Ghana gov’t hedges oil output at US$107/barrel

Minister of Finance, Dr. Kwabena Duffuor says the country is hedging 100 percent of the state share of the country's oil production at US$107 per barrel from May to December, 2011.

It was also hedging about 50 percent of its purchases of crude oil, much of it used to produce fuel at the state-run Tema Oil Refinery, but did not say at what price
The hedge protects the country from declines on the world market price, but also prevents it from benefiting from a sustained increase.

“The hedging position are not designed to make speculative profits, rather to ensure that the country’s economy attain stability.

“I want to emphasize that our risk management programme is primarily an insurance programme, we would buy protection to ensure that over a reasonable period of time, we have a predictable maximum price for our consumption and a predictable minimum price for our export.” Dr. Duffour made this known at the inauguration of the National Risk Management Committee established by the President, John Evans Atta Mills to develop overall risk management policies for government.

.Ghana began commercial oil production in December 2010 with the start up of the offshore Jubilee field, which is running at around 70,000 bpd and could reach a target 120,000 bpd by July.

The GNPC has a 13.75 percent revenue share entitlement in the field, operated by U.K. energy firm Tullow, along with government royalty rights.

The country has so far sold two cargoes of about 1 million barrels of oil each, representing its accumulated share of Jubilee's production since start-up.

The most recent cargo, which settled June 1, was expected to bring in $108 million in revenue to the state, GNPC said in a press release . The cargo was bound for a Total refinery in France and was priced as a differential to London's Brent crude.
Risk Management Committee
The committee would also be tasked to approve and implement monitoring systems, that would ensure that adequate controls are in place whilst it also report regularly to Cabinet on ongoing risk management activities.

The committee would as well ensure that the public is adequately informed about the risk management policies and activities of government.

Dr. Duffour revealed that the Committee would be supported by a technical team that has already been established at the Ministry of Finance and Economic Planning to handle day-to-day operations of the committee.

He added that the country’s economy has been heavily dependent on commodities both as a producer and consumer.

“The unpredictability of commodity prices has historically been a major source of instability in our economy and that the major risk associated with an economy that is heavily dependent on commodities is price risk.

“The hedging protects the exporter from declines on the world market price, but also prevents it from benefiting from a sustained increase.”

Chairman of the Committee, Sam Appah, thanked government for the establishment of the Committee and pledged to work toward the development of the country.
Members of the committee include, Alex Mould head of National Petroleum Authority, Kwaku Awotwe, head of Volta River Authority, Nana Oduro Owusu also head of Cocoa Marketing Company.

Others are Nana Asafu Adjaye, head of Ghana National Petroleum Corporation, Steve Opata, representative from Bank of Ghana, Thomas Akabzaa, Chief Director-Ministry o Energy, Dorothy Afriyie-Ansah, representative from Attorney General’s Department and Ms. Yvonne Quansah, Ministry of Finance and Economic Planning.