Equatorial Guinea – one of the fastest growing economies in the world

Equatorial Guinea is a relatively small and ‘new to market’ oil-producing country in Sub-Saharan African. Since the country began exporting oil in 1995, its economy has grown rapidly and Equatorial Guinea is currently considered the third largest oil producer in Africa.

Suzanne Bird, International Business Executive at Aberdeen and Grampian Chamber of Commerce, has compiled this special exportlink report on a market which is too rarely granted serious consideration by North East oil service companies:

Equatorial Guinea has one of the fastest growing economies in the world due to its recently discovered large reserves of oil and gas, and the country has recorded a 34.2% growth in the past 2 years.

According to World Oil, Equatorial Guinea had total proven oil reserves of 1.77 billion barrels as of January 2005. The majority of these reserves are located in the oil-rich Gulf of Guinea. Since the 1995 discovery of the Zafiro field, Equatorial Guinea's oil production has increased more than tenfold.

In 1995, average oil production was 5,000 barrels per day (bbl/d), which increased to an average oil production of 356,000 bbl/d in 2005.

Government influence

The Ministry of Mines, Industry and Energy is the overall regulatory body for the petroleum industry in Equatorial Guinea. However, to better manage the oil sector, the Equatoguinean government created a national oil company (GEPetrol) that became operational in 2002.

GEPetrol’s primary focus is to manage the interest stakes of the Equatoguinean government in various production-sharing contracts (PSAs) with foreign oil companies. The company can also participate in oil exploration and production activities outside Equatorial Guinea.

Oil production

Zafiro Field - In 1995, ExxonMobil and Ocean Energy discovered the Zafiro field, which is located northwest of Bioko Island. The field contains estimated recoverable reserves of over 400 million barrels, and is Equatorial Guinea's largest oil producer.

Ceiba Field - Ceiba, Equatorial Guinea's second major producing oil field, is located just offshore of Rio Muni in exploration Block G and contains an estimated 300-800 million barrels of oil.

The field began production in December 2000 and currently produces around 40,000 bbl/d. Ceiba is operated by Amerada Hess, with partners Tullow Oil and GEPetrol. Adjacent to Ceiba field is the Okume Complex, which Amerada Hess is expanding after having received government approval in 2004. The expansion project includes two tension-leg platforms, four fixed platforms and the drilling of 43 wells. Amerada Hess, Tullow Oil and GEPetrol will invest approximately $1.1 billion, with production output expected to reach 60,000 bbl/d.

Alba Field - Alba, Equatorial Guinea's third significant field, is located 12 miles north of Bioko Island. It was discovered in 1991 by Water International.

Original estimates of combined proven and probable reserves at Alba were around 68 million barrels of oil equivalent (BOE), which includes both oil and natural gas, but recent exploration has increased estimates to almost 1 billion BOE.

Unlike the Zafiro or Ceiba fields, exploration and production at Alba has focused on condensates and natural gas. Recent production improvements at Alba resulted in average production of 65,000 bbl/d of condensates. Marathon Oil Corporation serves as operator of Alba field, with a 63% interest and is joined with partners Noble Energy (34%) and GEPetrol (3%).

Field development

In June 2006, the Equatoguinean government began a new licensing round for offshore acreage, including parts of Blocks F, G and B. Asian firms from China and India were especially interested in gaining exploration rights in the licensing round.

Additional international companies to have registered interest in the licensing round include Chevron; Vanco Energy; Atlas Petroleum International; Devon Energy; Petronas; Sasol Petroleum and Glencore.

Luba Port

Luba Freeport is a new deep-water port and oilfield service logistics base that is being developed on the west coast of the island of Bioko. Construction work commenced in March 2000 and the port became operational early in 2002.

This development includes port and dockyard facilities, an oilfield logistics base with warehousing, storage and workshop facilities and fabrication, repair and maintenance yards. The Freeport also advertises the benefits of a duty-free zone with its own 24-hour customs and immigration regime and fuel storage and bunkering services.

The Equatoguinean government hopes that offshore oil and gas companies will use the Luba port as their transportation hub in the future of the country’s oil and gas business.

Recent market visit to Equatorial Guinea

West Africa offers some of the most lucrative oil and gas opportunities world wide in the offshore/deep water environment. This region is often considered high-risk and subsequently overlooked, however this is where members of the UK West African Action Group (UK WAAG) can benefit from the past 10 year’s experience that the group has in helping UK companies understand the business issues and safety concerns in West Africa.

As part of its ongoing range of services to develop opportunities in West Africa, UK WAAG, run under the auspices of the Aberdeen and Grampian Chamber of Commerce, recently organised a trade mission to Malabo, Equatorial Guinea.

Former International Business Director of Aberdeen Chamber Reith Still has had two previous opportunities to visit Equatorial Guinea, most recently three years ago. Reith then led the UK WAAG mission to Equatorial Guinea in June 2006, and witnessed valuable first-hand evidence of current oil and gas prospects.

“I was very interested to see the developments since my last visit and to gain a better understanding of the business environment from a UK perspective,” he says.

“It was particularly significant to see that Equatorial Guinea understands the benefits offered by ‘UK Plc’, especially the technologies and expertise that our companies have developed in the offshore sector. Equatorial Guinea has also opened an Embassy in London to further assist with UK companies travelling to this country and to facilitate the issuing of visas.”

Although Equatorial Guinea offers rewarding market opportunities for UK companies, as with Nigeria and Angola, care and attention must be given to security and health issues along with a good understanding of legislative and business requirements.

Equatorial Guinea is often overlooked in the quest for African oil and gas reserves, however the country has proven that it is interested in foreign investment and is capable of supporting the needs of UK companies looking to internationalise and win a share of the lucrative West African oil and gas market.

Suzanne Bird is International Business Executive at Aberdeen and Grampian Chamber of Commerce. She is responsible for organising trade missions, international events and seminars, maintaining information on local exporters and markets supplied and running the secretariat for the UK West Africa Action Group.

(T) 01224 343 921 (F) 01224 343 999 (E) suzanne.bird@agcc.co.uk