H.E. Gabriel Obiang Lima, Minister of Mines and Hydrocarbons of Equatorial Guinea, has announced the Ministry’s intention of preparing a new Hydrocarbon law focused on attracting oil investment into the country’s sector. With national targets to establish the country as an oil and gas leader, the new Hydrocarbon Law aims to enhance investment, attract both regional and international energy participants, and accelerate growth and development in 2021 and beyond.
During his presentation at the Leadership Insight Series: Equatorial Guinea webinar hosted by the Bilateral Chamber in Houston, Texas, the Minister provided insights into the proposed Hydrocarbon Law, stating that with new fiscal terms that encourage investment, the country will be able to realize its ambitious energy sector goals. H.E. Minister Gabriel Lima addressed some of the challenges related to the preparation of the new Hydrocarbon Law, emphasizing the value this new piece of legislation will have for creating both an enabling and enticing environment for investors.
Equatorial Guinea is endowed with significant oil and gas reserves that have and continue to attract significant level of foreign capital. To date, the country holds over 1.5 trillion cubic feet of natural gas reserves and approximately 1.1 billion barrels of crude oil reserves. With the Minister leading a strong campaign to enhance investment in emerging exploration and production prospects in order to drive large-scale project developments, the new Hydrocarbon Law will drive progress, promoting investment and enhancing energy sector advancement.
“Equatorial Guinea has already established itself as both an African and global oil and gas competitor. We have seen great companies like Hess, Marathon, ExxonMobil, Devon, and Chevron, explore for hydrocarbons offshore Equatorial Guinea with tremendous success. This is no time to stop and be comfortable. In the era of energy transition, and stiff competition for capital, it is important to be pragmatic and have a hydrocarbon law that deals with today’s realities and incentivize growth. We have to be more competitive, cut red tape, promote free markets, balance local content, create more jobs and increase our tax base,” stated H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons.
H.E. Minister Gabriel Lima will provide further insight into the new Hydrocarbon Law at African Energy Week (AEW) 2021 in Cape Town – taking place on the 9th-12th of November – and at the U.S.-African Energy Forum in Houston – taking place on the 9th-10th of December. By detailing the legislative specifics, addressing challenges to implementation, and emphasizing the value of the Law for enhancing investment in Equatorial Guinea’s hydrocarbon sector, the Minister is focused on accelerating energy sector growth and positioning the country as an African hydrocarbon leader.
“We’ve made a case for the importance of strategic fiscal policies, from revised production sharing contract (PSC) requirements to reduced tax and royalty requirements. Some have been critical of us for advocating this. I disagree with them, and I still love them, but resource nationalism is not the way to go and it is actually dangerous for Africa. Equatorial Guinea taking the lead to make reforms is a step in the right direction. I truly believe that these changes are necessary to give IOCs an incentive to explore in Equatorial Guinea during the current downturn. But we can’t stop there. We need to consider other pain points that discourage foreign operations in Africa and find ways to eliminate those challenges as well. If needed the Chamber will provide advice and support,” stated NJ Ayuk. Executive Chairman of the African Energy Chamber (AEC).
While the details vary by country, the licensing round process has, in general, become too prone to delays and uncertainty. All too often, exploration and production (E&P) companies have to wait one or two years before the exploration projects they propose are sanctioned. These practices, which help protect the interests of oil-producing nations, made sense when crude sold for $100 a barrel. But they don’t make sense now.
After all, conditions are still uncertain. True, crude pricing forecasts for 2021 are cautiously optimistic at the moment, and Goldman Sachs has said Brent oil prices could reach $65 per barrel by this summer, up from the $50-range we’re seeing now. But the outlook for Africa’s petroleum market remains shaky at best.
Under these circumstances, it’s up to African oil and gas producers to do everything possible to encourage as much E&P activity as possible, particularly by international oil companies (IOCs). In the long term, of course, African producer states do need to lessen their reliance on oil and gas revenue. But for now, a number of them rely on it for much of their budgets. And as long as they do, they ought to ask for more. They should lobby for knowledge transfers, training, gas monetization programs, and other significant opportunities so that their strategically managed oil and gas operations can create pathways for economic growth and diversification.
AEW 2021, in partnership with South Africa’s Department of Mineral Resources and Energy DMRE, is the AEC’s annual conference, exhibition and networking event. AEW 2021 unites African energy stakeholders with investors and international partners to drive industry growth and development and promote Africa as the destination for energy investments.