OBG talks to Etienne Ngoubou, Minister of Petroleum, Energy and Hydroelectric Resources

Interview: Etienne Ngoubou

What is the timeline for deep offshore explorations?

ETIENNE NGOUBOU: This year is a turning point for the hydrocarbons industry in Gabon, with deep and ultra-deep offshore exploration beginning. As a result of the government’s commercial campaigns, three companies – Total, Perenco and Shell – obtained licences to lead the exploration. Total Gabon began drilling at the Diaba block in the second quarter of 2013, and Shell and Perenco will start deepwater exploration in the first and second quarters of 2014, respectively. The government has high expectations for these projects, which could double current oil production. The similarities between Latin America’s pre-salt plays and the Gulf of Guinea bolster confidence that oil will be found, and contract negotiations have already started with 18 firms for the assignment of deep and ultra-deep blocks.

How can Gabon improve its capacity for refined products to maximise the gains from its resources?

NGOUBOU: To be honest, this is a sensitive topic. For 15 years, this area suffered from a lack of investment. As we know, for the last decade or so, the country’s GDP has increased tremendously – indeed, many sectors experienced exponential growth. Yet, the oil and gas industry has failed to efficiently provide refined products to those sectors. Still today, we have no more than a 15-day supply of refined product to keep the nation autonomous. To overcome this challenge, increasing the storage capacity and reorganising the distribution system will be key. Furthermore, by domestically refining a larger portion of national production, additional value will be added to our hydrocarbons. To that end, a new refinery will be built with our South Korean partner, Samsung. Hence, by refining larger volumes of oil, greater economies of scale will be reused and the local sector will benefit from those activities.

What are the challenges to the hydrocarbons code?

NGOUBOU: The hydrocarbons code is not brand new. The legislation was passed in 1982 and is a three-page document. The oil and gas industry has evolved and changed since then. Concepts and values like sustainable development or integrating local communities have appeared, and legislation must be updated. In Gabon, local content enhancement is part of our DNA, and therefore small and medium-sized enterprises must be integrated into the sector. For the past decade, new requirements were included in contracts without a real legislative support, hence the decision that a new hydrocarbon code be implemented by end-2013. The updated code includes changes linked to the transformation of the industry, and its role is to manage the relationship between the state and investors. International companies should not be worried about upcoming changes, but must remain confident in the sector. Based on the Alex Stewart audit, the government realised the weaknesses in its administrative system. Those weaknesses have had negative effects on governance of the sector, and measures have been taken to improve management and reinforce professionalism within the administration. The code is part of this new phase, encouraging a strong regulatory framework applicable to producers and contractors.

How can Gabon capitalise on hydraulic resources?

NGOUBOU: As water resources are widely available in Gabon, it is by far the cheapest way to produce electricity. Therefore, we want to raise the capacity of hydroelectricity by 6000 MW and then gas potential will be further developed, with a complementary role. There are some areas like the Atlantic coast where there are no other solutions. The Atlantic coast is made of a sedimentary base with low relief, so hydroelectricity cannot be produced. We are looking at creating and generating electricity with gas in these areas. Telemenia and the government have already reinforced electricity generation capacity with a power plant in Alenakiri and another in Port-Gentil. Gas generation would especially help agriculture, but property rights and land occupation constrain petrochemicals development.