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Equatorial Guinea throws down the gauntlet

The west African state’s hopes of restoring oil output rest on the reception given to its 2019 licensing round

Equatorial Guinea's drive to revive stalling oil and gas production will get into full swing with the formal launch in early April of a licensing round that the country desperately needs to succeed if the sector is to have a bright future.

The launch of the 2019 round, delayed from January, is due to take place at an oil and gas conference in Malabo, which starts on 2 April. The bid window is expected to close in late 2019. Equatorial Guinea is also set to launch a mining licensing round in April.

More than 20 offshore exploration blocks are on offer, mainly in the Rio Muni and Douala basins. They include relinquished acreage, as well as two blocks with established reserves for appraisal and development.

Bidders will need to show willingness to develop any finds rapidly. Energy minister Gabriel Obiang Lima has adopted a tough line with existing acreage holders that have failed to develop commercial finds quickly enough.

UK-based Ophir Energy lost the rights to develop Block R in January, after its Fortuna floating LNG project to exploit gas reserves failed to find sufficient funding to progress after years of gestation. The acreage has been redesignated as Block 27 and is one of the two appraisal and development blocks included in the licensing round. It is likely to be awarded to a bidder that can show it has a cast-iron development plan, Obiang Lima has said.

Noble pause

Ophir-subject to a takeover bid by Indonesia's Medco-may not be the last licence holder to risk ejection. Obiang Lima has been putting pressure on US independent Noble Energy to make a final investment decision (FID) on its redevelopment of the Alen gas field on blocks O and I. The field is to supply gas to the Equatorial Guinea LNG export plant and a liquefied petroleum gas (LPG) facility at Punta Europa near Malabo airport on Bioko island.

Noble signed a heads of agreement with the government in May 2018 to modify existing infrastructure on the gas and condensates field and build a 65km (40-mile) pipeline to Punta Europa.

However, progress has been too slow for the energy ministry's liking. The government is keen to secure fresh feedstock fast for the 3.7mn t/yr ELNG plant to compensate for projected production declines from the Alba field, which currently supplies it. Both the plant and the Alba field are operated by US independent Marathon.

Obiang Lima indicated in February that Noble could lose the redevelopment project if it had not taken FID on it by April. For its part, Noble said in a mid-February trading guidance statement only that it "expects to sanction the Alen gas monetisation project… in the first half of 2019, with first gas sales estimated for the first half of 2021".

Gas produced at the Alen field since start-up in 2013 has been reinjected to enhance liquids recovery. Noble, which has a 45pc stake in the field development, estimates the field "monetisation" project can recover an incremental 600bn ft3 of gross natural gas equivalent resources.

Lofty ambitions

Obiang Lima-son of long-time president Teodoro Obiang Nguema-has been forthright about the country's ambitions to boost oil production beyond peaks reached more than a decade ago and to boost government revenues from the sector.

Equatorial Guinea is the smallest Opec member in terms of production, with current output of some 130,000 bl/d-only around a third of the level reached in 2005. Without reserve replenishment, production is likely to head down still further as existing fields mature.

The energy minister has talked of boosting production to 500,000 bl/d in the early-to-mid-2020s. That would require major new discoveries and their rapid development-and for that to happen the 2019 licensing round needs to be a roaring success.

Offshore blocks and production areas Source: Petroleum Economist
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