Equatorial Guinea courts $1bn to diversify energy sector

Equatorial Guinea’s energy ministry pitched a round of oil and gas projects to investors in Malabo on Wednesday. Ten projects, which will be open to investors next year, are part of the OPEC country’s efforts to diversify its oil industry and lay the foundations for in-country processing and manufacturing.

Equatorial Guinea’s mines and hydrocarbons minister, Gabriel Obiang Lima, called for investment in the construction of three in-country oil refineries, tanks for storing and refining gas and LNG, a urea processing plant and the expansion of an LNG project.

Two of the three refineries will have a combined capacity of 30,000-40,000 bpd, and will refine crude from the Zafiro and Aseng fields into gasoline, kerosene, and other petroleum derivatives. A third refinery in Kogo will refine gold mined from Equatorial Guinea and the wider Central African region.

The new refineries will help sub-Saharan Africa’s third-largest oil producer  refine and process petroleum products in-country for domestic use, says NJ Ayuk, the executive chairman of the African Energy Chamber.

“Currently, the majority of petroleum products in the country are imported. Having a new refinery puts Equatorial Guinea in a prime position for energy self-sufficiency. In addition there is a regional market that will play to its favour given the geological position the country finds itself.”

A final project calls for investors to develop the country’s compressed natural gas (CNG) plant, with grand plans for a bus terminal, gas-powered bus fleet, cooking gas bottling facility and upgraded road infrastructure.

In partnership with French Total and state-owned GEPetrol, the energy ministry hopes to position the country as the first in the region to use CNG for transport, the energy ministry said in a statement.

The plans build on the country’s efforts to diversify its economy away from crude exports that currently provide 90% of foreign revenues, but are predicted by the World Bank to decline by over 3% in 2019.

“Equatorial Guinea’s economy needs to export more of something other than oil, which starts with developing the manufacturing sector and a supply side”, Ayuk says.

“If we do not see a long term rebound in oil prices, foreign exchange earnings from the sale of oil will remain relatively constant for Equatorial Guinea.”

The initiative is also part of concerted efforts to revive stalling oil and gas production in ageing fields, says Ayuk.

“There has been a well-crafted policy to drive up production in both oil and natural gas especially in fields that faced a natural decline. This has included restructuring the energy sector, new competitive bid rounds and support of new investment in producing fields and areas under exploration, like deepwater acreage, that has led to discoveries that once sanctioned will see an increase in the countries daily output.”

Despite ranking 172 out of 180 countries in Transparency International’s 2018 corruption index, the government of Equatorial Guinea has attracted international oil companies. While reputational risk is a key consideration for oil majors operating in the country, it has not stopped ExxonMobil, Marathon, Noble, Glencore, Hess, Devon, Gazprom, Luckoil and Vanco from exploring and in some cases discovering and exploiting oil in the country.

President Teodoro Obiang Nguema, is the world’s longest-serving leader who has ruled over the country’s 1.3 million population since 1979, after deposing his uncle.

The country is not a member of the Extractive Industries Transparency Initiative, an international initiative to fight corruption in managing revenues from oil, gas and mineral extraction, and transparency issues continue to be a concern, says Ayuk.