A New Path

This article was originally published in the Africa Energy Series: Equatorial Guinea book.

Equatorial Guinea emerged from the oil price crash with a renewed vision and purpose.

As Equatorial Guinea turns 50, its oil and gas industry is going through a profoundly transformative moment. Since the oil price crisis of 2014, the Ministry of Mines and Hydrocarbons has sought investors and made a new push for international cooperation in the hope of bringing oil production up and diversifying further along the energy chain. Equatoguinean leaders have also attempted to diversify the country’s sources of income. It’s a two-front battle that is now starting to show results, as the years ahead promise a stronger, more capable oil and gas sec- tor that will propel Equatorial Guinea to a new era of prosperity.

The most important historical moment in Equatorial Guinea’s recent oil and gas his- tory was its entry into the biggest oil and gas club on the planet, the Organization of the Petroleum Exporting Countries (OPEC). In May 2017, Equatorial Guinea became its 14th and most recent member.

The country’s ascendance to membership of OPEC at this point in time is no coincidence. Equatorial Guinea has embarked on a strong strategy to reinforce its inter- national status, particularly within the oil and gas industry. Even before it was officially welcomed into the club, the Central African nation was already supportive of OPEC’s efforts to curb oil production to stabilize the price of the barrel. Now the opportunities ahead are more diverse. Equatorial Guinea wants to be more influential in the global energy market, which is bound to be disrupted by renewable energy, electric cars, energy efficiency and other technologies.

Further, Equatorial Guinea’s new stand in the international oil community comes with a regional commitment towards Africa. It was under that banner that Minister of Mines and Hydrocarbons H.E. Gabriel Mbaga Obiang Lima appealed to other Sub-Saharan African oil producers to also join OPEC, so that African explorers and producers can have a stronger voice with- in the global industry.

Fostering partnerships

A major development in 2017 was the fostering of cooperation initiatives be- tween Equatorial Guinea and its African allies in the energy sector. In March, high level meetings with South Sudanese representatives led to the signing of a memorandum of understanding for the exchange of resources and knowledge in the energy sector. In August, a similar agreement was reached with Uganda, and March 2018 saw yet another similar MoU signed with Mozambique.
In the natural gas sector, an initiative dubbed LNG2Africa has been a component of landmark cooperation agreements with regional partners. In August 2017, the government of Equatorial Guinea agreed to supply Ghana with 150 to 200 million cubic feet per day of liquefied natural gas. A month later, officials signed an MoU with Burkina Faso for the future supply of LNG. In April 2018 a new agreement for LNG supply to Togo was finalized.

These agreements and initiatives, both regional and global, mark a striking evolution in Equatorial Guinea’s approach to its oil and gas industry over the last few decades, combining internal development with a growing voice in international circles of influence.

Flared up

Natural gas has been at the center of Equatorial Guinea’s new vision for its energy sector. A progressive program of gas monetization projects was already in place since the 2000s, with gas flaring eliminated at the Alba field and LNG exported since 2007. Now, however, the movement is accelerating fast.

No other project stands out like Fortuna FLNG. Spearheaded by the London-based Ophir Energy, Fortuna will be Africa’s first-ever deepwater floating liquefied natural gas project. It should see a final investment decision being reached in 2018.
According to the plans of Ophir and partner OneLNG, first gas should come in 2022 and plateau production will reach 330 million scf per day. That amounts to around 2.2 million metric tonnes per an- num of LNG. Today, Equatorial Guinea’s LNG production capacity stands at 3.4 million mtpa, coming from the one-train EG LNG plant in Punta Europa.

Further down the chain, natural gas is also occupying a greater role in power generation. While the Malabo Turbogas 154 MW thermal power plant has been Equatorial Guinea’s largest power plant for over a decade, the Ministry of Mines and Hydrocarbons has pushed further

for the use of natural gas for internal consumption. The Bata power plant has undergone the conversion of its turbines to use natural gas as fuel in addition to heavy oil. Under the banner of the Petrochemicals Revolution, the MMH plans to use natural gas as feedstock for down- stream facilities at the REPEGE II project.

Licensing Round

As efforts for diversification continue, Equatorial Guinea keeps working on the fundamental building block of the industry – continued and effective exploration. With existing fields ageing, it is crucial that new companies enter Equatorial Guinea and bring fresh eyes to its acreages.
One of the major steps taken towards that objective, in June 2016, was the launch of a bidding round for oil and gas blocks. The EG Ronda 2016 put 17 li- censes on offer to investors. A year later, at the Africa Oil & Power conference in Cape Town, H.E. Gabriel Mbaga Obiang Lima announced the bid round’s seven winners.

The interest in acreage acquisition by international players gives good indications for the maintenance of oil production, and its potential increase.
Following the EG Ronda, 2017’s biggest private deal in Equatorial Guinea was the acquisition of Hess Corp.’s assets by Kosmos Energy and Trident Energy. The $650-million deal included the handover of Hess’ majority participation in the Okume and Ceiba producing fields. The two fields have seen declining production in recent years, falling from an output of 60,000 barrels per day in 2015 to around 45,000 today.

Kosmos and Trident plan to invest in further exploration and enhanced oil recovery techniques to reverse the decline. At the same time, the two companies have also acquired exploration licenses for offshore blocks EG-21, S and W. The entry of two explorers whose management have a heritage and strong belief in Equatorial Guinea is another indication of the turn the market is facing, bouncing back from low oil prices and volatility, and of the interest private players are showing in Equatoguinean assets.

Trade hub

In the downstream, Equatorial Guinea is also trying to assert itself as a center for storage and distribution of fuel. The Bio- ko Oil Terminal, in which the government is seeking investment, will be western Af- rica’s largest oil and petroleum products storage facility. At a cost of $500 million, it will make Equatorial Guinea a linchpin point for oil trading and storage in the whole Gulf of Guinea. In 2017, Equatorial Guinea reached an agreement with UAE company Arabian Energy for the development of the 1.2 million-cubic-meters terminal.
2017 started a transformation in Equatorial Guinea’s oil and gas industry that is far from over. A country that has found economic prosperity in the export of crude oil is now using its oil and gas re- sources to expand its energy sector and grow its economy beyond energy. It is making use of all its resources and adding value to its output, both for exports and domestic use, all the while building its international standing across Africa and the world.