Economy of Equatorial Guinea - Energy Developments

Energy Developments

After a slow start, Equatorial Guinea has recently emerged as a major oil producer in the Gulf of Guinea, one of the most promising hydrocarbon regions in the world. The main oil fields, Zafiro and Alba, are both located offshore of Bioko island. In 1999 oil production was about five times its 1996 level; Zafiro Field, operated by Exxon Mobil and Ocean Energy, produced about 100,000 barrels per day (16,000 m3/d), and CMS Nomeco extracted approximately 6,700 barrels per day (1,070 m3/d). Aggressive field development and promising exploration activities may raise production to nearly 300,000 barrels per day (48,000 m3/d) within 2–3 years (slightly above the current estimated production of Gabon) according to the official sources.

In 1995 Mobil (now Exxon Mobil) discovered the large Zafirobbbb field, with estimated reserves of 400,000,000 barrels (64,000,000 m3). Production began in 1996. The company announced a 3-year U.S.$1bn rapid development program to boost output to 130,000 barrels per day (21,000 m3/d) by early 2001. Progress was delayed due to a contractual dispute with the government and by unexpectedly difficult geology. The difference with the government was eventually resolved.

In 1998 a more liberal regulatory and profit-sharing arrangement for hydrocarbon exploration and production activities was introduced. It revised and updated the production-sharing contract, which, until then, had favoured Western operators heavily. As a result domestic oil receipt rose from 13% to 20% of oil export revenue. However, the government's share remains relatively poor by international standards.

In 1997 CMS Nomeco moved to expand its operation with a U.S.$300m methanol plant. The plant entered production in 2000 and help boost natural gas condensate output from Alba field.

In August 1999 the government closed bidding on a new petroleum licensing round for 53 unexplored deepwater blocks and seven shallow water blocks. The response was small due to combination of factors, including falling oil prices, restructuring within the oil industry, and uncertainty over and undemarcated maritime border with Nigeria (which was not resolved until 2000).

In late 1999 Triton Energy, a U.S. independent, discovered La Ceiba in block G in an entirely new area offshore the mainland of the country. Triton expects a U.S.$200m development program to enable La Ceiba and associated fields to produce 100,000 barrels per day (16,000 m3/d) by late 2001, despite disappointments and technical problems at the beginning of the year.

With an upturn in oil prices, exploration intensified in 2000. In April 2000 U.S.-based Vanco Energy signed a production-sharing contract for the offshore block of Corisco Deep. In May 2000, Chevron was granted block L, offshore Rio Muni, and a further three production-sharing contracts (for blocks J, I, and H) were signed with Atlas Petroleum, a Nigerian company.

In early 2001 the government announced plans to establish a national oil company, to allow Equatorial Guinea to take a greater stake in the sector and to facilitate the more rapid transfer of skills. However, critics fear that such a company may become a vehicle for opaque accounting and inertia of the sort that has hindered development in neighbouring countries including Angola, Cameroon, and Nigeria.

Since 2001 the government has created GEPetrol, a national oil company; and Sonagas, a national natural gas company. The company EG LNG has been created to construct and operate the Bioko Island LNG plant and terminal.