Malabo comes out swinging for local content

11 September 2018, Week 36, Issue 754

Equatorial Guinea had harsh words for international explorers, developers and oil-service companies last week as it announced plans to launch a new oil and gas exploration bidding round, for both onshore and ultra-deep areas, in January 2019.

Equatorial Guinea Minister of Mines, Industry and Energy Gabriel Obiang Lima, on September 6, said the country may refuse to extend existing licences for oil companies already active in Equatorial Guinea unless they invest at least US$2 billion between them. Companies at risk include ExxonMobil, Kosmos Energy, Marathon Oil and Noble Energy. Licence extensions are due to be negotiated during this month and October.

“We expect all of them to have an understanding that we do want serious investment in activities and if that is not happening … some of the extensions they will be asking for will not be handed over,” he said. “The objective is that we have a large amount of foreign direct investment in the country. The expectation is a minimum of US$2 billion must be invested across the entire industry, from operating, management and drilling.”

Separately, Obiang Lima also criticised majors for slowing exploration efforts across Africa, saying they often take longer to assess, prioritise, execute and appraise frontier exploration drilling compared with the less cash-rich independent companies from whom they have been snapping up assets.

Although he acknowledged that global majors were well suited to developing existing discoveries, he compared them to “big elephants” whose big portfolios make them too slow at exploration. “We need someone to go into the next cycle. We need to drill. That’s the only way and we want companies that are willing to do that,” he said. “If you want to be in Equatorial Guinea, you drill. If you don’t want to drill, we’ll look for someone else.” 

An unnamed government official also said that TechnipFMC, Subsea 7 and Schlumberger may all be excluded from Equatorial Guinea for failure to comply with local content rules over training and jobs.

Upstream operators could be instructed by the end of September to cancel contracts with the three oil service providers and issue new tenders, the official added. In July this year, Malabo ordered companies to cancel contracts with CHC Helicopter over similar local content concerns.

The country’s 2014 National Content Regulation stipulates that all agreements have local content clauses and provisions for capacity building, with preference given to local companies in the award of service contracts.

Subsea 7 said it was “aware of the increased focus on local content” in Equatorial Guinea and was working “closely with authorities” to ensure it meets all local regulations. Schlumberger said that it was working with the ministry and has submitted its plans to ensure full compliance with the regulations.

 

Edited by

Ed Reed

Editor

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