OilVoice - Congo Increases Budget On Back Of Oil Production Forecast

Congo Increases Budget On Back Of Oil Production Forecast

Wednesday, December 09, 2009

The government of the Republic of Congo has unveiled plans to double its expenditure in 2010, using revenues from a projected 16% rise in oil production to help upgrade infrastructure and combat poverty. The national assembly approved a budget increase from $3.1 billion, to $6.2 billion, on December 5, with the spending to be channeled towards improving water, power and housing infrastructure and tackling poverty, according to finance minister, Gilbert Ondongo. The budget increases comes at a time when the central African nation's aims to nearly double economic growth to higher than 12%.

The government has based the spending hike on its projection that its domestic oil production is set to rise by 16%, to 127.7 million barrels in 2010, worth an average price of $63 per barrel. This equates to an oil production target of 350,000 barrels per day (bpd) next year, up from around 300,000 bpd recorded this year. The increases are expected to come from a number of new developments including the Total-operated Moho-Bilondo project.

State oil company Societe Nationale des Petroles du Congo (SNPC) operates in partnership with various international oil companies in the region. Around one third of the oil produced goes directly to the government and is sold by SNPC on behalf of the state.

If Congo is right in its economic growth expectations it will prove to be the regional outperformer. The growth rate for the whole central African region stands at 4% for 2010, while Congo's own forecast for the region collectively was 6.8% for this year.

The Congo's growing petroleum sector is by far the country's major revenue earner. Since the early 1980s, when rapidly rising oil revenues enabled the government to finance large-scale development projects at a time when GDP growth averaged 5% annually, the state has mortgaged a substantial portion of its oil earnings, contributing to the government's shortage of revenues. Following recent discoveries and oil fields currently under development, Congo's oil industry is slowly beginning to return to its former glory. Significantly, production is expected to continue to rise in the next few years.