Equatorial Guinea - Oil
Equatorial Guinea is the third-largest producer of crude oil in Sub-Saharan Africa, after Nigeria and Angola. Hydrocarbons are essentially synonymous with Equatorial Guinea’s national economy, accounting for over 99 percent of the nation’s exports, and 98 percent of government revenues in 2008. The country's oil reserves are located mainly in the hydrocarbon-rich Gulf of Guinea. Equatorial Guinea's total proven oil reserves are estimated at 1.1 billion barrels. Equatorial Guinea was one of the fastest growing economies in the world in the early years of the millenium due to investments in its recently discovered large reserves of oil and gas.
The country, a tiny former Spanish colony of about 700,000 people, became very wealthy in the 1990s after oil was discovered, with per capita income, when currency differences are accounted for, exceeding $50,000 (compared with $43,800 in the United States). But little of that has trickled down. While Teodorín accumulates mansions and Rolls-Royce, 70% of Equatorial Guinea (of a total population of 700 000 inhabitants) live on $ 1 a day despite income per year per capita than Japan, the France or Spain, to 34,843 dollars. Equatorial Guinea is a major producer of oil and gas, the third sub-Saharan Africa after Nigeria and Angola - but the majority of people live without water and electricity, and life expectancy is around 50 years.
In June 2000, executives of the major US oil companies began to nickname Equatorial Guinea the "African Kuwait", oil continues to be injected into the country huge amounts of money. Suddenly, a country that for decades survived thanks to cocoa and timber became the new Eldorado, and Malabo-Houston flights became direct and almost daily. In 2010, Equatorial Guinea's production reached 273,900 barrels per day, according to a report of the company BP, which stated that at current rates Equatorial Guinea has reserves for over seventeen years. Getotal, a company equally owned by the French Total and the State of Equatorial Guinea, is responsible for refine crude oil produced by the American ExxonMobil, Marathon Oil, Amerada Hess and Vanco Energy.
Within a few years, the constant influx of currency radically changed the face of the capital, Malabo (formerly Santa Isabel), located on Bioko Island (formerly Fernando Poo), but also that of Bata, the largest city of the mainland. A huge bank with a golden facade became the symbol of the new Equatorial Guinea.
Equatorial Guinea's hydrocarbon riches dwarf all other economic activity, and oil and gas exports will drive the economy for years to come. The government is seeking to diversify the economy by encouraging agriculture, financial services, and tourism. Equatorial Guinea has other resources, including its fertile soils, deepwater ports, and reserves of unskilled labor. The once-significant economic mainstays of the colonial era--cocoa, coffee, and timber--have received attention, though they remain miniscule in comparison to the energy sector.
Per capita income rose from about $590 in 1998 to approximately $18,209 in 2010. The Equatoguinean budget grew enormously as royalties and taxes on foreign company oil and gas production provided new resources to a once-poor government. Government revenue for 2010 was about $6.739 billion. Oil accounts for more than 81% of government revenue. Value added tax and trade taxes are other large revenue sources for the government. Real GDP growth was estimated at 0.9% for 2010, a drop from 5.3% for 2009.
The International Monetary Fund (IMF) has held regular Article IV consultations, or periodic country evaluations, with Equatorial Guinea since the 1996 end of the country's Enhanced Structural Adjustment Facility (ESAF). In 2011, the IMF noted that “Equatorial Guinea’s largely oil-driven economy was hit hard by falling oil prices in the wake of the global crisis. While oil prices have bounced back, the absence of large discoveries make it likely that oil production will decline over the medium term. Without strong domestic engines of growth, economic activity will slow jeopardizing development goals and hopes of more inclusive growth, while sustained spending of oil wealth will run down government deposits. Even if more oil is discovered, the economy’s oil dependence would leave it highly vulnerable to external shocks. Economic diversification is vital to future welfare.”
The government has undertaken a number of reforms since 1991 to reduce its predominant role in the economy and promote private sector development. Since 1991, the government has lifted qualitative restrictions on imports, non-tariff protections, and many import licensing requirements, liberalized trade regulations, eliminated quota restrictions, reduced tariffs, and privatized distribution of petroleum products. Its role is a diminishing one, although government interactions with the private sector are at times capricious. The government has sold some state enterprises, and the country's economic policies include an open investment regime. Equatorial Guinea is attempting to create a more favorable investment climate, and its investment code contains numerous incentives for job creation, training, promotion of nontraditional exports, support of development projects and indigenous capital participation, freedom for repatriation of profits, exemption from certain taxes and capital, and other benefits.
Equatorial Guinea was a candidate in the Extractive Industries Transparency Initiative (EITI), which aims to strengthen governance by improving transparency and accountability in the oil, gas, and minerals sector. But in April 2010 Equatorial Guinea was “de-listed” because the country did not demonstrate “sufficient commitment to the goals and spirit of the initiative,” according to an EITI board member. President Obiang stated his intention to have the country re-apply for EITI candidacy.
Equatorial Guinea's balance-of-payments situation has improved substantially since the mid-1990s because of new oil and gas production and favorable world energy prices. The country's exports totaled $10.24 billion in 2010. Crude oil exports now annually account for more than 94% of export earnings. Timber exports, by contrast, now represent only about 2% of export revenues. Imports into Equatorial Guinea are growing quickly. Imports totaled $5.743 billion in 2010.
The maritime border with Nigeria was settled in 2000, allowing Equatorial Guinea to continue exploitation of its oil fields. In 2001, GEPetrol was established as Equatorial Guinea's national oil company, and in 2002 it launched operations under the Ministry of Mines and Hydrocarbons. It was originally to be the primary state-run institution responsible for the country's downstream oil sector activities. However, since 2001 its primary focus has become managing the government's stakes in various Production Sharing Contracts (PSCs) with foreign oil companies. GEPetrol also partners with foreign firms to undertake exploration projects and has a say in the country's environmental policy implementation. In recent block-licensing negotiations, Equatorial Guinea has pursued increases in the government's stake in new PSCs. In early 2008 it announced a $2.2 billion purchase of U.S.-based Devon Energy's stake in the country's oil fields, increasing its participation to 20% in the Zafiro field operation.
In October 2004, the government capped oil production at 350,000 barrels per day (bbl/d) to extend the life of the country's petroleum reserves, but lifted the cap the next year to allow expansion. With the addition of LNG production that came on line in 2007, total hydrocarbon production peaked in 2008. It is now in decline. Three fields--Zafiro, Ceiba, and Alba--account for the majority of the country's oil output.
The Zafiro field is Equatorial Guinea's largest oil producer, with output rising from an initial level of 7,000 bbl/d in August 1996 to approximately 280,000 bbl/d by 2004. Ceiba, Equatorial Guinea's second major producing oil field, is located just offshore of Rio Muni and is estimated to contain 300 million barrels of oil. Production at Ceiba rose dramatically during the 2-3 year period following improvements and upgrades to the facility. Alba, Equatorial Guinea's third significant field, was discovered in 1991. Original estimates of reserves at Alba were around 68 million barrels of oil equivalent (BOE), but later exploration increased estimates significantly to almost 1 billion BOE. Unlike the Zafiro or Ceiba fields, exploration and production at Alba has focused on natural gas, including condensates.
Ceiba's discovery significantly increased interest in petroleum exploration of surrounding areas, with many new companies acquiring licenses in exploration blocks further offshore in the Rio Muni basin. International companies with interests in one or more exploration blocks include Chevron (U.S.), Vanco Energy (U.S.), Atlas Petroleum International (U.S.), Roc Oil (Australia), Petronas (Malaysia), Sasol Petroleum (South Africa), and Glencore (Switzerland). In October 2004, Noble Energy Equatorial Guinea, an Equatoguinean subsidiary of American Noble Energy, Inc. signed a contract to exploit a new oil field off the island of Bioko. Recently, Equatorial Guinea gave the Chinese National Offshore Oil Company (CNOOC) the rights to a new oil field, but Chinese exploration has to date been unsuccessful.
Equatorial Guinea's natural gas reserves are located offshore Bioko Island, primarily in the Alba and Zafiro oil and gas fields. Natural gas and condensate production in Equatorial Guinea expanded rapidly in the 5-year period following new investments by major stakeholders in the Alba natural gas field. Alba, the country's largest natural gas field, contains 1.3 trillion cubic feet (Tcf) of proven reserves, with probable reserves estimated at 4.4 Tcf or more.
Marathon Oil, other investors, and the state-owned gas company, SONAGAS, joined together in a $1.5 billion deal to construct a liquefied natural gas (LNG) facility on Bioko Island. The world-class facility shipped its first product in May 2007. In early 2008 Marathon and the government announced tentative plans to construct and operate LNG trains 2 and 3, pending confirmation of feedstock gas from national and neighboring gas fields.
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