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COVID-19 affected upstream oil and gas sector in 2020, says PIAC

Oil rig

The Public Interest and Accountability Committee (PIAC) says the outbreak of the COVID-19 pandemic and its associated shocks on the economy and major industry actors proved challenging to upstream oil and gas operations in 2020 compared with 2019.

PIAC said the outbreak and effect of the COVID-19 pandemic brought some uncertainties in the global upstream petroleum industry operations during the period with a consequent effect on the Ghanaian petroleum industry.

The 2020 PIAC report, which covers the period January to December, made available to the Ghana News Agency at Tema said: “New contracts and projects earmarked to be executed were halted.

“Production levels at the various oil-producing fields are also cut in the wake of the pandemic and ultimately, anticipated government revenues were affected.”

While the government, in its 2020 Budget Statement and Economic Policy, projected a crude oil benchmark price of US$62.6 per barrel; however, it indicated that the outbreak of the pandemic in January saw oil prices plunged to as low as US$20 per barrel.

It said although prices picked up in the year, the anticipated revenue inflow was significantly reduced.

As a result, the report said the Ghana Stabilisation Fund (GSF) had to be capped at US$100 million from an initial balance of US$455.53 million, and the excess transferred to the Contingency Fund to shore up the shortfall in projected revenues from petroleum, in line with the Petroleum Revenue Management Act 2015.

The PIAC report said the petroleum industry’s performance was unstable for most of 2020 as the first half saw Brent oil price fall from an average of $63.5 per barrel in January to an average of US$32.01 per barrel by March.

“The commodity further witnessed a collapse to a historic bottom of $18.38 per barrel in April before picking up slightly in May to US$29.38 per barrel.”

The report indicated that a combination of COVID-19 global containment restrictions and the Organization of the Petroleum Exporting Countries (OPEC+) intervention measures designed to sustain the market through timely production cuts, resulted in oil prices rising to $40.27 per barrel in June 2020 – one-third lower than the 2019 average for the same period.

As of December 2020, oil price more than doubled in value to around $50 per barrel, closer to the pre-pandemic values of above US$60 per barrel.

It said even before the recovery of oil prices in the second half of 2020, the government put in place measures to sustain the country’s efforts at managing its hydrocarbon resources.

“The Petroleum Commission had at the beginning of the year approved work programmes and budgets amounting to about US$324 million for Exploration and Production (E&P) companies in the exploratory and appraisal stages,” the report said.

“The companies were due to undertake various drilling campaigns, acquisition and interpretation of seismic, geological and geophysical data, well planning, procurement tender and mobilisation before the COVID-19 global pandemic,” it said.

The report acknowledged that project execution, planning, risk management as well as associated preparatory activities had stalled, with implications for cost and time overruns.

The PIAC report stated, amongst other instances that, in March 2020, Aker Energy postponed its development activities in the Pecan Field project, valued at US$4.4 billion and the company was scheduled to submit a revised Plan of Development (PoD) and make a final investment decision on the Field.

“However, due to the effect of the COVID-19 pandemic on the oil and gas industry globally, Aker Energy requested for a suspension and postponement of the Pecan Field development activities.”

It said: “there was also a freeze or cancellation of critical operations and maintenance works on production facilities scheduled for the year, due partly to the skeletal workforce operated by most companies in compliance with approved COVID19 protocols.”

Notwithstanding the COVID-19 situation, the report admitted that there was sustained production in the country’s three offshore producing Fields.

It explained that for the period under review, a total of 66.93 million barrels of oil was produced of which the Jubilee Field produced 30.42 million barrels, TEN 17.80 million barrels, and OCTP (SGN) 18.70 million barrels.

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