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New Market Report: Equatorial Guinea Oil & Gas Report Q3 2013

posted by – August 22, 2013

Boston, MA — (SBWIRE) — 08/22/2013 — Equatorial Guinea could be well positioned to benefit from increasing interest in deepwater exploration off West Africa, but given the declining production from mature fields, our long term outlook for the sectors is bearish. Over the medium term, we expect gains in output until 2015/16, at which point, the impact of new production is unlikely to offset falling volumes from mature fields. Although there is some upside from new exploration, highlighted by a number of contracts signed with small firms in April 2013, our current forecasts suggests output will fall from 325,000b/d in 2013 to 296,000 in 2022. On the gas side, recent exploration success suggests Ophir has firmed up the resource base to support an expansion of the country’s LNG export capacity. Yet a decision on this has been pushed back and – given uncertainty regarding the project’s financing, resources, and potential export markets – there remain a number of obstacles to overcome as a 2014 decision date approaches.

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The key trends and developments in Equatorial Guinea’s oil & gas sector are:

– BMI expects oil production to reach 324,500 barrels per day (b/d) in 2013, before peaking at 331,200b/d in 2016. Production growth will be driven almost entirely by new production from Noble Energy’s Aseng and Alen developments. This will offset declining output from the flagship Zafiro field. Beyond 2016, we anticipate a steady decline in production unless further investment is made in exploration and production (E&P).
– Equatorial Guinea recently announced the awarding of a number of onshore and offshore blocks to small and mid-sized players. Traditional IOCs and players from Brazil, Africa, and Asia were among the winners. In announcing the awards, officials said other blocks would be put up for auction as additional 3D seismic data was made available.
– Equatorial Guinea remains overly dependent on hydrocarbons production, which generates 78.0% of GDP, 89.0% of tax revenue and 97.0% of exports, according to BMI data. Concerns regarding the country’s business environment, where high levels of corruption are often suggested, are evidenced by an announcement form the Norwegian Sovereign Wealth Fund that officials are considering divesting shares in oil and gas companies that operate in Equatorial Guinea given longstanding concerns that the country’s oil wealth has not been used to alleviate chronic poverty.
– Ophir’s latest offshore discoveries at Block R pose upside risk to our gas production forecasts. A decision to commercially develop the fields in support of an LNG expansion would cause us to revise our figures upward. Without a decision to develop Block R – which has yet to be included in our forecast as we await FID – or additional exploration success, we expect gas production to reach 7.1bcm in 2013 and fall to 5.9bcm by 2022.