'Ghana could have made millions from oil hedging'

Former Finance Minister Dr. Kwabena Duffuor has revealed that ineffective hedging against unstable oil prices resulted in Ghana missing an opportunity to make millions.

Hedging enables a buyer to purchase oil at an agreed price in future by paying a premium now to international insurance and oil companies based on a predetermined maximum rate.

Speaking at the ongoing 2015 Natural Resource Governance Institute on the theme, “Falling prices, rising risks” at St Catherine’s College at Oxford in the UK, Dr. Duffuor said Ghana would have gained a lot of revenue if the decision to hedge the country’s oil was not revised by the government.

“I believe that this time, we have lost or missed an opportunity in the sense that Ghana was going to be in a win, win situation because the consumption of crude was going to be a big bonus for us.

“If we were buying at hundred, it is now 40 or 50 we would have made huge savings so for consumption you have made savings there. At the same time if we had put the put option in place and we had sold the oil at that price because of the put option we would have also gained, so Ghana was going to win on the consumption side and win on the export side.

“Unfortunately, it didn’t happen because the government was looking at the hedging issues again and while they were looking at the issues the prices crashed and it affected everything in the country, especially the budget.

“So our situation is different and very sad, it is a missed opportunity, we would have made millions out of this but it didn’t happen,” Dr. Duffuor said.