Sao Tome to make US$396.1 million in oil revenue in 2015

14 August 2006

Sao Tome, Sao Tome and Principe, 14 August – Sao Tome will reach a “peak” in terms of oil revenue entering the public coffers in 2015, when it is expected to make US$396.1 million, and this level of revenue should tail off until 2031, the International Monetary Fund (IMF) has said.

An IMF report, written by economist Alonso Segura, said that Sao Tome has been taking measures to maximize the effect of oil revenues on the economy, which are due to begin reaching the State treasury within six years, at an initial level of US$29.5 million per year.

According to IMF projections, this amount will continuously increase in the years that follow, and will be more than US$300 million per year between 2014 and 2018, a year in which direct production revenue is expected to begin falling, down to US$47 million in 2031.

That year, according to the IMF, and if the oil revenue management model adopted by the archipelago works, the level of revenue from oil will be sustained by the Permanent Fund, as production tails off.

This Fund will begin to be set up in 2015, with US$128.2 million, with its value increasing continuously until 2034, when it is scheduled to reach an optimum reserve level of US$3.063 million, which is expected to be maintained over the following years.

According to Segura, although the amount of oil Sao Tome has available has yet to be determined, available data indicates that it ‘will be very significant – enough to finance development needs in perpetuity,” through the revenues of the Permanent Fund.

“There is the possibility that the country’s oil riches will be so great in relation to the size of the country that constraints on absorption capacity will restrict the total and efficient use of the funds,” the IMF economist warned.

If this is the case, and taking into account the figures that are to be known in the meantime, Segura recommended that the rules of the model be revised, boosting the weight of investment in the management of the fund, and reducing the annual allocation of “per capita” resources” to “more conservative” levels.

According to Segura the Sao Tome authorities should now dedicate themselves to ‘eliminating administrative constraints and improving regulatory bodies and others, in order to maximize the local contribution to the availability of services for the oil industry.”

“It is imperative that total accountability and transparency characterize the development of the oil sector from its beginning. This will require a firm political stance and a process to encourage capacities and bodies that make it possible to create strong supervisory bodies,“ Segura said. (macauhub)