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Equatorial Guinea Deepens Ties With Chinese Energy Firms

posted by – July 20th, 2012

Equatorial Guinea, the third-largest crude-oil producer in Sub-Saharan Africa,  is seeking to deepen ties with Chinese energy companies as the country works to  improve power infrastructure and increase output of crude and natural gas.


Equatorial Guinea has approached China Petrochemical Corp., known as Sinopec  Group, about building a 20,000-barrel-a day refining and petrochemical complex  in the country, which later could be expanded to 60,000 barrels a day, Gabriel  M. Obiang Lima, the country’s minister of mines, industry and energy, told Dow  Jones Newswires.

“We are planning to build a refinery, but will only use a small amount (of  crude) coming from our own production,” he said. “We are having discussions with  Sinopec regarding that…we were expecting to sign something today, but the time  has gone too fast.”

Although Equatorial Guinea has approached other engineering companies based  in the U.S., Spain, Italy and Germany about developing the refinery, state-owned  Sinopec would be the only company that would take an ownership stake in the  project if chosen, Mr. Obiang said, adding that a final decision could be made  by year-end. Sinopec couldn’t immediately be reached for comment after work  hours.

The West African country has approached Sinohydro Group Ltd. (601669.SH),  which built most of China’s Three Gorges Dam, about building more hydroelectric  power plants with an eye toward selling electricity to neighboring countries  such as Nigeria, Cameroon and Gabon, Mr. Obiang said. Sinohydro’s first  125-megawatt hydropower project in Equatorial Guinea is expected to come online  in October, he added.

Cnooc Ltd. (CEO), China’s largest offshore oil producer, plans to drill two  deepwater wells off the coast of the country next year, Mr. Obiang said. Cnooc  has drilled one well already, but discovered non-commercial amounts of crude, he  said. Next year’s wells will be drilled in partnership with South Korea’s SK  Innovation Co. (096770.SE), which will provide deepwater drilling technology, he  said.

Cnooc signed an agreement with Equatorial Guinea in 2006 to explore a 2,287  square kilometer block off the coast of the country, with a water depth ranging  from 30 to 1,500 meters. “We are inviting (Cnooc) to negotiate in another block,  but they haven’t concluded discussions with us,” Mr. Obiang said.

Additionally, Equatorial Guinea plans to sign a total of six  production-sharing contracts for onshore and offshore oil blocks this year with  companies such as Noble Energy Inc. (NBL), Dana Petroleum PLC and Murphy Oil  Corp. (MUR), Mr. Obiang said.

Meanwhile, the West African country on Friday signed a series of preliminary  agreements with Chinese energy companies on the sidelines of the fifth Forum on  China-Africa Cooperation in Beijing. The agreements included a memorandum of  understanding with Hong Kong-based Elegance Power to explore and develop onshore  oil-and-gas blocks, electricity projects with China Machinery Engineering Corp.  and a crude-supply deal with Sinochem Corp. in exchange for trade credit to pay  for infrastructure projects.

Unlike the U.S. and other countries, China hasn’t attached political or  environmental strings to much of its aid.

“Equatorial Guinea remains mired in corruption, poverty, and repression under  President Teodoro Obiang Nguema Mbasogo, who has been in power since 1979,” the  non-government organization Human Rights Watch said in its 2012 report. “Vast  oil revenues fund lavish lifestyles for the small elite surrounding the  president, while most of the population lives in poverty,” it said.

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