Equatorial Guinea Oil and Gas Report Q3 2012

BMI View: Crude output will rise slightly over the short term as Noble Energy’s new Aseng and Alen projects come onstream, offsetting declines in production from Equatorial Guinea’s flagship Zafiro and Alba fields. Beyond 2015, however, oil production will fall rapidly unless significant new investment is channelled into exploration and production. While some new gas discoveries have been made, we anticipate that further resources will be needed to support the planned expansion of Equatorial Guinea LNG (EGLNG). We do not, therefore, expect the development of a second EGLNG train before 2016. In the meantime, gas production is likely to fall slightly as existing fields mature. The key trends and developments in Equatorial Guinea’s oil & gas sector are:

BMI expects oil production to reach 313,000 barrels per day (b/d) in 2012, before peaking at 320,000b/d in 2015. Production growth will be driven almost entirely by new production from Noble Energy’s Aseng and Alen developments. This will offset declining output from the flagship Zafiro field. Beyond 2016, we anticipate a steady decline in production unless further investment is made in exploration and production (E&P).

Consumption of crude is likely to rise steadily, albeit from a small base, as GDP per capita remains very low and vital downstream infrastructure is not in place.

BMI estimates that gas production will decline from an estimated 6.49bn cubic metres (bcm) in 2012 to just 5.99bcm by 2016 unless more investment is made in existing fields or new prospects, such as Ophir Energy’s Block R discoveries.

Gas demand is set to rise steadily on the back of solid economic growth and improved domestic infrastructure. BMI forecasts consumption of 1.74bcm in 2012, rising to 2.12bcm by 2016.

Despite the government’s massive gas reserves upgrade, we do not anticipate that a new LNG facility will materialise much before 2016-2017. This is largely due to a shortage of proven resources for feedstock.

The development of a new 22,000b/d refinery at Mbini looks to be one step closer to a final investment decision (FID) after the government tendered the project in February 2011. Nevertheless, we have not included the refinery in our forecast as, without a firm commitment from the government, it is very difficult to establish when the facility would come onstream. At the time of writing we assume an OPEC basket oil price for 2012 of US$111.47/bbl, falling to US$107.00/bbl in 2013.