HE Gabriel Obiang Lima, Minister of Mines and Hydrocarbons of Equatorial Guinea, has announced the Ministry’s intention to prepare a new Hydrocarbon law focused on attracting oil investment into the country’s sector.
The new Hydrocarbon Law aims at enhancing investment, attract both regional and international energy participants, and accelerate growth and development in 2021 and beyond. This is in line with national targets to establish the country as an oil and gas leader on the continent.
The Minister at a webinar hosted by the Bilateral Chamber in Houston, Texas, provided insights into the proposed Hydrocarbon Law. He stated that with new fiscal terms that encourage investment, the country will be able to realize its ambitious energy sector goals.
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.
As such, the Minister is 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 is expected to drive progress-promoting investment and enhancing energy sector advancement.
Need to be competitive
Mr. Mbaga Obiang highlighted the need to be competitive in order to create more jobs whilst increasing the tax base.
“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” .
H.E. Gabriel Mbaga Obiang Lima
Meanwhile, H.E. Lima is expected to provide further insight into the new Hydrocarbon Law at the African Energy Week (AEW) 2021 in Cape Town between 9th -12th November, 2021. He is also expected to speak on the new law at the US-African Energy Forum in Houston between 9th and 10th December this year.
Need for more reforms
NJ Ayuk, Executive Chairman of the African Energy Chamber (AEC) also highlighted the need for more reforms on the African continent to iron-out the challenges facing investors in the Oil and Gas industry.
“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” .
NJ Ayuk
Delays and uncertainties
The African Energy Chamber (AEC) stated that while the details vary by country, the licensing round process has, in general, become too prone to delays and uncertainty. According to the AEC, exploration and production (E&P) companies sometimes 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”.
AEC
Under these circumstances, the AEC stated that 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, the AEC indicated that African-producer states do need to lessen their reliance on oil and gas revenue. The Chamber noted that for now, a number of them rely on it for much of their budgets.
As such, the Chamber urged oil producers in Africa to lobby for knowledge transfers, training, gas monetization programs, and other significant opportunities. By doing this, the Chamber believes, their strategically managed oil and gas operations can create pathways for economic growth and diversification.
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