Charles Tchen, CEO, Independent Petroleum Consultants, on the structure of the oil sector

Text size +-
Share
Charles Tchen, CEO, Independent Petroleum Consultants

 

The country’s production has been successfully maintained at 240,000 barrels per day (bpd) over the past four years and is expected to remain at that level for the next three years. Major producers are Perenco, Shell and Total, with each producing about 60,000 bpd. In 2013, three oil discoveries have been made: Mitsubishi Petroleum had a marginal and sub-economic discovery in the Nguma block, which has now been relinquished and returned to the state; Vaalco and Total made a discovery in Mutamba Iroru block, which is being evaluated; and Harvest Natural Resources is looking at development schemes for the Dussafu Marin discoveries. Once developed, these reserves, additional discoveries and recovery improvement in the existing and traditional known petroleum basin are expected to only slow the decline of national oil production, at best.

In the medium term, only Total, currently drilling the Diaba exploration well; Shell, which is planning to drill two exploration wells at the end of 2013 or beginning of 2014 in the BC9/BC10; Ophir in Ntsina, and Mbeli and Perenco in Arouwe in 2014, who are all testing the pre-salt play in deep offshore Gabon, could, if successful, contribute to increasing natural oil production.

The results of these exploration wells are very important for the 42 deep offshore blocks being negotiated currently. These will give the first indication of the geological similarity between pre-salt Brazil and West Africa.

The 42 blocks were put on the market in May 2013 and have attracted many firms, such as super majors Exxon, Chevron, Total, Shell, Petronas, Marathon, Noble and Repsol, which have made offers to the Ministry of Petroleum. These are being analysed, prior to being invited to negotiate production-sharing contracts (PSCs).

However, the late launch on the market of the 42 deep and ultra-deep offshore blocks may affect national oil production in the long run. Indeed, development of hydrocarbons in these water depths (800-3500 metres) may require six to eight years after discovery of economic oil reserves. To date, no PSC has been signed. This can be expected in the third and fourth quarters of 2013, based on the availability of the Petroleum Code. For these blocks, oil will first be expected 10 years after licensing. This is too late to compensate for the national oil production decline, which may reach half of today’s daily production of 240,000 bpd.

Overall, 2013 has been challenging for the petroleum industry in Gabon. The acquisition by the Ministry of Petroleum of the Obangue field, previously operated by Addax, and its handover thereafter to Gabon Oil Company (GOC) prompts questions over the business and investment environment, compounded in part by the slow negotiations for renewal of exclusive exploitation licences (EEL). Some EELs due to be renewed are still awaiting final signing by the government authorities even after negotiations have been completed.

Complications are also being encountered with the Customs administration. Lengthy and changing procedures are being applied to clear oil equipment from Customs. The Gabon Petroleum Union (UPEGA) has been involved in endless negotiations in trying to solve those issues, but so far without success.

There are currently discussions with the Ministry of Commerce to allow oil companies to operate as a branch during the exploration phase, supported by the Ministry of Petroleum. However, the challenges together with the strikes faced by the oil industry risk affecting the reputation of the country’s attractiveness as a stable investment place with sustainable fiscal terms.

The lack of a clear strategy for the petroleum industry or a precise definition of the mission and vision of national oil company GOC has caused uncertainty among foreign oil companies, with GOC seen as a possible competitor for land production operations.

Two forums, the UK-Gabon Investment Forum in November 2012 in London and the New York Forum Africa in Libreville in June 2013, attracted many potential investors. The government’s message has been one emphasising the need for reforms, but no reforms have been announced thus far. Hopefully, these will form part of the petroleum code, but this has yet to be published.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Gabon 2013

The Report: Gabon 2013

Energy chapter from The Report: Gabon 2013

Energy chapter from The Report: Gabon 2013

Cover of The Report: Gabon 2013

The Report

This article is from the Energy chapter of The Report: Gabon 2013. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart