Equatorial Guinea’s energy outlook

Equatorial Guinea

Equatorial Guinea’s offshore hydrocarbons industry has been developing continually, with five new blocks expected to be awarded by the end of 2015. Minister of Mines, Industry and Energy Gabriel Mbaga Obiang Lima speaks to TOGY about what has been done and what will be done to ensure the reinvention of the country in the offshore and downstream sectors.

What does Equatorial Guinea hope to achieve through the construction of downstream projects such as the integrated petrochemicals complex in Riaba and the Bioko Oil Terminal?
The Ministry of Mines, Industry and Energy (MMIE) has a long-term vision of transforming Equatorial Guinea into an energy centre. Both the Bioko Oil Terminal and the integrated petrochemicals complex serve this vision.
Equatorial Guinea has a keen interest in developing its oil and gas industry, establishing itself firmly as a power in West and Central Africa and gaining access to global oil trading flows by investing in assets.
The infrastructure in West Africa is not developed enough to address the growing demand for oil and petrochemicals. Through these two new investments, we will be well positioned to accommodate the required logistics efficiently.

How will these investments serve the supply and trade sectors in not only Equatorial Guinea, but West Africa as a whole?
These assets will serve global trade flows and regional demand centres. They will be only a few hours in sailing time away from key demand centres. Customers can use shipment services from Equatorial Guinea to serve those markets.
Bilateral agreements between West African countries and Equatorial Guinea can address inefficiencies in key supply routes while promoting the security of supply.
These investments in infrastructure will have a direct positive impact on national economy and employment, including the creation of jobs and demand for our own construction services. During construction and operation, we will attract technology and expertise from abroad that will be passed on to our own people, as well as recruit and train a large number of our nationals.

How can the MMIE ensure sufficient funding for downstream projects?
The MMIE has to present upcoming downstream projects to international capital communities, to the energy partners that hold a vision of Equatorial Guinea as a regional energy centre and to the banking sector, to attract funds.
In the existing economic environment, where crude prices have fallen by almost 50 percent since summer 2014, funds will go to projects with clear location, supply and logistics advantages. We believe that the Bioko Oil Terminal and the integrated petrochemicals complex have these characteristics.

What role will natural gas play in the Equatoguinean development plan?
The MMIE plans to monetise and increase the added value of domestic natural gas projects. The government is creating and integrating petrochemicals complexes to diversify the national economy and eradicate its dependence on oil. Equatorial Guinea will co-operate with all the oil-producing countries in the Gulf of Guinea to develop gasfields. The creation of a regional gas entity will boost co-operation.
The open-bid blocks of the 2014 licensing round have not been tendered. How can the MMIE increase their attractiveness, particularly for the deepwater blocks?
The terms used in the negotiation of shallow-water blocks should not be the same as for deepwater blocks. The bonus paid by exploration and production companies should be reduced from $1 million-2 million to $500,000, which would help accelerate their work programmes.
The cost of mandated corporate social responsibility, as well as the contributions to the National Technological Institute of Hydrocarbons of Equatorial Guinea, should be cut by 50 percent, while the payment schedules for royalties and the division of hydrocarbons should be flexible for deepwater blocks.
These measures are necessary to attract new actors and investors that will bring economic benefits for the development of the country.

Why has Equatorial Guinea’s government promoted the migration of oil companies from the K5 Oil Centre to the Luba Freeport?
Hydrocarbons companies that left K5 by government mandate to move to the Luba Freeport will benefit from the free port status in place at Luba. In the same regard, they will support the government in the development of the local population of South Bioko by providing oil and gas industrial infrastructure in the city of Luba.

How can local content in the domestic oil and gas industry be strengthened?
In September 2014, a new local content regulation that applies to Chapter 10 of the Hydrocarbons Law of Equatorial Guinea was adopted. The first step in ensuring the successful application of this law is to inform domestic and international companies about the articles and clauses that are in place, so that later, the ministry can demand abidance.
The new regulation does not differentiate between companies that are 100-percent Equatoguinean from those that have a share of 35 percent, the minimum required.
The ultimate objective is for domestic companies to win contracts in the hydrocarbons industry, generate jobs for locals, with the corresponding payment of taxes to the Treasury. We live in a globalised world in which any input from international businesses in terms of know-how is useful for updating productive or management processes.

What is the logic behind the establishment of industrial complexes in Equatorial Guinea, such as the Mbini Industrial City?
The plans for the industrialisation of the country are part of its social and economic development. Equatorial Guinea’s private sector is one of the engines of the economy.
Supported by the private sector, we are aiming to create mixed companies between the government and economic and technological private partners, to encourage the establishment of small and medium-sized enterprises, to promote the exports of locally manufactured goods and to reinforce important areas of the domestic industrial sector.
With these objectives in mind, the MMIE arrived at a decision to establish the Industrial City and Special Economic Zone of Mbini.

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