After months of negotiations,
Gabon signed seven exploration and production-sharing contracts in August,
which it hopes will spur new exploration in deep-water offshore blocks and
generate up to $1.1bn in new investment, according to estimates from Gabon’s oil ministry.
Following licence awards at the end of last-year, the ministry announced
on August 8 that it had signed contracts (Contrat d’Exploration et de Partage
de Production, CEPP) with six companies including Impact (UK), Repsol (Spain),
Marathon (US), Noble Energy (US), Petronas (Malaysia) and Woodside (Australia).
Gabon is among the top five oil producers in Sub-Saharan Africa, pumping
roughly 240,000 barrels per day (bpd) in 2013. However, this is down from a
peak of 370,000 bpd in the late 1990s due primarily to maturing fields, which
means the offshore blocks could mark a notable turnaround for the sector.
Although the government has accelerated its plans to diversify the economy
in the past five years to reduce its dependency on crude exports, by spending
heavily on infrastructure, hydrocarbons continue to underwrite the economy.
Oil-related activities account for, on average, roughly half of total
government revenues and over 80% of export revenues, which adds urgency to the
efforts to attract new oil investment.
Lifting roadblocks
Gabon’s 10th tender round was initially scheduled for October 2010, but
plans were put on hold while the government worked on drafting a new hydrocarbons
code, which was passed in June and recently adopted. The petroleum code carves
out a larger role for the state as well as allowing it the option to capture a
greater share of oil revenues. It seeks to clarify investment and production
sharing terms, as well as the role reserved for Gabon Oil Company (GOC), which
will have the right to purchase a 15% share in all new oil contracts.
The tender was finally held in October last year, when a total of 13
offshore oil and gas blocks were provisionally awarded to 11 companies, which
represented a significant step forward for the sector. Investor interest in
Gabon’s offshore play has peaked in recent years thanks to geological
similarities with the east coast of Brazil. Important offshore discoveries have
been made in the pre-salt layer, as well as sizable discoveries elsewhere along
the Gulf of Guinea, such as Ghana’s Jubilee field.
Combined with efforts to improve oil recovery at maturing fields, oil
minister Etienne Ngoubou stated in October that the development of offshore
resources could double production to 500,000 bpd in the medium-term.
Contract Negotiations
Since then, the conclusion of the seven new CEPPs has proven to be a
complicated process with discussions dragging on for nine months and several
contract drafts, according to press reports.
The government has sought to take a more robust approach to auditing and
managing the sector in recent months, which has meant that the roster of
companies eligible to negotiate production-sharing contracts has changed since
last October. Thirteen firms were initially declared eligible for negotiations.
However three junior firms were dropped from the list in May, according to
press reports, after the ministry concluded that they would be unable to
finance offshore drilling projects, although one since argued its case
successfully enough to ink one of the seven CEPPs. Two of the oil majors, Total
and Shell, were not awarded blocks last October but both firms were invited to
join the negotiation process in May.
Interest in the offshore licences was aided by the discovery, in August
2013, of a gas condensate reserve in the deep offshore Diaba licence held by
France’s Total in partnership with two US-based firms, Marathon and Cobalt, as
well as the Gabonese government. The Diaba discovery indicates the potential
for further discoveries, and has helped to raise the profile of Gabon’s
offshore plays.
Italian operator Eni also announced in July that it had made a new
discovery of gas and condensates in the pre-salt layer of its offshore Nyonie
licence. While the operator is conducting further analysis of the findings,
initial estimates indicate the reserve contains up to 500m barrels of oil
equivalent.
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