The launch of the restoration of the nurses’ trainee allowance, set for to take place in Sunyani in the Brong Ahafo Region on October 10, will see about 58,000 trainee nurses and midwives receive their monthly allowance after they were scrapped in 2016 by the John Mahama government.

[contextly_sidebar id=”PEl8fZ14D7Ge6yik2OYYl67gC1zkX00I”]The decision to have an occasion just to symbolize the restoration has been criticized as simply a frivolous move from the government by some sections of the public.

The Minister of Health, Kwaku Agyemang-Manu, defended the launch, asking why the people would expect the government to restore the allowance quietly.

“We are launching [the restoration of the allowance] to demonstrate to Ghanaians that the government has honored its promise. We don’t want to hide in a room somewhere, pay the allowance and that is the end of it. Ghanaians should know what we are doing,” the Minister of Health stated to the Media after appearing before Parliament.

He stressed that, it was important “to communicate the good works of our President and that is why are we are launching. People are happy; they want to jubilate about it and we want them to jubilate about it.”

The trainee Nurses allowance was initially scrapped to allow the various training colleges to admit more students in a decision which was met with wide condemnation.

The National Democratic Congress (NDC) earmarked a students’ loan scheme in place of the allowance.

But the Mahama government had agreed to pay a reduced allowance for the trainees temporarily, until such a time that they are finally moved onto the students’ loan scheme.

–

By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Nursing allowance can’t be restored without a ceremony – Minister appeared first on Citi 97.3 FM - Relevant Radio. Always.

Ghana’s government inaugurated the Saltpond platform back in 1978 to pump oil from an offshore field. In its heyday, the field, located seven miles off the country’s coast, produced more than a million barrels a year. That has dwindled to just over 100,000 barrels over the course of 2013, according to Ghana’s finance ministry.

But since last August, three tankers picked up more than 470,000 barrels from Saltpond, transporting it to an Italian refinery near the port of Genoa, according to port officials, ship-tracking services and port records.

All the activity at Saltpond has ratcheted up scrutiny of the facility—which also includes a storage tanker—and its possible role in the market for stolen Nigerian crude. For years, Western companies operating in Nigeria, like Royal Dutch Shell RDSA.LN -0.37% PLC and Chevron Corp. CVX -0.64% , have lost millions of dollars a month to bandits who tap onshore oil pipelines and siphon off crude.

Some U.S. and Nigerian officials suspect Saltpond is one of several destinations that smugglers use to transship stolen Nigerian crude, effectively laundering it by making it appear to come from a legitimate source outside of Nigeria.

The platform’s operator, which denies wrongdoing, and Nigerian officials say the facility has a legitimate contract with Nigerian authorities to transship oil that the country’s law-enforcement officials have confiscated. But those volumes are small, according to the Nigerian government, raising questions about the origins of the rest of the oil the platform has loaded onto ships. The Saltpond platform, meanwhile, has been a destination for at least one vessel connected to Nigerian oil theft, according to ship-tracking services.

In recent years, executives and officials estimate that as much as 80% of Nigeria’s stolen oil is being shipped out of the country in small tankers. Where it goes, though, has long been a mystery.

“Tankers often will come twice a week to load [stolen oil in Nigeria] and will go abroad,” a senior U.S. official familiar with the issue said, referring to international smuggling and not to Saltpond. “But it’s extremely difficult to investigate the final destination.”

U.S. officials said Washington is probing Saltpond as part of a broader inquiry into how Nigerian oil gets stolen and laundered. Washington has in recent years strengthened ties with Nigeria—Africa’s biggest economy and one of the world’s biggest oil exporters—and has set up a working group to liaise with Nigerian officials to help curb the smuggling.

Emmanuel Oware, general manager of Petro-Marine Consult Ltd., which specializes in ship cargo inspections and is based in Tema, Ghana, said small vessels that have loaded what he called “unofficial” oil in Nigeria’s oil-rich Niger Delta frequently come to discharge at Saltpond. There, the Nigerian crude is mixed with Ghanaian oil, he said.

“It comes from Nigeria, but it gets a certificate of Ghana origin,” he said.

The oil is then transferred to larger tankers, according to Mr. Oware, who said he inspected a transshipment at Saltpond last year.

The majority owner of the Saltpond platform, Lushann International Energy Corp., a private company based in Houston, doesn’t dispute that some of the oil it loads onto tankers comes from Nigeria. But Lushann’s owner said the company purchases the crude legally from Nigeria’s Economic and Financial Crimes Commission, the authority with primary responsibility for cracking down on oil smuggling.

The company says the EFCC sells crude that it seizes in its pursuit of oil theft. “The only crude we take from Nigeria…has been seized by the government,” said Quincy Sintim, Lushann’s owner and president, in a telephone interview. “We have invoices that we pay to EFCC Nigeria.”

Mr. Sintim said Saltpond’s production had never been higher than 200,000 barrels a year since his company took over in 2000, and declined to comment further.

Jarrett Tenebe, the owner and head of Fenix Impex Nig Ltd., a Nigerian oil-trading firm, said he had been selling confiscated Nigerian crude oil to Saltpond on behalf of the oil ministry, but said the quantities were small.

Dorothy Bassey, head of public affairs at Nigeria’s department of petroleum resources—the oil ministry’s regulatory body—said Fenix only loaded “about 2,000 barrels” of confiscated crude oil since late 2012. It is unclear how much of that was sold to Saltpond.

Fenix is Saltpond’s only provider of EFCC-confiscated crude, according to Mr. Sintim.

The provenance of the other oil that made its way to an Italian refinery over the course of the past year, however, isn’t clear. Three cargoes, listed in shipping documents as “Saltpond blend crude oil,” went to Genoa’s terminal for delivery to Italy’s Iplom SpA refinery, according to shipping and port records and officials.

Two cargoes, unloaded in August 2013 and February 2014, carried about 340,000 barrels altogether, according to Genoa port officials. The third tanker, unloaded on April of this year, carried 132,000 barrels. Together, that’s more than four times the platform’s 2013 output of around 100,000 barrels, according to the Ghana government figures.

Giorgio Profumo, Iplom’s president, confirmed his refinery had received crude labeled as coming from Saltpond but said he believed the cargoes were legitimate because they are approved by the Ghana authorities.

Ghana’s customs and petroleum regulator didn’t return an emailed request for comment and couldn’t be reached over the phone.

Saltpond, meanwhile, has been a frequent port of call for at least one vessel connected with Nigerian oil smuggling. The Akshay is a tanker co-owned by Ajay Bhatia, an Indian national who was sentenced in an Nigerian court in May in absentia to 15 years in jail for oil theft. The Akshay traveled three times between Nigeria and Saltpond in the four months before the ship’s seizure by the Nigerian navy, for allegedly carrying stolen crude, in November 2012, according to shipping tracker service IHS Fairplay.

Two other vessels partly owned by Mr. Bhatia also travel frequently from Nigeria to Saltpond, according to vessel database FleetMon.com and to some of the ships’ crew members.

Asked about the Akshay and other vessels co-owned by Mr. Bathia, Mr. Sintim said he would look into those tankers’ activity at Saltpond but didn’t respond when contacted again.

A lawyer for Mr. Bhatia declined to comment. Mr. Bhatia didn’t respond to numerous calls, text messages and emails.

–

Source: Wall Street Journal

The post Tiny Ghana oil platform’s big output sparks scrutiny appeared first on Citi 97.3 FM - Relevant Radio. Always.

Even though it may be common to consumers, the expensive earth resource is not a common commodity of all nations. In countries where it is found, its exploration does not come cheap. Kuncoro, H. (April 2011,) establishes that the volatility of oil price causes ‘the prices of metals, food grains and other commodities’ to go up sharply, which has a high political implications. He further indicates that fluctuations will increase a household’s income risk and a potential output loss for business and increase government subsidies.  Similarly, Balaguer, J. and Ripollés, J. (February, 2012) show that ‘short-term transmission of wholesale prices to retail prices is quite symmetric for both gasoline and diesel’. As far as oil prices affect local output, under standard considerations, their effects should be surrounded by the cost share of oil in domestic production. Interpreting oil as an intermediate input in the value added production function is questionable if viewed as an imported commodity. Under considerable assumptions, imported oil enters the production function of domestic gross output, but it does not enter the production function of domestic value added. Instead, they affect the domestic economy by changing domestic capital and labour inputs, Kalian, L. (December, 2009)

The Research Department of the International Monetary Fund (December, 2000), indicates that the rise (instability) in oil prices will raise the cost of the economy, resulting in an increase in the relative price of energy inputs and putting pressure on profit margins. There will also be an impact on the price level and on inflation. Its magnitude will depend on the degree of monetary tightening and the extent to which consumers seek to offset the decline in their real incomes through higher wage increases and producers seeking to restore profit margins. There will be direct and indirect impact on financial markets, corporate earnings, inflation, and monetary policy. Oil price increases (instability) will affect equity and bond valuations, and currency exchange rates.

Ghana has made several attempts, dating from ‘1896’, in her bid to explore oil but not enough was found for commercialization. Until 2007, when significant amount was discovered at cape three points in saleable quantities, Ghana had been relying on the international market for her crude oil needs.

When the Ghana National Petroleum Authority and her jubilee partners announced the discovery of oil in commercial quantities, many Ghanaians received the news with a sigh of relief from the international oil shocks, but this remains a nightmare because TOR has, so far, failed to refine oil from the jubilee fields.

According to Kuncoro, H. (April, 2011), oil price volatility has always been a global concern. Even before the 1973 embargo, demand and supply has been characterized with geopolitical and economic interruptions. When Iraq invaded Kurdistan, the US army, between 1996 and 2001, raided missile factories in Southern Iraq, the consequences of which was felt around the world. Also, as Iraq refused United Nation’s weapon inspectors into the country, tension was mounted across the board and the oil industry suffered some shocks. Similarly, the cut down of Organization of Petroleum Exporting Countries’ (OPEC) operations within this same period contributed to high oil prices, the economic recessions, the 11/2001 terrorist attack on United States of America (USA), the 2010 Middle East political  revolutions in Egypt, Libya and Tunisia, the continuous civil war in Syria and many other global wrangling, causing  the volatility of oil prices in the industry.

Yépez-García, R. A. and Dana, J. (2012) indicate that oil vulnerability is the value of net oil imports divided by current GDP.  It is calculated from data on oil production and oil product consumption. Values are estimated by multiplying volumes by the Brent price of oil for a particular period. From a macroeconomic standpoint, the vulnerability of an oil importing country is measured by the ratio of the value of net oil imports to GDP.  The higher this ratio, the larger the fall in GDP that is required to offset a rise in oil prices. The impact of the oil price shock is calculated as the index of vulnerability, multiplied by the percentage increase in oil prices. Vulnerability affects the economy in two ways; firstly by affecting the supply of the economy because of oil price rise which adversely impact supply recession and secondly, affecting the demand side of the economy, due to lower levels of income on consumers and businesses behaviours.

Expectations of Ghana’s oil find and oil pricing

After joining the league of oil producing countries, Ghana’s economic managers faced a heavy task of moving the country either to a blessed economy or to a cursed nation. For the  ordinary  Ghanaian citizen, all he/she expects is some reasonable reduction of petroleum prices, industry and gross domestic product (GDP) growth, reduction in inflation  and job creation. This evidence is captured in the words of the  then president Kufour on the BBC : ‘Even without oil, we are doing so well …with oil as a shot in the arm, we’re going to fly; … my joy is that I’ll go down in history as the President under whose watch oil was found to turn the economy of Ghana around for the better.’ The indigenous Ghanaian in Takoradi on whose native land oil was found, shared similar hopes in Agbefu’s paper: ‘this has been long in coming…We are extremely excited and flattered that the oil was found in the western region, our region. With the coming of the oil, we the youth can now boast of finding white collar jobs, earning more than we earn now with fishing and petty trading. We only hope the government will consider this as a birth-right to us, and not play politics with it as usual’.

Theoretical calculation in prices is meaningless unless it reflects in pump prices. According to Adam, M. A. (November 2009) this belief is justified by the intermittent pressure by ‘civil society groups like the Committee for Joint Action (CJA) and the Alliance for Accountable Governance (AFAG) on governments’ whenever prices rise.

To meet expectations, the government needs to influence prices through subsidies. ‘Subsidies are therefore unavoidable under some circumstances but these should be clearly defined in a subsidy policy and transparently managed. What remains challenging, however, is how to finance these subsidies’.

Consumer subsidization: the government of Ghana implemented a cross subsidization fund, where petrol consumers paid more to subsidize for diesel consumers. The logic behind this was that subsidies were intended for the vulnerable or the poor, and the only way to get them to benefit was to reduce diesel prices, which many commercial vehicles (trotro) use. But from the researcher’s observation point of view and from his analysis, subsidies in this regard are skewed to the disadvantage of the poor –‘Fact is, the petroleum pricing formula used by the National Petroleum Authority is supposed to reward consumers when crude oil prices fall; and penalize them when crude oil prices rise. However, under-recoveries by the Tema Oil Refinery as a result of non-payment of subsidised bills by Government have often led to the use of the gains from falling crude oil prices to finance the under-recoveries. Thus, while petroleum prices increase with increasing crude oil prices, they do no decrease with decreasing crude oil prices. The relationship has been asymmetric, demonstrating an inconsistent application of the petroleum pricing formula’

However, the petroleum unification fund was used to reduce the burden of consumers. This worked on the basis of proximity to TOR;  customers who are far away from TOR pay less at the disadvantage of those closer and the  difference is use to offset any outstanding balances.

Price stabilisation is yet a policy path for the government; a price stabilisation fund is usually established and tied to a price band with a floor and a cap. In situations where prices fall below the floor, the difference is kept in the fund at other times when prices go above the ceiling and the fund is used to ‘soften’ the price. For instance, the 2004 Peruvian Petroleum Price Stabilization, the Colombian Petroleum Price Stabilization Fund  also Cameroon, Ethiopia and Malawi used similar methods.

The Reality in Ghana’s Pricing

Pricing policy direction has been a problem to the people of Ghana and for the NPA. The prices of petroleum affect every single consumer directly or otherwise, so the NPA has decided to formulate the following formula for calculating petroleum prices in the country. The effectiveness of this model is determined by prevailing market conditions. From the formula, crude oil prices, exchange rate, taxes or levies and margins are the factors that influence oil prices. Policy regulations and activities of government, the performances of TOR, Oil Marketing Companies (OMCs) and oil trading companies all play a major part in oil price determination.

The Formulae;

‘Ex-pump Price = Ex-refinery Price + Taxes/Levies + Margins

Ex-refinery Price = CIF + Related Charges

CIF = Cost (FBO) + Insurance + Freight

Related Charges = Off-loading Cost + In-transit Losses + Inspection + L/C Cost +Financial Cost + Storage Cost + In-plant Losses + Track Loading Cost +Operating Margin’.

 Impact of oil price shock in Ghana’s economy

International price shocks have, over the years, presented some unfortunate economic challenges in Ghana by way of redirecting government resources from social intervention towards subsidies. It also, at one point or the other, caused shortages and panic in the system. The most recent one came in June 2014 as the government of Ghana tried to take off the gap created between international prices and domestic prices, which caused some misunderstanding in the process between government and the Bulk Distribution Companies (BDCs), and these efforts resulted in some shortage and panic buying of petrol in the local market. Another impact of the oil shock is felt in 2003 as a substantial percentage of the GDP was spent on subsidies. The table below provides details.

TABLE 3.   Oil vulnerability and oil shock (2003)

Data source: Bacon, R., and Matter, A., The Vulnerability of African Countries to Oil Price Shocks: Major Factor and Policy Options the case of Oil Importing Countries, Energy Sector Management Assistance Program,

A: Oil and oil products consumption in 2003 in 000 barrels per day,

B: Domestic oil production in 2003 in 000 barrels per day,

C: Net imports of oil and oil products in 2003 in 000 barrels a day (oil consumption minus oil production),

D: Oil import dependence in 2003 (net oil imports / oil consumption),

E: GDP in 2003 in current US$ 7.62,

F: Estimated vulnerability to oil in 2003 (net oil imports* 365*1000* average Brent price [US$28.84] in 2003 / GDP),

G: Estimated size of shock as percentage of 2003 GDP following an average annual price increase of Brent to US$38.21(Vulnerability * 33 per cent),

H: Estimated size of shock as percentage of 2003 GDP following an average annual price increase of Brent to US$49.54(vulnerability * 72 per cent),

I: GDP per capita in 2003

J: Ratio of external debt to GDP in 2003.

From the table it is realized that 0.044 and 1.4 of Ghana’s GDP for 2003 alone was exposed to oil vulnerability and price shocks respectively by way of estimation and this is equivalent to what government spent on subsidies thereby causing some amount of pressure on government budget. Money that could have been used in other sectors like building roads, hospitals, schools and among others are used to cushion price fluctuations which has serious economic implication for the ordinary Ghanaian in the long run.

In disguise subsidies are not beneficial to the consumer because they tend to be asymmetric towards the vulnerable in the long run.  0.7% of the 2006’s Gross Domestic Product (GDP) in Ghana was spent on subsidizing oil price volatility. These subsidies cause a big pull from government finances and eventually distort development because government sacrifices development to spend in such a non-productive area, which is a heavy price the poor people have to pay in order to correct market failures,

The exchange rate effect; as indicated by the world trade organisation, higher energy prices are co-movement of higher prices for imported energy goods, and that at least some  income lost from higher prices of imported energy goods are transferred from abroad  to the local market and can to some extent attributed to the currency speculations. Higher energy prices reduce discretionary income as consumers have less money to spend after paying their energy bills. With perfectly inelastic energy demand the magnitude of the effect of a unit change in energy prices is bounded by the energy share in consumption. Also, changing energy prices may bring about future uncertainty, causing consumers to postpone irreversible purchases of consumer durables. Another facet is even when purchase decisions are reversible; consumption may fall in response to energy price shocks, as consumers may increase their precautionary motive of savings. This response may arise if consumers smooth their consumption because they perceive a greater likelihood of future unemployment and hence, future income losses. Ideally, this will cause general equilibrium effects on employment and real income. In addition, the precautionary savings will also reflect greater uncertainty about the prospects of remaining gainfully employed, in which case, any unexpected change in the price of energy would lower consumption. Finally, durable products, whose operations require energy, will tend to decline even more, as households delay or forego purchases of energy-using durables, (WTO, January 2010). Even travelling, transportation and consumption of agrarian products will reduce. The government may be forced to increase taxes and levies in other to reach the equilibrium of price fluctuation.

Like any other net oil importer, Ghana’s problem of oil price volatility, it does not seem, will end soon, since pricing hikes are influenced by international factors. However, with good pricing policies, distortions can be minimized. Other alternative sources of primary fuel should be introduced, regulatory policies should be taken seriously because it is realized that price adjustments are asymmetrical (wholesalers or retailers and even commercial vehicle owners are quick to increase oil prices and fares respectively when GNPC announces increments in oil prices but are reluctant to decrease when the same body announces reduction) thereby putting unfair pressure on the poor consumer. By far, we can say that as a result of government inability to pay for under-recoveries of subsidies, unfair pressure is skewed towards the poor consumer.

Recommendations

Following the 2007 announcement by the jubilee partners about the oil find in the country, there have been consistent announcements about improvement capacity on gas discoveries. This suggests that Ghana is a potential country for diversification into other energy sectors like gas. Other products like coal, natural gas, biogas, wind energy and solar are also worth considering.

Oil price hikes have been, over the years, an unavoidable problem in Ghana’s pricing regime. Since pricing has international influence, oil import countries may not obviously have total control over fluctuations, however policy makers can initiate programs and pricing schemes that will lessen the burden on consumer.   The following proposal could be considered by the NPA:

Total deregulation reduces public sector dominance and develops a liberalized market that ensures adequate supply of products, this could be a suitable policy decision for the government of Ghana in the petroleum subsector because the OMC’s and the BDC’s could have full cost recovery which takes off the burden of subsidy from government. Countries such as Chile, USA, Venezuela, Japan, Mexico and Argentina are shining examples of deregulation. Considering the country’s current economic woes with unemployment and labor issues, deregulation will be unjust for Ghanaians because it could worsen the ongoing economic hardships, thus the high transport fares, loss of jobs, and general cost of living. Nigeria tried it and it is believed to be one of the results of the ‘Niger Delta disease’.

Ghana has some level of experience in hedging and with the introduction of a price band, the country can buy the Contango and backwardation concept to ‘soften’ her oil prices by;

(1) Expanding storage capacity,

(2) Determining a price band,

(III) When prices are expected to go ‘contango’ (futures prices going higher than current spot  prices) but are currently within the band then government can sign a spot contract and hedge against future prices,

(IV)   When prices are expected to ‘backwardate’ (futures prices going lower than current spot prices) then use the available stock.

The advantage here is that GNPC and TOR could harvest some profit in the process, which could be used to service subsidies.  Secondly there will always be assurance of security of supply and thus volatility will not have much impact on local consumption

Name: Mahama Hudu (Ordinary Ghanaian)

(Center for energy research-Ghana)

Contact: 0506734457

Email: [email protected]

The post The effects of oil price hikes on Ghana’s economy appeared first on Citi 97.3 FM - Relevant Radio. Always.

The Jubilee partners have no option than to choke production by 5,000 barrels of oil per day to make way for successful re-injection of 120 million standard cubic feet of gas every day.

The re-injection has been occasioned by the lack of plant to process the gas.

On April 14, 2014, the FPSO Kwame Nkrumah completed the 100th off-take from the Jubilee fields’; followed closely by the production of the 100 millionth barrel on May 4.

Mr Charles Darku, General Director (GM), Tullow Oil Company, said that if the gas processing plant was in operation, 70 million standard cubic feet of gas would have been taken care of by the processing plant every day while between 45 million and 50 million cubic feet of gas would be re-injected every day.

He explained that the re-injection of 45 million and 50 million cubic feet of gas is what should be done every day at the Jubilee fields to sustain oil production at optimum level.

However, he said because government policy bans flaring of gas, they had to be re-injecting 120 million standard cubic feet of gas every day, thereby choking production by 5,000 barrels of oil per day.

Consequently, he said Tullow was collaborating with Ghana Gas Company to install a by-pass facility to provide an alternative route to give a limited processed gas to the Volta River Authority (VRA).

Mr Charles said the FPSO has the capacity to process 30 million standard cubic feet of gas a day and the by-pass facility will carry the gas directly to VRA thermal plants.

He said the imported equipment for the project had already been imported and arrived in the country last Tues-, day, with installations expected to begin this week.

He explained that the by-pass facility is not taking over from the Ghana. Gas Processing Plant, but would serve as a back-up facility when the plant breaks down or shuts down for routine maintenance.

Mr Darku said the collaboration centres mainly on engineering assistance in terms of quality and installation procedures and did not go into any agreement on financial assistance.

He said the collaboration was necessary to find quick solutions to the problem while government continues to find ways to complete the gas plant.

The GM noted that for now the company is re-injecting gas back to the wells, and assured the public that their engineers are on the ground and are monitoring their operations very critically.

“For now, we are managing the situation well and we are comfortable at the rate at which we are re-injecting and we will continue to do that to avoid damaging our reservoirs,” he said.

Mr Darku said the company spent $100 million in developing the third gas rejecting ,well last October to augment the existing two wells.

He said though it turned out to take less gas than expected, there is enough space in the other two wells to accommodate the capacity being injected currently.

Answering a question on how long the company would continue to re-inject gas, Mr Darku said the decision is in the domain of the engineers, who are monitoring the issue on daily basis and would offer an advice when they reach their ultimate limit.

“I can assure you that we do not have imminent problem, at hand now. We are currently re-injecting 120 mil-lion standard cubic feet of gas daily and we are comfortable with that, but we also want to urge government and Ghana Gas Company* to facilitate work on the plant to the benefit of all,” he added.

Earlier, there was an investor forum to take stock of the company’s performance in 2013 and strategies for 2014.

The forum was an annual event after the Shareholders’ Annual General Meeting (AGM) in London.

The 2013 AGM took place last week, during which the company declared a dividend of 12.0 pence per share.

Ian Springett, Chief Finance Officer of Tullow, said the company had also recorded a net debt of S1, 909 million as against $989 million in 2012, an increase 93%.

He stated that the company paid the Government of Ghana $300 million last year.

He said $130 million was spent on local suppliers, explaining that over 40% of Tullow Ghana’s contracts under $100,000 were awarded to local businesses, as well as 24% of contracts between $100,000 and $1 mil- ; lion were also awarded to local businesses.

Source: Business Finder

The post Ghana losing 5,000 barrels of oil daily appeared first on Citi 97.3 FM - Relevant Radio. Always.