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 compares 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.

Oil production in 2016

A total of 32,297,780 barrels of crude oil (bbls) were produced in Ghana in 2016 compared to the 2015 production of 37,411,661 barrels. This translated into a 13.7 per cent decline, despite the fact that a new oil field, the Tweneboa Enyera Ntomme (TEN) started producing oil in August 2016.

The TEN Fields actually contributed 5,316,140 barrels (16%) to annual production. The production shortfall would have been approximately 28 per cent but for the addition of the TEN Fields.

The decline in petroleum production in 2016 was caused by a 34-day shutdown of the Jubilee field for maintenance from March 31 to May 3, 2016;

Actual petroleum receipt in 2016 of US$247.18million was 29 per cent lower than the budgeted amount (US$348.42 million) and translates into a 38 per cent year – on year decline in annual petroleum revenues when compared to the 2015 receipts of US$396.17 million.

Gas production in 2016

The production of indigenous natural gas declined by from 52,455.91 Million Metric Standard Cubic Feet (MMScf) in 2015 to 38,420 MMScf in 2016. This represented a 27 per cent compared only with Jubilee gas production and by 14 per cent when compared to the combined production from Jubilee and TEN Fields of 44,780 MMScf;

Approximately 72 per cent of the gas produced on the TEN Field was flared compared to approximately 23 per cent and six per cent that was re-injected and used as fuel for the Floating Production Storage Offloading (FPSO) respectively.