Overview
Equatorial Guinea is situated on the oil rich Gulf of Guinea and comprises the Rio Muni coastal enclave, the island of Bioko and the islands of Annobon, Corisco, Elobey Grande and Elobey Chico. The upstream oil industry is key to the economy of Equatorial Guinea and is growing rapidly with expanding foreign interest and investment. Oil accounts for 60% of GDP and 90% of total exports. Equatorial Guinea has proven oil reserves of 12 million barrels and gas reserves of 1.3 Tcf. In the three years since 1996, oil production has risen from 17,000 bpd to 90,000 bpd in mid 1999. At the end of 1999, the estimate for annual oil investment in Equatorial Guinea was over $2 billion.
The offshore area of Equatorial Guinea falls into two separate sections; the shelf around Bioko Island and the Shelf off Rio Muni, an enclave between Cameroon and Gabon. Both have good hydrocarbon potential.
Although oil was first discovered in the 1960’s, it was first produced offshore in 1991 from the Alba oilfied discovered by Mobil. Production of liquified natural gas (LNG) began in 1997, using wet gas from Alba field. In March 1995, Zafiro field was discovered in Block B with an eventual production rate of 100,000 bpd. Zafiro oilfield is Equatorial Guinea’s major oil producer. Additional discoveries were made on Block B, including Jade, Topacio, Amatista, Rubi and Serpentina. In 1999, a deepwater field, La Ceiba with estimated reserves as high as 300 to 500 million barrels was discovered by Triton Energy and Energy Africa in Block G of the Rio Muni Basin. In mid 2000, Chevron and Vanco Energy have signed production sharing contracts for the deepwater Block L and Corisco Block respectively.
Equatorial Guinea’s possessions in the Gulf of Guinea provide it with complex maritime boundaries and territorial delineations. Since mid 1999 there have been strained regional relations over maritime boundaries. Particularly at issue is the Zafiro field in Block B, with Nigeria claiming that it is part of the same structure as the Ekanga oilfield which was discovered by Elf in Nigeria’s concession block OML 102, just 3.5 kilometres north of Block B.
Equatorial Guinea has a small downstream oil industry that uses imported products. Getotal, equally owned by Total and Equatorial Guinea is the only player in the downstream industry.
The Government’s Ministry of Mines and Hydrocarbons regulates the industry and is the licensing authority. Originally the state was represented in an operating company called Guinea-Espanola de Petreleos SA (GEPSA), a 50/50 joint venture between it and Spain’s Hispanica de Petroleos (Hispanoil, now Repsol). GEPSA was subsequently dissolved and there is now no fully owned national oil company in Equatorial Guinea.
Upstream
The upstream is an important and rapidly growing part of Equatorial Guinea’s economy. Oil constitutes 60% of GDP and 80% of exports. Annual investment in oil is in excess of $2 billion. Production in mid 1999 reached 90,000 bpd. The main oil producer is the Zafiro oilfield (80,000 bpd).
Oil was first discovered in the 1960’s by Mobil and produced offshore by Walter International in 1991. Since the mid 1990’s there has been a rapid upsurge in the industry,. Oil discoveries include the condensate discovery, Alba, on Block E; Mobil’s discovery of Zafiro and some smaller fields on Block B in the mid 1990’s and Triton and Energy Africa’s Ceiba discovery in Block G of the Rio Muni Basin in 1999. This latter discovery has given rise to increased interest in exploring the deep water blocks on trend with Ceiba. In 2000, production sharing agreements were signed with Vanco for Corisco Deep and with Chevron for Block L.
The Hydrocarbons Law, passed in 1981 and amended in 1998, governs oil exploration and production. This law provides the framework for the licensing and award of permits and authorises the Minister to enter into contracts with participants. The basis of contracts is the Model Petroleum Production Sharing Contract, 1998.
Downstream
The downstream oil industry is wholly dependent on refined petroleum products imported from neighbouring countries. Oil-derived products supply all of the country’s commercial energy needs. A World Bank study has forecast an overall 3.2% growth rate in consumption of petroleum products to the year 2000.
Procurement, distribution and marketing of fuels product is carried out by Getotal, the only oil company in the Equatorial Guinea downstream oil. It also owns three storage depots and products receiving installations at Bata and Malabo.
Gas from CMS Nomeco’s Alba block will be used in a new Methanol plant being built on Bioko Island by the Atlantic Methanol Production Company (AMPCO). The plant’s output will be used to make chemicals, solvents, fuel additives and building materials. CMS Energy and Samedan Oil hold 45% in the plant, with the state holding the remainder. The plant cost $300 million to construct and is expected to be operational by the end of 2000. It will have a capacity of 19,000 bpd methanol.
Risk Assessment
Equatorial Guinea has good hydrocarbon potential and therefore is geologically a low risk area.
Although political instability is common in West African countries, Equatorial Guinea has been relatively stable politically in recent years under what is to all intents and purposes a one party state. The government is however relatively inefficient and there have been reports of corruption.
One of the bigger risks for companies exploring offshore is the problem associated with the complex maritime boundaries created by Equatorial Guinea’s ownership of Bioko and the smaller islands within the Gulf of Guinea.
Nigeria is currently in dispute with Equatorial Guinea over its sole ownership of the Zafiro oil field discovered by Mobil on Block B. Nigeria claims that the Zafiro oilfield straddles the border between the two countries. In Nigeria, Elf made the Ekanga discovery on Block OML 102 which lies just 3.5 kilometres north of Zafiro. Equatorial Guinea claims, however that the Ekanga wells were drilled in her territorial waters in Block B.
Nigeria has an ongoing border dispute with Cameroon with is currently at the International Court of Justice(ICJ) in the Hague. Equatorial Guinea has made an appeal at this hearing for the ICJ to consider its interests in the Gulf of Guinea as well since the outcome of this dispute will directly affect Equatorial Guinea.
Equatorial Guinea has an unresolved dispute with Gabon over the disputed sovereignty of the islands in Corisco Bay. Its dispute with Sao Tome appears to be moving towards resolution, with an in principle agreement to applying the equidistance principle of delineating the maritime boundary.
Legislation
Petroleum licensing is governed by the 1981 Hydrocarbons Law, amended in 1998, and taxation is covered by the general tax provisions of 1986, amended in 1988, 1991 and 1997.
Contracts governing the exploration and exploitation of hydrocarbons are based on the Model Petroleum Production Sharing Contract , revised and updated in 1998.
This contract allows for an initial exploration term of 5 years followed by two terms of 3 and 2 years extendable on a yearly basis for up to a total of 8 years. Relinquishment of 40% after the first three years and a further 25% at the end of the five year term. Production sharing is based upon the contractors pre-tax return and is negotiable. The contractors can propose other forms of sharing. The signature, commercial discovery and production bonuses are negotiable. The production bonus and signature bonus are both recoverable. Annual surface rentals range between $1.00 per hectare for water depths less than 200 metres and $0.50 per hectare for water depths greater than 200m
The CWC Group is organising Algeria Energy Week II (SEA 2), Sonatrach’s event for staff, subsidiaries, partners, suppliers and for all involved with the oil & gas industries in Algeria and Opportunities in Algeria’s Oil & Gas Industries, designed as a forum for new and established international energy companies and the wider financial community, to hear new announcements from the Algerian administration.
Global Pacific & Partners is the organiser of the October 2004 Africa Oil Week in Cape Town.
The CWC group is hosting the Gulf of Guinea Oil and Gas (GOG6) on the 21 June 2004 to 23 June 2004 in London.
The Industrial Development Corporation of South Africa is a self-financing, national development finance institution focusing on contributing to economic growth, industrial development and economic empowerment through its financing activities.
