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Equatorial Guinea Seeks Revival of Its Oil Sector Through OPEC

H.E. Gabriel Obiang Lima

Minister of Mines, Industry & Energy

Equatorial Guinea


Equatorial Guinea’s participation in the Organization of the Petroleum Exporting Countries (OPEC) production cut and application to be a member are an attempt to revive its oil sector and be more involved in the global oil supply dynamics. The country started oil production in 1991 and currently produces about 243,000 barrels of oil per day (bd), ranked 35th globally and 7th in Africa. Its agreed OPEC-aligned production cut represents about 5% of its 2016 production, at 12,000 bd.

Recent licensing rounds have been unsuccessful and there are no planned projects with final investment decision (FID) in the country. The only significant planned project is the Fortuna Floating Liquefied Natural Gas (FLNG) development, which is a gas-led development. OPEC membership could spur activities in its dwindling oil sector and revive interest in its upcoming 2016/2017 bid round.


Oil production in the country is currently from six assets, with the Zafiro field operated by ExxonMobil contributing about 42%. The remaining crude is split almost equally between five assets, operated by Hess Corporation, Marathon Oil Corporation and Noble Energy. Equatorial Guinea’s oil production is projected to decline by over 57% by 2023. The long term supply outlook is bleak for the country considering the maturity of its producing fields and lack of further investment. Only considerable new investment will stabilize the decline and ensure oil production in the long term.


The national oil company (NOC), GEPetrol, plays an active role in supporting the development of the country’s resources. They are entitled to back-in rights of up to a 20% equity interest and also manage the state’s participation in projects. In an apparent bid by the Equatorial Guinea government to increase the NOC’s participation, they have taken a hardline approach in dealing with some of the international oil companies (IOCs). It has been reported that a contract extension for the Zafiro field license operated by ExxonMobil due to expire in 2023 will not be renewed. Additionally, purported equity interest farm-out agreements for the Ceiba and Okume fields will not be allowed unless the new partners are on good terms with the government. Both issues point to a strained working relationship between IOCs and the government, challenging one of the potential key sources of new investment. Widespread institutional and corporate corruption adds further challenges to the sector and attracting foreign direct investment. Equatorial Guinea already has significantly fewer IOCs participating in the country’s industry than other African OPEC countries.


The regulatory tensions are, however, counterbalanced by a favorable fiscal environment. A fiscal comparison between Equatorial Guinea and other sub-Saharan Africa regimes shows the country’s framework offers better returns when compared to established producers like Nigeria and Angola, although its known reserve holding and production capacity is significantly lower. The country compares favorably with countries like Gabon and Congo Republic, with similar production levels and infrastructure. Flexibility in license negotiations and incentivized fiscal terms could be key to encouraging further investment in the country’s hydrocarbon sector and increasing participation in its upcoming license bid round. OPEC participation will further support policy alignment with other members enhancing Equatorial Guinea’s investment appeal.

Source: Reuters

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