Sunday, Oct 22, 2017
Energy | Government | Africa | Equatorial Guinea

Mines & Hydrocarbons

Public-private projects bring out the best in EG’s resources


9 months ago

This year Equatorial Guinea has offered up 32 offshore and five onshore blocks to international bidders
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Gabriel Mbaga Obiang Lima

Minister for Mines and Hydrocarbons

Equatorial Guinea’s Minister for Mines and Hydrocarbons Gabriel Mbaga Obiang Lima discusses the country’s role in Africa, its stronger relations with foreign partners and the huge opportunities in its underground wealth, as well as sharing his views on the future of fracking and collaborating with the transparency initiative EITI.

 

What does the reelection of President Teodoro Obiang Nguema Mbasogo tell the world about the people’s trust and the continuity of all projects and plans for Equatorial Guinea’s future?

I believe that such a reelection is in itself a sign of trust by the people, and that it also shows the interest people have for continuity, not only political or economic but concerning the nation’s development. We all know that Horizon 2020 is already in its last stages and this somehow proves that there is an interest in seeing this through so that we can move on to the mining phase.

I also believe that this is a sign of the importance of this country’s stability, given that it has been accepted with very good results from the international market, from the companies that create such stability in a moment in which there is a lot of economic and fiscal imbalance, primarily. I believe those are the aspects that somehow reflect this new reelection.

 

What is the regional and continental role of Equatorial Guinea regarding the growth of the African continent?

In the context of the Central African Economic and Monetary Community (CEMAC), I would say that it is a region in which most countries are like us: they depend on oil, its derivate products and other minerals. Such is the case of Cameroon, Gabon, Congo, Chad, the Central African Republic, Angola and Rwanda. I believe, therefore, that it is very important for us to work harder in the entire region but also to start looking at other types of markets.

CEMAC was a sub-region predominantly directed to the francophone market, and we have had to start looking to different horizons, mainly because of the establishment of the euro and the European Community, and now with the current economic crisis.

Among those horizons, Asia stands out. The American horizon was there but it was reduced, mainly because America has changed from a consumer to an exporter. This leads us to conclude, again, that we must also look to the old markets, the European ones, in this case, but also the Asian ones.

 

When you talk about the Asian region, what countries in particular are you referring to?

China, first and foremost. We are getting very close to India as well and even Japan, which in August organized the sixth Tokyo International Conference on African Development (TICAD VI) in Kenya, a very important conference between Africa and Japan; and they are precisely the three Asian giants.

 

In the context of uncertain prices, high costs of exploration and the global tendency towards renewable sources of energy, what are the measures being taken by the national government, regarding the energy industry, to adapt to world tendencies?

I believe that the measures we are currently taking are focused on new technologies and new studies. The exploitation of our resources is not carried in the same way we used to do it. We are working towards a more conscious and environmentally friendly approach. For example, Equatorial Guinea has been, for many years, a pioneer of low gas flaring, which has always been near zero. We use near to 80% or 90% of the gas that would be burned otherwise for the fields, power, and the production of chemicals like methane, and we have all sorts of different other programs to keep making the most of it.

As for crude oil, refining was initially considered but we have since realized that it is more profitable and less costly to store such products in tanks. This is why we are more focused on ‘bunkering’ than on the building of refineries. We believe that we can become a hub, a center for the accumulation of oil products that can be later moved to other locations.

 

The ‘Punta Europa’ Project is currently responsible for producing 3% of the world’s ethanol for consumption. What are the reasons for this achievement and what opportunities does this achievement present to encourage the use of biofuels?

The main reason has been the good cooperation that the company has had with the ministry. We have always understood that this cooperation must be continuous, the government and the companies are not enemies, and therefore any sacrifice must be mutual as well, from both parts. This is how we get to fiscal terms that allow these projects to be profitable. That percentage has already lowered, there are many other plants in the world and I could not currently argue that the numbers are the same, but we are very proud of the fact that for many years we did produce 3% of the world’s methanol. Now, our goal is to continue with development and that is why we are focusing on new projects like REPEGE, so we can make use of this gas in the construction of other plants for urea, ammonia or even more methanol.

 

Under the ministry there are various state-owned companies like Sonagas and GEpetrol and several key projects such as the Bioko Oil Terminal, REPEGE and the Floating LNG project. What can you tell us about the development of these projects, and how you manage to make the most of these public-private relations with these institutions and projects?

One of the key subjects that we have taken into consideration in that the government cannot finance all projects and that this is a normal thing. We used to be in a more prestigious position in which we could do so, but now it is very important for the government to take a different role as more of an organizer, an agent, so that the private sector can take up the financing.

Most of the projects we are developing have been carried out that way: they are public-private projects in which we provide all the structures and all the measures for success and from there we make sure that they can participate. We have set the stage, dealt with all the necessary paperwork, and financed some of the engineering studies. Now, in the final phase, our partners are the ones who must make the financial decisions so that we can begin construction, hopefully, by the end of the year.

On REPEGE it is very similar. We signed an agreement to supply them with gas from the land. We also have an agreement with an engineering company that has done all the work for us, and we are currently in talks with our Chinese friends at both ICBC and engineering companies like APC to make this construction happen.

Last but not least, there is the Floating LNG Project, whose fiscal terms we have agreed with an off-field company to make this project possible in the future. We have partners like Bolar, like OPHIR, that are very eager. Now we have to push them so that we can have solid dates to invest in and begin those projects.

 

Historically, energy has paved the way for the industrialization and development of other sectors of the economy. What can the ministry do to promote both small and medium-sized businesses and large industries in the downstream sector?

What we can do is try to push and implement the requirements and regulations of local content. We have made clear what we consider to be ‘local content’. A job given to a gardener, a cook, a driver, for example, is not considered ‘local content’. We recognize the importance of this, mainly, on indirect benefit. In this case we are talking about the direct and indirect benefit that a project gives to small and medium-sized companies in the country. For example, a maintenance company: what interests us and benefits us from it is that it has national participation. The same happens with other services, which do not have to come necessarily from Singapore or the US, but can be provided here, and if they can’t then we associate them. It works differently for other services. Implementation and support of local content is what will allow those small and medium-sized companies to further develop.

 

Training plays a fundamental role in this as well, does it not?

Of course, of course. However, we are limited in the fact that we cannot wait for the ministry or the government to be responsible for the training of these businessmen. It is a business and as a business the businessmen must be prepared because this is what will decide whether he wins the negotiation or not.

 

Gas is an alternative to oil production in Equatorial Guinea. However, a portion of your natural gas reserves needs to be extracted by fracking. How do you evaluate the use of fracking to impulse the gas industry here and how does that correlate with Equatorial Guinea’s plans for environmental protection?

We have not considered or foreseen the need to establish the technology for fracking, which is done mainly on land and requires large quantities of chemical products to be inserted into the ground. We are still working with conventional hydrocarbons, which are extracted by pressure through drilling.

Fracking is gaining ground in countries like the UK, the US and many others. Personally, I believe it is quite dangerous, we are seeing it and we will see it clearly in the US, whether we want to talk about it or not. Sooner or later all those chemicals that are being used to fill the soil have to come out somehow. It can be controlled, we can get more products, but we have allowed the US to become a pioneer, merely watching it, which gives us a chance to study it. Five or six years from now we will know if this was a good idea or not, which will then lead us to implement it or avoid it entirely, never at the cost of our own population. I believe it is dangerous; there are some places where it might be done, but with utmost caution.

Fracking has its economic benefits and advantages, that’s the truth. Mainly, you can open and close at will. We are forced to work with pressure. This is why every time the price of oil rises to $50 they instantly open all of their wells, and when it’s down to $40 they close them again—something that we are unable to do. We are obligated to sell according to price.

 

Many countries in the region, such as your neighbor Cameroon, are joining the new EITI standard. This standard promises a better management of natural resources and is being formally considered for the approval of cooperation projects in this sector. Does Equatorial Guinea have any interest in adjusting to EITI and what benefit would you seek to participate in this initiative?

We are very interested. We are working on it and have made great progress, especially with international companies, national companies, the ministries, the Interior Ministry, civil society, etc. We have taken large steps and we are now at a stage in which we believe we will be able to formally present our candidacy by the end of the year, and then there will be a lot of work to do. It is the best way to prove our transparency: to show what the companies declare to give us and show what we receive. This also allows civil society to be integrated in the development or exploitation of these resources.

Now, what is happening in EITI is not free of concerns from many countries like our own. We are seeing that this idea is not producing the results or going in the direction that was initially planned. It was supposed to be a mechanism to show what the oil sector has given to its countries, and for these countries to prove it. It is becoming a political weapon in which civil society and the international organizations that deal with human rights are the ones controlling the board.

Being a country that complies with all the requirements, as has been the case with Guinea, every time those organizations are not happy with a country for different reasons they don’t allow that country to be in compliance with EITI.

There was a problem, recently, at the organization: its Secretary General resigned because a new phase was coming. The phase consisted of requiring not only developing countries to be in compliance with EITI but also developed countries like England, the US and the rest of them. These countries can’t and don’t want to be in compliance. And we ask ourselves: if countries like France, the US and England do not want to do this, why then are we forced to do it? This is the great debate that is taking place right now. If you do it, the companies that come from your country have to prove they have paid taxes here and there. If now we say that this is not working or that we don’t want to continue being in compliance, then we’re the bad guys.

This is the weapon that they wanted to use with many developing countries. Nobody cares now, because of the falling prices of oil, but when the coffers of countries like ours start to grow full again, the EITI flame will be rekindled.

Anyway, the answer is very simple: we are interested, we will continue with EITI and we will prove we’re in compliance but, once again, we are worried about the organization’s way of doing things. We still consider it an unfair and non-transparent process, even though they advertise transparency. They are more interested in the social issues of candidate countries. We have said before: if that is their interest, let us build an organization for social programs. EITI was meant to be a review organization for the funds assigned to extraction projects only.

 

Recent discoveries in the mining sector have turned the ministry into one of the key actors for progress in the country’s diversification. What are the ministry’s priorities for this last phase until the deadline of Horizon 2020 and what will be the new role of mining in these endeavors?

Mining is a much more complicated subject than oil. Its exploration periods are longer, its development periods are longer too, and also its return on investment. This makes companies less and less interested in mining, unless there are enormous reserves of a specific mineral waiting to be found or they already have a long national history regarding mining.

We are now at a period of exploration; we have conducted aeromagnetic surveys, drilling in all areas and in many of these areas we have found the minerals. The next step is to conduct a valuation of the total area that we believe holds these minerals. Among them we have gold, diamonds and bauxite. We hope to obtain, by end of this year, the first concessions to allow various companies to come here and do mining activity for the first time in Equatorial Guinea.

 

What are the ministry’s priorities for these last few years until 2020?

To keep meeting production quotas and to continue with gas diversification (which is very important) and aggressive exploration.

One of the measures we’re taking has to do with a new round of biddings for 2016. We began in Capetown, South Africa; we’ve been to London and more recently in Istanbul. We considered Istanbul because we wanted to get into the Middle East, but we may have to change course for Dubai or some other place in which we can do this. Then we went to Singapore and we will be in Houston in November, which will be where we will make our final announcements.

Many companies are already interested in working with us, mainly the larger ones because they have greater liquidity. It wouldn’t surprise me to be able to announce the chosen companies in December, as well as the areas in which we will start to do business with them.

 

Now for a little bit more personal question: when I came here, you were the Minister for Energy and Industry and now you have changed to Mines and Hydrocarbons. You are always at the top of this field. If we returned in 10 years from now, where could we find you?

You will most likely find me in Corisco, fishing. They say that there will be a golf course there, so I’ll be playing golf and enjoying the company of my family. That is what I will be doing. I will retire in 2020, I have worked enough. That’s the plan. 



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