Use it or lose it, Equatorial Guinea tells drillers
The West African state wants to see more activity from oil firms now the oil price has recovered, and is launching a new bid round
Equatorial Guinea has issued a stark warning to its oil and gas operators to either kick-start drilling in 2019 or "move aside", as the country ramps up efforts to stem declining oil production from maturing fields.
Gabriel Mbaga Obiang Lima, the country's Minister of Mines and Hydrocarbons, said operators, which include ExxonMobil, Noble Energy, Kosmos Energy and Marathon Oil, had no excuse for delaying drilling programmes in the new era of higher oil prices.
"2019 is an investment year," he said at September's Africa Oil and Power conference in Cape Town. "We will be very clear with the companies: if you invest, you can keep working in Equatorial Guinea. But if you are not going to invest, we will look for an alternative, so that we can bring [in] the company which is willing to make that investment. For us to be sitting there and doing nothing is not an option."
Obiang Lima said he was seeking a minimum of $2bn in investment in the country's hydrocarbons industry from the international oil companies.
"If a company comes to me and tells me they want to drill five wells next year, I will sign the contract tomorrow… If you want to be in Equatorial Guinea, you drill," he said.
The country is also launching a new bid round in January for blocks in ultra-deep water and onshore areas in January. Some of the blocks would include areas relinquished by existing operators, he said on the conference sidelines.
With production declining largely due to the ageing of existing fields, Equatorial Guinea, an Opec member since 2017, and the cartel's smallest producer, is keen to attract players to develop new plays.
Equatorial Guinea currently produces around 120,000 barrels a day of crude, according to Obiang Lima. In March, the International Energy Agency said it expected crude output to drop to 110,00 b/d by 2024, compared to a peak of over 300,000 b/d in the early years of this millennium. The country currently produces some 300,000 barrels of oil equivalent of crude, condensates and natural gas.
Ophir is currently developing the Fortuna floating liquefied natural gas project in Block R, but is under pressure from the energy ministry to reach a final investment decision fast, as it has already taken longer than expected to do so.
Obiang Lima stopped short of saying that the ministry could take over the license or hand it to another company should London-based Ophir fail to present a plan before the license expires at the end of the year; but the inference is clear. "The licence expires at the end of the year," he said. "The FID has to be done."
The project ran into funding troubles last year, which culminated in May 2018, when oil services firm Schlumberger said it was pulling out of its OneLNG venture with Golar LNG to help develop Fortuna, mainly due to financing difficulties.
Source: Petroleum Economist
In July, Ophir said it was in "active discussions" to secure a partner to replace Schlumberger and that the "status of the financing and timing of FID will become clear in the coming months". It also said that the carrying value of the Block R licence-$604m, as of end-2017-may need to be "reassessed".
Equatorial Guinea is keen to reduce its dependence on oil production, which accounts for 78% of GDP, and wants to diversify into gas as an alternative income stream. Obiang Lima has said gas production could become more important than oil, and in May outlined plans to develop a gas "mega-hub".
Equatorial Guinea's current LNG plant near the capital, Malabo on Bioko Island, is operated by Marathon Oil and has a capacity of 3.4m tonnes a year. But it's reliant on declining supply from the Alba gasfield, where production is expected to fall steeply within the next two years.
The idea of the gas hub is to replace Alba gas with supply from reserves once considered stranded, such as those targeted by the Fortuna project, and also by drawing in supply from other countries in the region.