Equatorial Guinea: Efforts to diversify the economy away from its current dependence on oil and gas have focused on processing hydrocarbon production within the country to add value to the export of raw materials.
While these ventures have created relatively little employment, they are a sensible use of natural resources and provide the country with some industrial capacity. Most such projects are located on Punta Europa, on the north side of Malabo.
The first industrial project to be developed on the back of rising oil and gas production capacity was the Atlantic Methanol Production Company (Ampco) plant on Bioko, which was completed in 2001. The plant was built at a cost of $450m, towards which a $173m loan guarantee and $200m political risk cover was provided by the US Overseas Private Investment Corporation (OPIC), which was its biggest arrangement for an African project to that date.
Most feedstock for the plant has been provided by the Alba Field. Ampco is owned by a consortium of Marathon Oil (45%), Noble Affiliates (45%) and state owned Sociedad Nacional de Gas de G.E (Sonagas SA) (10%). Ampco has storage capacity of 900,000 barrels and exports its chemical grade methanol via three dedicated 300,000 tonne carriers. The plant produces about 1m tonnes a year out of global production of about 50m a year, making it an important player in the international methanol industry.
Most methanol is used in the production of other chemicals, including as a motor fuel. It is also used to produce dimethyl ether, which has taken the place of chloroflurocarbons (CFCs) as an aerosol spray propellant because of the impact of CFCs on the ozone layer. The company also produces liquefied petroleum gas (LPG), building materials, chemicals, fuel additives and solvents.
Liquefied Natural Gas
The second big gas-fed industrial project was the $1.4bn Punta Europa LNG plant, which was developed by the EG LNG consortium of Marathon, GE Petrol and Japanese companies Mitsui and Marubeni.
The first and, thus far, only train came on stream in May 2007. It has production capacity of 3.7m tonnes a year and all output is sold to BG Gas Marketing of the UK under a 17-year free-on-board contract. Under the terms of the deal, which was signed in 2004, it was originally expected that the lion’s share of cargoes would be shipped to BG’s Lake Charles terminal in Louisiana in the United States.
However, the shale gas revolution in the US and Canada has depressed North American gas prices and reduced US demand for imports. As a result, much of Equatorial Guinea’s gas output is now sold to the world’s biggest LNG markets, in Asia. Most LNG is exported to Japan, with some shipped to South Korea and Taiwan. At the time the contract was signed, the Atlantic and Asian LNG markets were entirely separate and there was no expectation that they would overlap.
As a result of these changes in global gas markets, the government of Equatorial Guinea has suggested that it may attempt to renegotiate the terms of its LNG deal with BG, which is generally considered to be very favourable to the British company.
The price BG pays is fixed at a discount to US prices, which have now fallen below $4 per million Btu, whereas Asian prices have increased above $15 per million Btu. NJ Ayuk, the managing partner at Equatoguinean law firm Centurion, commented: “If Equatorial Guinea knew this gas was going to be sent to Asia, it would have been a different negotiation. This was not welcomed by the Equatorial Guinea government.” Malabo will seek greater assurances in new oil and gas contracts, as well as in the planned new joint venture projects.
Is there scope for Train 2?
The Punta Europa site was developed with scope to eventually produce up to 20m tonnes a year but field discoveries have failed to keep up with this ambition. Plans for a second and possibly even third train have been drawn up but require the confirmation of more gas before development can proceed.
The front-end engineering and design (FEED) contract on the project has already been awarded to Bechtel but the final investment decision has not yet been taken.
A plan to import Nigerian and Cameroonian gas to supplement domestic supplies to Punta Europa was mooted in 2006 and memoranda of understanding were subsequently signed with the governments of both neighbouring states but have not yet come to fruition, partly because of competing LNG proposals.
However, Nigerian and Cameroonian plans for their own LNG plants have also been delayed. Closer to home, new gas discoveries made by Ophir in 2012 made the development of new LNG production capacity more likely. In August 2012, the firm announced that it had discovered natural gas on its Viscata and Fortuna East 1 wells on Block R, which lies 100 km west of Bioko. This took the number of successful finds on the concession to six. Further successful drilling could make the difference between commercial development or not.
A new oil terminal with storage capacity of 2.2m cubic metres is planned on Bioko. Half of the capacity would be dedicated to blending crude oil and the other half to refined petroleum products.
The energy minister said: “We are very interested in the oil terminal because that would allow a lot of the producers and traders to accumulate the crude and do some blending and be able to have VLCCs [very large crude carriers] or Suez to ship this to Asia.”
All refined petroleum products are currently imported and distributed by Getotal, which is owned by French firm Total (80%) and the government of Equatorial Guinea (20%).
An oil refinery with production capacity of 22,000 b/d at Mbini was planned but now appears to have been shelved.