments it was supposed to have made to op- timize its fields. these consequently have untold impacts, in the medium term, on service companies and ghanaian enter- prises that would have benefitted from procurement this year, but are no longer going to. government, in the wake of these de- the impact is particularly felt in terms of physical in- frastructure and debt serv- icing. in the 2020 budget, ghana’s infrastructure de- velopment programme was heavily reliant on oil rev- enues; about 80 per cent of government’s domestic revenue for its capital budget was to be sourced from the abfa. this, there- fore, exposes development to significant risks as drop in oil production or price will greatly reduce govern- ment's anticipated rev- enues, with a rippling effect on the ordinary ghanaian." % 0 8 velopments, has had to revise its calcula- tions for the year, and consider exploring alternative sources of revenues to fill in the gap from the loss in the expected oil in- come. analysts estimate current crude oil production in the country to peak in 2021 and then subsequently experience a steady decline if no new developments come on stream in a two-three-year window. higher crude oil and gas output have been deemed critical to sustaining ghana’s growth drive. since december 2010, ghana has received more than us$7 bil- lion in oil revenues. this amount has been a fundamental consideration and support to the national budget since commercial production of oil in the country. ghana’s oil receipts come from royal- ties, carried and participating interest (capi), income tax and surface rentals. these are subsequently allocated and dis- tributed to the ghana national petroleum corporation (gnpc), the annual budget funding amount (abfa) and the ghana petroleum funds - the ghana stabilisation fund (gsf) and the ghana heritage fund (ghf). since 2010, the gnpc has received an allocation of some 31 per cent of oil rev- enues, 39 per cent into the abfa while the gsf and ghf have each been credited with 21 per cent and nine per cent of the revenues. the reduction in oil prices at any point in time, therefore, significantly im- pacts on the amounts that will be allocated to these funds. the covid'19-inspired downturn in oil prices has, thus, dealt a heavy blow to the cashflow of companies and revenue of the state. the government of ghana, in its 2020 budget, projected receive from oil revenues, us$1.567 billion founded on a price prediction of us$62 per barrel. to oil receipts for the country will experi- ence a plunge of about 53 per cent, accord- ing to the africa centre for energy policy, acep. this decrease in revenues will affect funding for major infrastructure develop- ments in the country. the corresponding projected shortfall of oil receipts on the abfa -a designated amount that funds critical infrastructure projects across the agricultural, health, educational, and roads sectors- is over ghȼ300 million; while shortfalls in the ghana stabilisation fund and the ghana heritage fund - funds that serve as buffer to the budget and also for contingency expenses- are over ghȼ100 million and over ghȼ400 million, respec- tively, according to ministry of finance data. the impact is particularly felt in terms of physical infrastructure and debt servic- ing. in the 2020 budget, ghana’s infra- 16 energyghana.com july 2020