H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons for Equatorial Guinea, talks to AOP about his country’s plans to join the Organization of the Petroleum Exporting Countries.
Why have you made the decision to submit an application to join OPEC at this time?
Equatorial Guinea is the third largest producer of oil and gas in Africa, and we consistently maintain internationally competitive production levels. Even with the low oil and gas price environment, we have maintained output levels at around 200,000 barrels per day, on par with Gabon, which rejoined OPEC in 2016.
Like other producers and net exporters, Equatorial Guinea has an important role to play in addressing the current global oversupply of petroleum products and maintaining stable market conditions in the future.
In December, we negotiated a deal with OPEC to be one of 11 non-OPEC members agreeing to production cuts, with our share of the reduction to be 12,000 barrels per day. As a member of OPEC, Equatorial Guinea can fully join other producers in their efforts to stabilize the oil and gas industry, and the global financial markets as a whole. This will not only benefit Equatorial Guinea, but other OPEC and non-OPEC countries. Though we are undertaking diversification efforts, oil and gas revenues are still immensely important to the economy of Equatorial Guinea and, like many oil and gas producers across the globe, we are eager for oil prices to stabilize. Steady global markets will boost our own economy and enable us to continue our diversification efforts.
Additionally, joining OPEC could garner benefits in terms of increased international investment. Already, Equatorial Guinea has been emphasizing and growing its relations with Middle Eastern countries, recently taking the EG Ronda 2016 bidding round to the United Arab Emirates. Equatorial Guinea hosted the 4th Africa-Arab Summit in November and in 2016 signed a memorandum of understanding regulating bilateral relations with Kuwait. Joining OPEC will further these relationships, and help Equatorial Guinea grow in the global market.
There was brief consideration for Equatorial Guinea joining OPEC back in 2009. How much has the oil and gas industry changed since then?
Obviously the industry has changed significantly, as the oil and gas industry has been experiencing a slump for over two years due to an abundance of oil and gas in the market.
In 2009, oil and gas prices were much more stable, though prices dipped somewhat that year. Oil and gas prices fell from an average nominal price of $91.48 for 2008 to a price of $53.48 in 2009. But the dip did not last for long, as prices quickly rebounded in 2010, rising to a nominal average of $71.21, and increasing steadily through 2014.
Prices peaked in 2014, and producers, countries and the global economy suffered a great shock when prices began to fall so dramatically at the end of that year. The drop in prices was not a one-time blip in the market, but a continued, steady decline, reaching lows of $28 per barrel in January 2016.
Importantly, these sluggish oil and gas prices have led to billions of dollars in deferred investment and cancelled projects. Compared to 2009, there is a much greater need for international cooperation to energize the industry; partnerships to contain and regulate oil and gas production; a demand for better and improved technology; and a need for more cross-border investment on large-scale projects.
This is what we are pursuing with our bid to join OPEC in 2017.
What kind of contribution would Equatorial Guinea make and what kind of influence would it have on OPEC?
As the third largest oil and gas producer in Africa, Equatorial Guinea is crucial to furthering OPEC’s overall mission of ensuring a steady supply of petroleum and associated products to global consumers. The stability within Equatorial Guinea with regard to government, energy policy and relations with petroleum companies enhances the overall stability of OPEC.
Equatorial Guinea maintains good relationships in trade and investment with two economic powerhouses: China and the United States. Our country has a strong record of using and leveraging international investment from these two economies, and we continue to develop the potential of oil and gas in regard to downstream activity.
Notably, OPEC is a meeting place for investors, and an opportunity to exchange advancements in technology and efficiencies. With a strong background in offshore oil and gas drilling, and as a pioneer in new technology — Ophir’s FLNG project is an example — we have much to offer to offer OPEC in the realm of experience and expertise.
Though we are a small producer compared to some of the OPEC majors, such as Saudi Arabia which has a production of about 10 million barrels per day, we are a major producer in Africa and a significant exporter of oil and gas and products. Our output is expected to rise as new projects from continued exploration come on-stream.
It is important that all of the petroleum exporters work together on a coordinated policy to limit production, which will provide stability to the global markets.
H.E. Gabriel Mbaga Obiang Lima will appear as a keynote speaker at the Africa Oil & Power 2017 conference, alongside presidents, prime ministers and energy ministers from around Africa. You can register for your delegate passes by clicking here.