Future co-operationOctober 21, 2016
TOGY talks to Estela Nse Mansogo, director at Centurion Law Group, about the impact of low oil and gas prices on the short and long-term trajectories of Equatorial Guinea, particularly as they pertain to the development of infrastructure and pan-African co-operation. Centurion Law Group is the foremost provider of legal services to international investors in Equatorial Guinea.
What has been the impact of low oil and gas prices on the Equatoguinean energy industry and its composition?
Low oil and gas prices have greatly affected mergers and acquisition projects. Most companies that are in their last exploration phase need to make a decision whether to drill a prospect well or not. They find it difficult to bring partners and financial support to develop their blocks. In this difficult environment, companies have decided either to request an exploration extension or to quit their blocks.
Most oil and gas companies have instead reduced operational costs by reducing their workforce in the hope that oil prices will increase next year or by the end of 2016. Exploration activities in Equatorial Guinea have reduced due to financing difficulties.
These are difficult times for our firm as well. However, we continue to believe Equatorial Guinea’s best days are ahead of us. We have invested more than any law firm in the region on improving the skills of our lawyers in the USA, South Africa and Europe. We continue to be the number-one choice of international investors in the region looking for legal services.
Are there any new or upcoming regulations impacting energy companies operating in Equatorial Guinea?
The government is working on legislation to regulate the power sector. The government’s action plan 2020, Horizon 2020, [aims] to provide the country with the most essential means and conditions for its people, and to determine the sustainability and development of a modern country. Since the development of a modern society is measured partially by the means of production, transport and electrical power supply levels, the adoption of a legal framework regulating this important utility will be the basis for this upcoming regulation. The government understands it is of utmost importance to provide people with efficient and reliable electricity.
How do you see the plans for downstream diversification being impacted by the drop in oil and gas prices?
The government is well aware that oil prices are always fluctuating. For that reason, under the third phase of Horizon 2020, the government is emphasising agriculture and industrialisation among the local population, in addition to focusing on the development of petrochemicals plants, ports and manufacturing, and transformation of industry in the country. With the drop in the oil prices, a lot is being invested in agriculture, such as the project for the construction of a tuna-processing plant in Annobón. The government knows it must diversify its sources of revenue, and have created a ministry that will be in charge of SMEs [small- and medium sized enterprises] in the country.
How should the government approach the current financial situation and encourage foreign investment?
The government has no difficulty making payments for past and current projects. Moreover, it has put in place a mechanism that will fasten, monitor and approve payments for past and current projects. With this payment commission, the government intends to bring more transparency and efficiency to the payment process.
How has the achievement of Horizon 2020 goals been impacted by the drop in oil and gas prices?
Of course, the low oil prices make it difficult to achieve some goals of Horizon 2020. Taking into consideration that this is an oil-dependent country, the drop in the oil prices, will subsequently reduce government revenue into the treasury. Thankfully, the government has already invested in basic infrastructure, such as roads, electricity and water.
How has Horizon 2020 promoted additional investments in the country?
Horizon 2020 has considerably promoted investment in Equatorial Guinea through media, international expositions and investment forums, national and international. The plan has identified the most important areas in which the government is willing to invest, promote and develop. This will enable investor to assess the need of the country without needing to come and conduct feasibility studies.
How do you assess the local banking sector’s ability to provide project financing, especially after the government announced it will no longer provide such funding itself?
Previously, most national banks were not participating in the oil and gas activities in EG. However, there are some banks that have begun to show interest in some energy projects such as the National Bank of Equatorial Guinea (BANGE), which has been actively participating in some important oil and gas events such as the African Oil and Gas week in Cape Town and participating in various downstream project meetings such as the BOT (Bioko Oil Terminals). This evidences the awareness and value national banks are beginning give to the oil and gas industry in EG.
How do you see international investors, especially pan-African investors, participating in downstream diversification?
Equatorial Guinea is giving priority to the South-South co-operation. A lot of African companies are beginning to invest in Equatoguinean projects such as the BOT [Bioko Oil Terminal]. African companies and subregional companies are beginning to show interest in EG by participating into projects such as the REPEGE and BOT projects.
What makes Equatorial Guinea an attractive place for investment in the region, and what are investors’ main concerns?
Equatorial Guinea is politically stable with well-established judicial organs and a favourable geographical location within the region. With its oil revenue, Equatorial Guinea has invested in infrastructure, which should attract investors in the country. These factors attract a lot of investors because most of the basic utilities have been put in place.
How will regional and pan-African co-operation provide stability to the Equatoguinean market?
Regional and pan-African co-operation bring more stability and assurance to the market. Equatorial Guinea is part of the CEMAC (Central African Economic and Monetary Community), and there is a free market between all member countries. An investor who has established his manufacturing, transformation or production industry in Equatorial Guinea can easily sell his product within member countries without further formalities. This makes it attractive to market-driven investors. They do not have to worry about who will consume their product.
A regional co-operation will most likely improve trade within the region, providing a landscape for exports of local products as well as cheapening the prices of imports into Equatorial Guinea. A regional and pan-African co-operation could improve the trade balance, thus providing a better economic framework to all Equatoguineans.
What needs to be done to improve regional and pan-African cooperation?
Political stability and safety are key to international co-operation. Leaders must have a unique political will for a better and more prosperous Africa, personal egos aside. Linking countries by road, sea and air will improve regional and pan-African co-operation and intra-African movement.
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