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HomeNewsIndustry report says Gabon oil production declining

Industry report says Gabon oil production declining

While some near-term gains are expected in Gabon’s oil production, the long-term trend is for decline as production falls from mature fields and fails to be offset by new volumes, according to a newly-published industry report by Business Monitor International (BMI).

According to BMI, a slight increase is expected in Gabonese oil output over the short term, supported by field redevelopment and to a lesser extent the upside from the start of some small new fields.

“While we see upside to this outlook from new discoveries or unannounced plans, the long-term outlook for Gabon’s oil supply will be tied to offering new acreage with the country’s deepwater and subsalt acreage seen as highly prospective.

“Moreover, with longstanding concerns about corruption and labour relations, the most recent developments — which have seen fields seized by the authorities — underscore concerns regarding the business environment, which could see otherwise interested parties hesitate to invest in the revival of Gabon’s flailing oil sector,” BMI observed.

“This report analyses all main industry participants and indicators for oil and gas and LNG, forecasting market performance in 2013 and beyond,” said Lyndsey Anderson, BMI’s Head of Industry Research

According to the report, Gabon’s oil output is expected to average 243,000 barrels per day (b/d) in 2013, before falling to 235,000b/d in 2017.

While at present BMI sees more downside than upside risk to these figures, the report noted that a series of recent discoveries in Gabon’s deepwater and increasingly subsalt acreage underscore the untapped potential of the country, despite its status as a mature producer.

“Unlocking this untapped potential will require greater clarity over fiscal and tax regimes,” the report said.

Although terms were to be reformed to offer greater incentive for investment in exploration and production, falling production seems to have encouraged contradictory policy, with oil minister Etienne Ngoubou confirming that the goal of fiscal reforms was to increase the share of oil profit remaining in Gabon to 35-45 percent in 20 years. He estimated that less than 20 percent remains currently.

The government would also expand its role in the sector with the newly-created Gabon National Oil Company receiving 10-20 percent equity stakes in both new acreage and as part of the renewal of existing licences.

More industrial action, which saw the oil workers union strike for several days in March, underscores the enduring threat of labour tensions to operations.

“Although officials and operators downplayed the impact of a week-long strike in March, the frequency of labour action and prospects that the government may overreact and further undermine confidence in the country’s business environment support our view that elevated above-ground risks remain a key threat to investment in Gabon’s oil sector,” BMI pointed out.

However, reports in late March that the government was in advanced talks with oil companies such as Shell and Total for some of the 42 blocks open for bidding suggested interest, at least among larger international oil companies, remained.

Yet, rising stakes for the state could limit the attractiveness of Gabon’s acreage to smaller independents, the report indicated.

“Moreover, the government use of audits to demand clawback provisions and increase its equity stakes in existing licences could undermine the country’s attractive business environment and undermine interest in the blocks on offer,” BMI cautioned.

With Gabon’s existing refinery scheduled to be shut down in 2016, at the same time as the new facility is to come online, the country would not only avoid the need to import expensive refined fuels, but would also gain the capacity to become a fuel exporter.

BMI estimates that gas production will continue to rise in line with consumption over the next decade, largely as a result of reductions in flaring, although there is upside from the recovery of associated gas as new fields are brought online.

“We have slightly adjusted our forecasts to the downside in line with historical data and news regarding projects, but our core view remains that gas output will grow over the decade as infrastructure comes online, notwithstanding delays and the potential upside from new discoveries,” said the report.


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