Posted by Aydanur Akkurt - Africa Oil & Power
Malabo, Equatorial Guinea, April 27, 2020 – Equatorial Guinea's Ministry of Mines and Hydrocarbons established its course of action against COVID-19 in a public webinar on Monday, specifically calling upon local companies to fill the vacuum created by international operators and service companies halting or slowing their operations in-country.
Under the theme, “The State of Oil Markets and Global Rebound,” the webinar addressed industry-wide challenges created by reduced global oil demand, OPEC-led production cuts and plunging commodity prices, with a strong focus on COVID-19 as an opportunity for local companies to take ownership over the extraction of domestic resources.
“This pandemic is an opportunity for the African continent,” said H.E. Minister of Mines and Hydrocarbons Gabriel Mbaga Obiang Lima. “For the first time, we may have to operate our installations ourselves. Expatriates leaving the country creates a vacuum, and that vacuum needs to be filled by nationals. We don't know how long Europe, the U.S. or Asia will be locked down. Africa has always been competitive. We have every single resource on the continent and the cheapest fiscal terms. We can finally take charge of our industry – not only in the extraction of resources, but also in the refining and marketing of where our oil is going.”
To drive both local content and diversification initiatives, the Ministry of Mines and Hydrocarbons is launching a local content law focused on nationalisation and the limitation of the time expatriates can work in the country to three years; the ratification of a new mining code governing the extraction of mineral resources; and new petroleum legislation that will incorporate regulations on refining and petrochemical development.
“Downstream is the future of our industry. It is king. It will create jobs and enable us to use the entirety of our entire resources to be processed in-country. Clearly, one of our solutions [to COVID-19] is going to be diversification within oil and gas. In fact, this is the worst time for renewables. Oil is so cheap that it is actually cheaper to produce electricity with oil than with wind, solar or renewables. Renewables should be praying that the price of oil comes up. Otherwise, it's going to be very difficult for them to compete.”
Downstream projects will take center stage for the country, specifically in the development of in-country refining, petrochemicals, bunkering and storage capabilities. Projects that remain on track in Equatorial Guinea include the Alen backfilling project, which is due to lay its infrastructure in November; and the construction of a small-scale, 5,000 barrel per day refinery in Punta Europa, for which the contract for feasibility studies for its construction was recently awarded, with ground-breaking for the project expected in Q4 of 2020.
Equatorial Guinea has also been developing the use of its own liquified natural gas (LNG) to power both the country and the region as part of its LNG2Africa initiative, and is still set to complete the construction of the country's first LNG regasification plant by the end of the year.
Conversely, frontier and upstream exploration will take a backseat to downstream developments, as the country aims to maximize the liquidity of exploration and production companies operating in-country.
“We learned from the crisis in 2014/2015 that we need to give extensions to exploration companies and to ensure that companies like Marathon Oil and ExxonMobil save cash. Liquidity is very important right now. The last thing we want is for them to decide that it is not economical to operate in-country. It's not actually going to help to discover oil this year. Instead, we need to keep drilling companies safe in 2020. Then, at the end of 2021 or the beginning of 2022, they will get back to drilling,” he said.
While Equatorial Guinea will produce in accordance with global production cuts issued by the OPEC, effective May 1, the Minister expressed concern over further production cuts as they pertain to smaller producing countries with offshore infrastructure.
“If you want to rapidly return to a $60 barrel price, every single oil and gas producer in the world would need to stop. But some producers cannot do that. If you are Saudi Arabia or the United Arab Emirates, you can stop the well in the desert. But countries like Equatorial Guinea have conventional offshore with undersea wells. Some of the production comes from pressure, so if we stop, the umbilical will collapse. What OPEC+ and the G20 are doing is helping by taking oil out of the market, but at the same time, monitoring is one of the most important parts because we don't know how long this pandemic is going to last. Within OPEC, Equatorial Guinea represents the voice of small producers who makes big producers understand that there are suppliers like us,” he added.
Visit source siteEquatorial GuineaAOP WebinarAfrica Energy ChamberAfrica Oil & Powercovid-19OPECThe State of Oil Markets and Global Rebound