Uneasiness in Equatorial Guinea over government spending
Production is rising again, promising oil and gas discoveries are being made and new licences have been awarded - but many are uneasy about the way the government spends its revenue
Equatorial Guinea presents challenges for the oil companies' corporate social responsibility programmes. While Marathon, with the largest portfolio of assets in the country, supports malaria control on Bioko island, and Hess, a large operator, has set-up model schools, the ruling family is frequently in the world's press, accused of lavish spending on overseas properties, aircraft and cars.
According to World Bank data, Equatorial Guinea's 700,000 population have per capita wealth approaching European levels - but in reality most are desperately poor, with inadequate health and education provision. The country's wealth is tightly controlled by the president, Teodoro Obiang Nguema, and his family, and political dissent is not allowed.
Meanwhile, the oil companies say it is not their role to criticise how the government spends its revenue - many would criticise them if they did - and they argue that their business dealings can provide an example of fair-play. Disinvestment would simply hand valuable assets over to others, probably with local interests increasing their share.
However, it might be significant that major companies have not taken territory in the latest round of licensing. In April, the government finalised the award of eight production-sharing contracts, only two of which went to well-known firms - US company Murphy and commodity trader Glencore. Murphy signed to operate Block W, offshore from Rio Muni (the African mainland part of Equatorial Guinea), its partners being PanAtlantic (formerly Vanco) and the state oil company, GEPetrol. Glencore signed for Block EG-05, south of Bioko island, where it is joined by Pioneer Brass (understood to be a trading company) and GEPetrol.
Of the other awards, China's little-known Xuan Energy is to operate Block Y, offshore from Rio Muni and extending north from the Okume producing field. Participants are US company Brenham, Strategic Oil and Gas Resources (registered in the British Virgin islands), Royalgate Energy (a subsidiary of Nigeria's Atlantic Energy) and GEPetrol.
Royalgate is also to be the operator of the highly-promising Block Z, which lies immediately south of the Marathon-operated licence holding the Alba field - although neither the company nor its parent, Atlantic Energy, has experience of operating an exploration area. Royalgate will be joined in the licence only by GEPetrol.
Another area off Rio Muni, Block EG-01, extending south from the Okume field, was awarded to G3 Oleo e Gas - possibly connected to 3G Holding, which groups Union Fenosa Gas, Galp Energia, the state's Sonagas and the energy ministry, and was set up to advise the government on gas utilisation. The company will hold the licence with just GEPetrol as a participant.
South of Bioko island, PanAtlantic will operate Block EG-02, where it will be joined by Novamark, a trading company, US-based Atlas Petroleum, and GEPetrol. Two onshore areas covering the entire coastal belt of Rio Muni, EG-03 and EG-04, will be held by Elegance Power, understood to be a Chinese trading company with no known exploration experience, in partnership with GEPetrol.
The energy ministry said it will continue with its "aggressive" licensing policy, and has plans to award licences covering Blocks F-13 and G-13, I-13 and I-14, and I-15 and I-16 later this year. It says it will shoot 3-D seismic over the areas first.
Equatorial Guinea's deeper-water areas are very lightly explored, with few recorded wells west of the Ceiba field, off Rio Muni, or south of Bioko. Existing seismic data is concentrated on the coastal Rio Muni area and around Bioko, although deep-water areas were surveyed in 2-D by Schlumberger's WesternGeco in 1998.
Prospects are rated highly, though, on the evidence of discoveries made when explorers move into new areas. Most recently, US company Noble Energy has opened up a new area to the east of Bioko, in Equatorial Guinea's part of the Douala basin. The first field there, Aseng, started flowing in November 2011 and ran at its expected 60,000 barrels a day (b/d) last year, lifting the country's production to over 300,000 b/d (see Table 1). The second field, Alen, is due to start-up in this year's third quarter and should flow up to 40,000 b/d.
Noble sees Aseng and Alen as a hub for an eventual complex of fields, which might even include a field lying in Cameroon waters. Aseng lies at a water-depth of 945 metres and was developed with a floating production, storage and offloading (FPSO) vessel but Alen, although only 24 km to the north of it, lies under only 73 metres of water. Accordingly, Alen is to have a fixed processing platform and a bridge-linked wellhead platform, with liquids piped to the Aseng FPSO.
While Aseng holds oil and gas, Alen is a liquids-rich gas-condensate field. Both fields will be produced initially with their gas reinjected for pressure-maintenance. Later, gas could be landed to Bioko for utilisation.
Aseng lies in Block I, where interests are Noble, 38.0%, Atlas, 27.55%, Glencore, 23.75%, PA Resources, 5.7% and GEPetrol with 5.0%. Most of Alen is in Block O, where Noble has 45.0% and is joined by GEPetrol with 30.0% and Glencore with 25.0% - but the field extends into the northern part of Block I and has been unitised, giving Noble 44.65%, GEPetrol, 28.75%, Glencore, 24.93%, Atlas 1.38% and PA Resources, 0.29%.
Of Noble's other development prospects, the soonest to reach production is expected to be Carla North, a mainly-oil field which lies below the Alen reservoir. Noble has carried out appraisal drilling at Carla North and says it is close to submitting a development plan, targeting first oil in 2016 and a 30,000 b/d flow-rate. But in April the firm was drilling the first well in the adjacent Carla South structure, using the Atwood Hunter semi-submersible, so a success could enlarge the plan.
Also seeing work is the Diega field, immediately east of Alen and Carla South, where five wells have found oil, condensate and gas. Another appraisal well is likely to be drilled in this year's fourth quarter. There are other drilling prospects in Blocks O and I, and, when gas-landing infrastructure is available, the YoYo gasfield in adjacent Cameroon waters is likely to see drilling. Noble is the operator of the YoYo licence with 50%, joined by Petronas and the state's SNH.
In the Rio Muni basin, just off the coast of Rio Muni, Hess operates the Ceiba field and the multi-field Okume complex, which together flowed just under 80,000 b/d last year. Ceiba lies in deep water, extending from 600 to 900 metres, so the field produces through subsea wells to an FPSO. At the Okume complex, the Okume, Oveng and Ebano fields, at up to 500 metres water-depth, produce through two tension-leg platforms, but the Elon field lies in shallow water and has a fixed processing platform and three wellhead platforms. Akom North is a subsea tie-in. Crude from all five fields flows through the Elon processing platform and is then piped to the FPSO at Ceiba.
Ceiba and the Okume complex have been challenging producers, their reservoirs needing high rates of water-injection to maintain pressure, yet output has continued to slide. Hess has implemented projects for water-alternating-gas injection and gas-lift at the Okume complex, and has experimented with nano-technology to sweep more oil to the production wells. A drilling programme through last year and this covers recompletion of existing wells and drilling new ones, including a number from the tension-leg platforms.
Equatorial Guinea's largest oil producer, and the source of the surge in its oil wealth in the late-1990s, is the Zafiro field, held by ExxonMobil with 71.25% and GEPetrol with 28.75%. Lying northwest of Bioko in water 120-850 metres deep, Zafiro is a substantial development - facilities include a floating production unit, a floating storage vessel, a fixed platform and, on the southern part of the field, an FPSO. There are 117 wells, with 92 producers, 24 water-injectors and one gas-injector.
Zafiro's production built up to a peak of 278,000 b/d in 2004 and then declined, slipping to 109,000 b/d last year according to the energy ministry. It is said that the decline is not entirely a matter of geology: Zafiro lies adjacent to the border with Nigerian waters, and Nigeria claims the field extends into its territory. With the dispute still unresolved, the northwestern flank of the field has not been fully drilled. There has also been a dispute over the utilisation of Zafiro's gas - it is flared at present, but the energy ministry wants it landed to Bioko.
Just northeast of Zafiro is the Marathon-operated Alba gas and condensate field, source of gas for the liquefied natural gas (LNG) plant at Punta Europa, on the northern tip of Bioko. Although brought on stream as a minor condensate field, Alba has grown into a large development - there are four platforms, standing in 80 metres of water, with gas and condensate separated offshore and gas landed through a 30-km pipeline. In April, Marathon placed an order with Heerema for a new compression platform, due to start-up in mid-2016.
Alba interests are Marathon, 63.3%, Noble, 33.7% and GEPetrol, 3.0%.
The LNG facility - owned by EGLNG, made up of Marathon, 60.0%, Sonagas, 25.0%, Mitsui, 8.5% and Marubeni, 6.5% - is a 3.7 million tonnes a year (t/y) single train, completed in mid-2007, and supplying all its LNG to the UK's BG for the first 17 years. Up to 70,000 b/d of condensates and natural gas liquids is extracted from Alba's gas, and dry gas is also used as feedstock for a methanol facility. Atlantic Methanol Production - Marathon, 45%, Noble 45% and Sonagas, 10% - has a capacity of 1m t/y at Punta Europa.
Marathon says EGLNG and the methanol plant both benefit from particularly low costs. EGLNG is claimed to have had the fastest project-cycle of any LNG scheme, of four years from pre-contract agreements to start-up, and it came in under-budget at $1.4 billion. The methanol facility benefits from scale, its capacity representing 2% of the world market.
Accordingly, Marathon is keen to construct a second LNG train, and recently added another licence to its holdings in the Alba area in the hope of finding the necessary gas. The company has also, with the government, been exploring the idea of bringing-in gas from neighbouring countries- discoveries - there are a number, closer to Punta Europa than their national coasts - although a cross-border LNG scheme would carry considerable commercial and political risks.
But, following discoveries last year by UK-based Ophir Energy, cross-border gas might not be needed. The company made finds with three successive wells in its Block R, in the western part of the offshore, and earlier this year estimated that the block holds over 74bn cubic metres (cm) of gas in a total of seven discoveries. The main field is the Fortuna complex, lying 140 km southwest of Punta Europa in about 1,800 metres of water, where three wells in pressure-communication have shown 101 metres of gas column.
Ophir said in April that its preferred commercialisation for the gas is a dedicated new LNG train at Punta Europa, an arrangement giving fewer stakeholders than joining with the EGLNG partners and allowing "more control of the pace by Ophir". But the company - it describes its activity as "pure-play deep-water African exploration" - recognises it will need to form a joint-venture with an LNG specialist for the development. As an alternative to landing the gas at Punta Europa, it is considering a floating LNG scheme.
Meanwhile, Ophir plans to acquire a farm-in partner this year for Block R, which it holds in an 80:20 venture with GEPetrol. After the farm-in, up to six wells will be drilled in the block this year and next.