Malabo's dash for gas in Equatorial Guinea
Equatorial Guinea has secured fresh supply for its LNG plant, but can it build on that success?
Gabriel Mbaga Obiang Lima is a big fan of natural gas. Equatorial Guinea's energy minister spends large chunks of his year travelling around the world proselytising on the potential of the West African producer—the smallest Opec member by crude output—to become a major gas export hub.
He says he is taking his cue from Middle Eastern oil producers now focusing on gas as the fossil fuel of the future. But he is also well aware of the need to replace Equatorial Guinea's declining oil output from maturing fields with export earnings from new volumes.
Crude output is running at around 113,000bl/d in 2019, compared to 120,000bl/d in 2018, according to the minister. He puts a positive spin on that, saying that the decline could have been worse—possibly down to as low as 100,000bl/d—had it not been for efforts by UK independent Trident Energy, ExxonMobil and others to boost output from existing producing fields.
"There has been some drop off in crude, which was expected. But we have also been able to reduce the percentage of the decline," he told Petroleum Economist in an interview at June's Africa Oil and Power Forum in London.
Trident says it has increased output from the Ceiba and Okume complex, off the south cost of the country's mainland, by around a quarter from an initial 42,000bl/d when it took over their operatorship from US independent Hess in late 2017. The company says it expects further gains due to the use of electric submersible pumps to enhance production, followed by infill drilling. Trident, which is backed by private equity firm Warburg Pincus, teamed up with US independent Kosmos Energy to buy three Equatorial Guinea exploration licences in 2017, as well as taking over Ceiba and Okume.
There has also been positive news on the gas side, with another US independent, Noble Energy, reaching an agreement with the government to feed gas from the Alen condensates field to the Alba processing plant at the Punta Europa industrial complex near the capital Malabo on Bioko Island. The gas is currently being reinjected.
The plant, operated by US independent Marathon, is set to run short of gas feedstock, as output from Marathon's 5.2tn ft³ Alba gasfield declines, prompting Obiang Lima to threaten to take the Alen project away from Noble earlier this year if it did not take a rapid final investment decision.
An agreement was duly reached in April, paving the way for the construction of a 70km-long pipeline to the plant, capable of handling 950mn ft³/d, the details of which are expected to be finalised later this year. Noble has estimated the project could recover an incremental 600bn ft³ of gross natural gas equivalent resources. First gas is expected in 2021.
Once processed to extract liquids, the dry gas will go to the nearby EG LNG plant. Obiang Lima says this will help ensure the LNG facility, in which Marathon is also the largest shareholder, would be able to maintain exports close to its 3.4mn t/yr capacity over the next five years, even as output from the Alba field declines.
Further gas could come from the ExxonMobil-operated Zafiro field, which accounts for most of Equatorial Guinea's oil production. Much of the associated gas from the field, which is located to the west of Bioko Island, is currently flared, making it an obvious source of feedstock for Punta Europa. Equatorial Guinea is also promoting turning Zafiro into a hub into which to feed gas from surrounding fields for pipeline transfer to Punta Europa.
However, progress there will probably need to wait until the government and ExxonMobil resolve discussions over the terms of future development of the field, with a number of companies reportedly interested in buying the asset should ExxonMobil want to sell.
The need for more oil and gas discoveries if Equatorial Guinea is to become a regional hub in the longer term has prompted a flurry of licensing round activity. In April, the country launched its 2019 licensing round including 25 exploration blocks, as well as two blocks where gas discoveries have already been made for appraisal and development.
The latter two include the former Block R—now EG27—where UK independent Ophir Energy had planned to use a floating LNG (FLNG) facility to develop gas exports, but ran into funding difficulties. Ophir had its license revoked in January, and has since been taken over by Indonesia's Medco. The other development block is EG23 is adjacent to the Alba field and includes parts of the former Block D, which was relinquished by Marathon.
Whoever replaces Ophir on EG27 may be advised not to resurrect the idea of an FLNG project. "Personally, I'm not happy with [FLNG]. I am looking more to bring the resources by pipeline to Punta Europa, rather than floating LNG," Obiang Lima says. Any gas from Block 23 could also go to Bioko Island via the existing Alba field pipeline infrastructure.
Obiang Lima says 14 companies had applied for pre-qualification for EG27 and EG23. That process closes in early July and bids will then be invited for both those blocks and the exploration blocks—which do not require a pre-qualification process—by late September. Block winners for the exploration acreage are scheduled to be announced in November.
However, Obiang Lima says extra time is likely to be needed to evaluate the appraisal/development blocks, especially EG27, where the minister is keen to get in an operator who has the resources to carry through the development rapidly.
"I do not see us deciding on EG27 by November, it would probably be first quarter of next year," he says.
The drive for offshore investment does not end with the 2019 round. Another is planned for 2020 with a focus on deepwater acreage and Equatorial Guinea is not just after the familiar faces of the western oil sector to bid. Obiang Lima is heading for Beijing in July to try to woo companies to both the country's mining and hydrocarbons opportunities. He says Chinese companies had already expressed interest in next year's round.
Regional hub aspirations
It remains to be seen how easy it will be to attract investment for potentially costly deepwater projects. But Equatorial Guinea hopes it may also be able tap the potential of "stranded" gas reserves in neighbouring countries, as part of its regional gas hub push. Obiang Lima hopes to persuade them to send their gas to Punta Europa, rather than needing investment in expensive stand-alone export infrastructure.
Source: Petroleum Economist
Talks with Cameroon, São Tomé and Príncipe and Nigeria continue over possible development of gas reserves close to Equatorial Guinea that could remain stranded and undeveloped, if they are not piped to Punta Europa. Equatorial Guinea is open to collaboration with its neighbours to finance early stage exploration to help open up these areas to drillers, says the minister.
Perhaps the best bet for cross-border cooperation is the development of gas reserves that straddle the maritime border between Equatorial Guinea and Cameroon in the Yoyo-Yolanda gas condensate field, which is operated by Noble on both sides of the divide.
A memorandum of understanding was signed between the countries over a possible development in July 2007, but progress since then has been slow.
With the future of the Punta Europa gas facilities seemingly assured for the next few years, Obiang Lima is hopeful a deal can be reached to develop a jointly run unitisation development. He is keen for Cameroon to act quickly, in order to keep development costs down by using rigs, seismic and other oilfield services equipment already in, or heading for, Equatorial Guinea.
"Some of the critical decisions need to be done in months," he says. Equatorial Guinea also proposes that 40,000bl/d of liquids separated from the Alen field gas at Punta Europa could go to Cameroon's Limbe refinery, as part of any agreement to take gas from Cameroonian projects.