Focus on expenditure in and not revenue from oil sector – Tsikata
As Ghana poises to join the world’s oil producing countries when commercial oil production begins in the country in November or December 2010, the country’s leaders have been called upon to focus on the expenditure that is going into the oil sector and not the revenue they expect.
Since the discovery of oil in commercial quantities was made in Ghana in 2007, the focus has been on how much the country would earn.
Tsatsu Tsikata, an energy consultant made the call in Accra Friday when he spoke at an Insurance Forum organized by Star Assurance, to mark the insurance company’s 25th anniversary.
He spoke on the topic, “Opportunities and challenges for the Ghanaian insurance Industry”.
Tsikata who for along time was the CEO of the Ghana National Petroleum Corporation (GNPC), said there is too much focus on government revenues that are expected from the oil production.
“In my humble opinion, we need to focus on the expenditure that is going into the project before we even consider the revenues,” he said.
According to Tsikata, the companies have said they are spending between $3 billion to $4 billion on the projects. “It is essential,” he said, “to have as much of that expenditure as possible having a positive economic impact by being used, for instance to procure goods and services produced or provided in Ghana and create jobs.”
He warned that “more so, because the companies will be seeking to recover those investments with a return from the future oil production and that will have an impact on whatever revenues you are anticipating, especially, during the early years of production .”
He indicated that during those early years as the companies are recovering their costs, “your revenues will be lower.”
Tsatsu therefore urged that it is important to make the costs being incurred by the companies in the exploration and production of the oil relevant to Ghana’s development.
On insurance, he said “we need to ascertain how much is being spent on various insurances covering the various operations, how much is being spent on insurances related to the assets that are being used and see what proportion is going to Ghanaian insurance companies.”
He said when this is done, then it will be possible to determine whether the preference of insurance determined by law to go to local insurers is actually being respected.
He however, admitted that there are significant barriers to be overcome to make this legislative provision not only an empty proclamation but a practical reality.
By Emmanuel K. Dogbevi