This article was originally published in the Africa Energy Series: Equatorial Guinea book.
A strong pipeline of projects and region-leading infrastructure for oil and gas make Equatorial Guinea a prime deal-making destination in Central Africa.
In recent months, Equatorial Guinea has courted international investors with great enthusiasm — seeking to pump fresh life into a variety of sectors, from the well-established oil and gas sector to the barely developed (but bursting with potential) agricultural sector. H.E. Gabriel Mbaga Obiang Lima, the Minister of Mines and hydrocarbons, has been particularly active, taking the country’s EG Ronda 2016 on a global roadshow from Cape Town to Singapore, building close ties with potential Middle Eastern investors, successfully applying to join the Organization of the Petroleum Exporting Countries and seeking to collaborate with African nations.
At the same time, the government of Equatorial Guinea has taken real steps to ease investment and put an end to a reputation for having an inefficient bureaucracy. In the last several years, the government has established a co-investment fund of $1 billion for key industries like petrochemicals and mining; created a “one-stop-shop” for opening a business in the country; offered tax exemptions for diverse projects; and established an independent body to solve business disputes. The Ministers of Economy and Finance also held a roundtable discussion with the US Chamber of Commerce in 2016 in an effort to solicit investment.
The concerted effort to attract new investment to the country is not surprising, coming on the heels of a recession and stagnated growth since the price of oil and gas took a downward spiral. Real GDP growth fell from 8.3 percent in 2012 to -10 percent in 2016, while foreign direct investment plummeted from $13.5 billion in 2012 (the fifth-most for all of Sub-Saharan Africa) to $54 million in 2016. The country’s many infrastructure projects were put on hold — roads and buildings sat unfinished; oil and gas deals were cancelled or delayed and a drive to diversify the economy with petrochemicals, agriculture and storage projects was deferred.
But the endeavor to woo international investors is paying off, with global leaders in the energy industry taking a fresh look at the country. The Fortuna FLNG project, spearheaded by Ophir Energy and expected to reach FID in 2018, has attracted key investors, including Schlumberger and Golar LNG. Geneva-based Gunvor Group was named the preferred LNG offtaker for the project. The country has already entered an agreement with OneLNG, the joint venture company heading the project, to examine the possibility of a second FLNG.
In 2017, the Ministry of Mines and Hydrocarbons signed a memorandum of understanding with Shell to facilitate its entry into new hydrocarbons projects in the country, in addition to confirming Shell would continue to buy LNG from the country’s Punta Europa gas complex after its acquisition of BG Group in 2016. Following the EG Ronda licensing round, there are several new entrants into the sector, including leading frontier explorers Kosmos Energy and Trident Energy; and longtime players in the Equatorial Guinea offshore sector, including Exxon- Mobil and Ophir Energy.
Luba Freeport, majority-owned by London-based Lonrho, is also a draw for investors. The natural deepwater port, which also offers fabrication, bunkering and many other competitive services, provides for the offshore oil and gas sector throughout the Gulf of Guinea with its convenient location and fiscal incentives.
Investment is also entering the country from the Middle East — the Bioko Oil Terminal is expected to break ground in 2018 after a development and financing deal was inked with Arabian Energy of Saudi Arabia in May 2017 during the Equatorial Guinea-Saudi Arabia Economic Forum held in Jeddah, Saudi Arabia last year. The $500 million, 1.2-million cubic meter storage facility will further Equatorial Guinea’s drive to be a leader in the Gulf of Guinea, which is severely lacking in storage facilities.
Like most oil-dependent economies, Equatorial Guinea’s economic and development progress took a tumble after the oil price crash. But the country clearly did not sit idle waiting for the price slump to end. Instead, after years of carefully laying the groundwork for new investment, Equatorial Guinea is emerging from the oil price crash stronger, and ready to double down on development and economic diversification.