Towards a stable energy sector

This interview was originally published in the Africa Energy Series: Equatorial Guinea book

Centurion Law Group is a pan-African legal services group with an active role in Equatorial Guinea’s energy sector for over a decade.

How did the oil and gas price crash impact the Equatoguinean economy?

The oil price crash in 2014 and the lower-for-longer price environment had a dramatic impact not only on Equatorial Guinea’s energy sector, but also on the development of the economy as a whole. The price crash certainly altered the oil and gas landscape, but not all of the consequences were negative. On the contrary, the crash forced both the government and private companies to find efficiencies and seek collaborations at both the local and global level that were long overdue. Equatorial Guinea joined the Organization for Petroleum Ex- porting Countries in 2017 and has become an advocate for African producers.

Equatorial Guinea has actively reached out to African countries to cooperate on local content, gas monetization and the development of mining and hydrocarbons, signing agreements with South Sudan, Mozambique, Uganda and others. Notable examples are the memoranda of understanding with Burkina Faso, Ghana and Togo to supply and construct LNG infrastructure. Equatorial Guinea is operating stronger and smarter as we emerge from the price crash.

What are your expectations for the development of Equatorial Guinea’s energy sector in 2018?

The last bidding round was a resounding success. Kosmos Energy, in addition to its acquisition of Hess’ Okume and Ceiba assets, also signed production sharing contracts for new acreage. Kosmos, responsible for major discoveries in West Africa, brings fresh energy and competition to the oil and gas sector. The country’s biggest producer, ExxonMobil, also acquired new acreage during the licensing round, as did Ophir Energy, Atlas Petroleum and others.

New exploration will bring life to the sector, and the resumption of projects will greatly benefit local companies and local industry. As the financial sector regains confidence, efforts to diversify the economy and strengthen local industry can steam ahead.

Why is local content regulation necessary? What is your definition of a fair and effective local content policy?

Development of local content in Africa is crucial. It builds up communities and ensures Africans are benefiting from African resources; it is the only way Africa will be able to compete on an international level. There is no doubt that development of local content is the right way to conduct business. Unfortunately, after decades of oil and gas production on African soil by international oil companies, we can confidently assert that companies will not provide for local capacity when left to their own devices. Instead, strong local content legislation with a method for monitoring and compliance enforcement is necessary to move the economy forward in a sustainable way.

To this end, governments need to create a local content policy that accomplishes one important goal: encouraging the development of local enterprise without hampering international investment. Equatorial Guinea’s national content regulation is a great example of a policy that is fair and balanced – recognizing that international investment and international participation in Africa’s energy sector is to be incentivized, along with corporate responsibility to the host country and people. The regulation does not force out international companies or create an unsafe work environment in the name of local content. At the same time, to build capacity and eventually create a self-sustaining sector, the Ministry of Mines and Hydrocarbons of Equatorial Guinea created clear regulations that require international companies to work with local employees and companies, as well as implement training and education programs.

How does Equatorial Guinea compare internationally in terms of creating an attractive investment climate?

Equatorial Guinea has taken firm steps to attract international investors, especially in the energy sector. The Ministry of Mines and Hydrocarbons has a reputation for fairness, and a deep understanding of how to do business, successfully attracting the biggest names in oil and gas to the country time and again, including ExxonMobil, Marathon Oil and Ophir Energy. The country has clearly demonstrated its ability to attract a range of international investors on land- mark projects, including the Fortuna FLNG project, Punta Europa gas complex and the Bioko Oil Terminal project. The regulations governing the oil and gas sector through the hydrocarbons code are fair and balanced, with very competitive terms in the production sharing contracts.

Equatorial Guinea is also a member of CEMAC and the Organization for the Harmonization of Corporate Law in Africa, creating an ease of doing business for investors operating elsewhere in Africa. The government has created a “one-stop-shop” for opening a new business and recently simplified the registration process. The country boasts world-class infrastructure, including roads, ports and airports. Business in the country would benefit from improved per- mitting and licensing times, being able to access more information and applications online, and a more open visa regime for business travel.

What impact does oil and gas have on the Horizon 2020 initiative?

Low oil prices delayed certain aspects of the government’s Horizon 2020 development initiative. But a crucial aspect of the plan – the development of physical infrastructure like roads, electricity, telecommunications and ports – was largely completed already. With that infrastructure in place, the country is in a unique position to capitalize on the price rebound we are experiencing now. Equatorial Guinea is leaps and bounds ahead of many other African countries in terms of the development of these vital infrastructure projects, and the economic diversification of the country is on a more secure footing because of it.

Additionally, because of Horizon 2020, the government has placed a particular emphasis on the development of agriculture, fisheries, petrochemicals and industrialization. As investment opportunities recover, we will see activity in these sectors take off.

This interview was originally published in the Africa Energy Series: Equatorial Guinea book.

 

NJ Ayuk, CEO, Centurion Law Group

CEO and Managing Partner of Centurion Law Group, a pan-African corporate law conglomerate. From its headquarters in Malabo, Equatorial Guinea, and from affiliate and partner offices throughout Africa, Centurion assists clients that are starting or growing a business on the continent. Mr. Ayuk has been advising major companies on investment strategies, the establishment of joint ventures and cooperation structures, privatization, licensing and related tax, OHADA, Equatorial Guinea law, oil and gas, local content, litigation, negotiations, governance and other matters. He also frequently advises international oil companies, governments, oil service companies, financial institutions, development banks and construction firms across Sub-Saharan Africa.