Gabon’s new Hydrocarbons Code has brought a new energy in the sector, especially for what concerns offshore resources.
Gabon is one of the top ten oil producers in sub-Saharan Africa. With current production rates hovering around 200,000 bpd, the hydrocarbons sector has been a pillar of the country’s economy for over five decades and remains an unparalleled driver of growth. In recent years, the government has been progressively shifting the focus to Gabon’s conspicuous offshore oil and gas reserves, which account for about 70% of the country’s total resources.
During 2018’s Africa Oil Week, Gabon launched its 12th Shallow and Deep-Water Licensing Round, putting an offer on 12 shallow water and 23 deep-water blocks. In July 2019 the government fully implemented a brand-new Hydrocarbons Code to open the way to new investments in the sector. The new code replaced the pre-existent 2014 code, increasing market liberalisation and creating enticing opportunities for companies looking to invest in Gabon’s oil and gas sector. As a consequence of the attractiveness of the new code, in October 2019, seven new exploration and production sharing agreements (EPSA) were signed with Assala Upstream Gabon, Assala Gabon SA, Perence Oil and Gas Gabon Limited and Sinopec Overseas and Gas Ltd., driving US$250 million in investments.
Most interestingly, the new code enables investors to maintain a higher degree of control over operations in production sharing contracts (PSC), cutting the state participation quota from 20% to 10%. “The new code will allow for an augmentation of oil production,” says Jacqueline Bignoumba, President of UPEGA, the Association of Gabon’s Petroleum Companies.“This code will allow for a relaunch of exploration and the discovery of new fields. If production increases, it will contribute to the diversification of the economy.” With the new code Gabon will be able to promote offshore exploration, where already a number of important discoveries have been made and new investors have been attracted to the nation’s natural gas potential.
A few months after entering into force, the new code has already engendered some positive effects: in the summer, Malaysian company Petronas signed an agreement for two exploration permits. Soon thereafter, Houston-based West African producer Vaalco announced that it had scheduled a drilling campaign for an appraisal well, to be later followed by a development well in its Etame field, with further developments expected for late 2019 and early 2020. The company also extended its lease contract for its Gabonese floating, production, storage and offloading (FPSO) vessel to September 2021. “Gabon is a critical part of our business,” says Thor Pruckl, Executive VP of International Operations at Vaalco. “The investment climate has improved thanks to the efforts of the Gabonese government and we are looking forward to continuing and expanding our operations in the country.”
Indeed, Gabon’s reserves host an incredible potential in terms of oil and gas resources and the government is keen on finding ways to ensure the country can fully benefit from its offshore riches, increasing gas production with the ultimate aim of satisfying its internal demand and becoming a gas exporter in the near future. Within this context, an agreement has been recently signed with Perenco Gabon for the construction of an LNG production plant.
The government’s strategy for the hydrocarbons sector includes the development of a domestic petrochemical industry, with Port-Gentil set to become the country’s petrochemicals hub in cooperation with long-time partnering companies such as international giant Total. Total, the country’s leading retailer of petroleum products, recently decided to focus its efforts on offshore resources and is working to provide efficient and clean energy while investing in local content and employing local workforce. According to Total Gabon’s Director General Stéphane Bassene, the new Hydrocarbons Code and the ongoing bidding round have caused shockwaves of excitement within the sector: “There will be blocks for the industry, so there are opportunities,” he says. “There has been a lot of movement in our industry in recent years and this is a very exciting time.”
Indeed, with the bidding round in its final stages and the new Hydrocarbons Code in full force, great things are afoot in the oil and gas sector of Gabon, ready for bold investors eager to seize its opportunities.