Public Interest and Accountability Committee (PIAC) wants government to consider hedging a portion of Ghana’s share of crude oil exports.
Although the committee is recommending this to cushion the country against oil price volatility, it said such a decision should be preceded with the requisite expertise to ensure that hedging inured to the benefit of the country.
As part of its recommendations in its 2016 annual report, PIAC, which has oversight responsibility over the management of petroleum revenues, said once the country is able to build expertise on hedging, it would then be in a position to go ahead to hedge.
“The Ministry of Finance should seek expert advice on hedging and consider undertaking hedging activities as part of strategies to mitigate Ghana’s exposure to commodity price risk/volatility associated with future oil production,” the report recommended.
Some of the Jubilee Partners, Kosmos and Tullow, already have a hedging policy in policy, and as a result are not adversely affected by the falling oil prices, unlike Ghana.
For instance, in 2016, Ghana’s crude oil from the Jubilee Field was sold at an average achieved price of US$46.13per barrel which compared favorably with the average dated Brent price of US$44.01 as well as the average achieved price of all the Jubilee Partners, comprising Tullow–US$41.7; Anadarko –43.93, and; Kosmos –45.94.
“The Jubilee Partners however were able to sell a portion of their liftings at a higher price as a result of their respective hedging policies, with Kosmos and Tullow realising a unit price of US$73.76 per barrel and US$61.7 per barrel respectively,” the report said.
Already experts have warned against any hasty moves to hedge Ghana’s oil explaining that such a move could expose the economy to greater risks. The International Oil Companies (IOCs) that actually benefitted in the midst of the crisis were able to anticipate some uncertainty in the global market and hedged before the crisis, hence their ability to benefit from it.
Without adequate knowledge and foresight, before using any hedging instrument, the country would lose a lot of revenue, if it is not able to predict the prices within a correct margin.
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