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The vital necessity of stopping oil production decline in Equatorial Guinea

Published

1 year ago

June 5, 2024

By Leoncio Amada NZE NLANG)

The discovery of oil in Equatorial Guinea in the mid-1990s constituted an undoubted turning point in the country’s history. The country’s economy had previously been based on agriculture (largely coffee and cocoa) and the export of wood, until the dawn of the oil era.

The influx of multinationals (oil majors) in Equatorial Guinea’s energy sector was due to the attractiveness of the fiscal terms and the prospectivity that the country offered for foreign direct investment (FDI) compared to other countries in the region; so much so that the nation occupied the third place among Sub-Saharan African oil-producing countries in for many years, behind Nigeria and Angola.

In effect, the discovery of oil put an end to the economic primacy of the agricultural sector and promoted the activities of the oil industry, which very soon began to attract foreign investment, allowing the enrichment and financial autonomy of the country. Oil activities led to the implementation of other related industries, thus allowing the development of other economic sectors.

This was made possible through the country’s infrastructure investments and social projects, which in turn had a new, reliable source of finance. Prior to that, traditional products like coffee, cocoa, and wood made the Equatoguinean economy largely dependent on the economic aid it received from the great powers and international financial institutions (including the World Bank, International Monetary Fund, etc.). But the discovery and exploitation of national oil deposits allowed the country to free itself from foreign economic influence. As such, Equatorial Guinea was able to undertake a huge public infrastructure investment program that covered the entire national territory and oversaw the construction of roads, bridges, ports, airports, public housing, power plants, urban districts, hospitals, university campuses, and new cities, as well as the creation of new ministry buildings and town halls. At the same time, oil wealth led to a growth in public savings and investment, reaching the record figure of 3,784 million euros in 2009.

To delve into the details, 534 million euros were invested in social infrastructure, 1,322 million euros in civil infrastructure, 997 million euros in productive investment, and 930 million euros in investment for public administration. Social investment grew by 116% in 2009, compared to an overall growth of 78%.

At the same time, the country’s oil boom has generated other complementary industries, including the construction of a liquefied natural gas (LNG) plant, a methanol plant, a liquid petroleum gas (LPG) plant, among others. These developments have given Equatorial Guinea business opportunities across the economy and have played an important role in the diversification of economic activities, promoting investment in diverse sectors of society and giving the state control over the country’s affairs.

The current situation:

After years of frenetic activity in the energy sector, the country today faces a sharp drop in oil production, which has put it at the bottom of the production rankings of OPEC countries, as can be seen in the following chart:

The reasons for this decrease in production are manifold, but foremost among them is a lack of new discoveries. The last discovery made was in 2007 at the Aseng site. If constant exploratory activity is not maintained, new deposits will not be discovered, and production levels will become volatile.

Natural gas has performed relatively better, despite being a more mature industry than oil. The gas era began with the discovery of the Alba field in 1984, with production coming online in 1991, ahead of oil production. The field still accounts for approximately 45% of the country’s daily production and is a large supplier of feed gas for its LNG (EG LNG) plant, which has been operational since 2007.

The aging of the Alba field has reduced the country’s total production, which peaked in 2013. But the decline has been gentler compared to the precipitous decline in oil production. However, growing domestic demand for gas is further reducing the country’s export capacity.

Hoping to safeguard Equatorial Guinea’s gas exports and attract international interest, the government has set out a vision of establishing the country as a regional gas liquefaction hub, receiving gas from domestic fields, as well as from neighboring Cameroon and Nigeria, to process it and export it to international markets. Such a plan would extend the lifespan of our EG LNG facility, which has been in difficulty since gas supplies from the Alba field began to decline. The project is progressing at a slow pace due to obstacles like negotiations with neighboring countries on developing cross-border oil and gas fields, securing potential supplies, and building connecting pipelines.

In 2019, the country launched a licensing round to auction 27 oil and gas blocks. In the end, three blocks were awarded to small players. In 2023, the government adopted an “open door” policy, whereby any company could express interest and enter into direct negotiations with the government. In 2023, a block was awarded to Panoro Energy as a result of these negotiations.

An open-door strategy is generally adopted when the success of a bidding round is in doubt. Indeed, bidding rounds are the superior and most widely used strategy for allocating oil and gas licenses. However, their success depends on several factors, some of which go beyond a country’s borders, such as prevailing oil and gas prices, while others are related to the country’s potential. When prices are high and the country’s oil and gas sector has promising prospects, competition among bidders tends to be strong, resulting in a windfall for the government. A failed bidding round that does not attract enough interest can damage a government’s negotiating position. To avoid such an outcome, governments use direct negotiations.

With aging assets, technically challenging small fields, and high exploitation costs, Equatorial Guinea is among the producers that are particularly exposed to the pressures of the energy transition. The government’s priority should be to extend the lifespan of its hydrocarbon sector, which represents around 85% of its GDP and just over 75% of its tax revenue, by remaining open to offers from smaller players. Governments usually prefer to work with large industry players that have a presence on their home soil, given that smaller players lack adequate financial and technical resources. It also makes it easier to negotiate new agreements. However, a change in the structure of the industry is expected as producing oil fields become more mature. The government should adopt measures that will help it adapt to this new phase.

To improve the attractiveness of investing in the country, the government announced several tax incentives, effective from early 2024, including reducing the corporate income tax rate from 35% to 25%. These measures could help but are not enough to offset the limited potential needed to generate the kind of rewards big players typically require. In fact, we believe that the measures adopted are too timid and that more forceful actions should be implemented in the short term to save and reactivate the sector that constitutes the backbone of the country’s economy.

There are no miracles in the oil industry, the only alternative is to apply the “Drill baby Drill” theory, which means drilling and drilling more exploratory wells to maintain or increase production levels. For this, certain incentive actions are necessary:

Resolve the problem of the New BEAC Change Regulation. This highly bureaucratic and suffocating process has become the biggest obstacle and brake on foreign direct investment in Equatorial Guinea’s oil sector.
Tax incentives.

Exemption from payment of tax on assignments and transfers of assets in the oil sector for companies in the exploration and development phases. This measure would revive the appetite of independent companies to invest in the Equatoguinean oil sector and would revive exploratory activity in the country, motivating agile companies dedicated to exploration, thus favoring the farm-in and farm-out processes.
Tax holidays on the payment of corporation tax (IS) for a negotiable period for new deepwater gas field contracts.
Tax holidays on the payment of corporation tax (IS) for a negotiable period for new contracts for gas fields in shallow waters.
Tax holidays on the payment of corporation tax (IS) for a negotiable period for deepwater crude oil field contracts.
Tax holidays on the payment of corporation tax (IS) for a negotiable period for crude oil field contracts in shallow waters.
Tax credits for operating companies that train Guineans and whose management positions are occupied by nationals for contracted companies as follows:
Exemption from the payment of customs and parafiscal duties on the import of equipment and machinery intended for oil operations in favor of local companies operating in the sector.
Tax credits for operating companies that partner with local companies for the establishment of research and development (R&D) centers in Equatorial Guinea.
Although the issue of transfers abroad is not a tax issue, we appeal to the Ministry of Finance and Budgets to take action on the matter because this issue has become one of the greatest obstacles to foreign investment into Equatorial Guinea.

Regulatory and legal stability. Investors seek stability in the regulations and laws that govern the oil sector. Constant changes in regulations can increase uncertainty and deter investment.
Ease of acquiring permits and regulations. Simplify the processes of obtaining permits and licenses, streamline bureaucratic procedures, and reduce the regulatory burden for companies in the oil sector.
Training and education. Promote training and specialized training programs in the oil sector to guarantee the availability of qualified labor.
Legal security. Ensure a stable and predictable legal environment to attract long-term investments in the oil sector.
Incentives for innovation and technology. Stimulate the adoption of innovative technologies in the oil industry through financial incentives or R&D support programs.
Promotion of sustainability. Promote sustainable practices in oil extraction and production.

The role of Gepetrol.

With the transfer of MEGI’s assets to Gepetrol SA, the company has the opportunity and potential to become one of the most vibrant national oil companies (NOCs) in Sub-Saharan Africa. Its association with PETROFAC as a technical partner for the operation of the ZAFIRO field will not only allow the company to acquire the experience and technical and operational capacity necessary to effectively and efficiently manage Block B, but also to be an active partner in the operation of other oil fields to represent the interests of the state.

Equatorial Guinea is in a transitional phase of formulating projects and transformative strategies aimed at diversifying its economy, the results of which have yet to be felt, but which will considerably reduce its high dependence on the oil sector.

The fact remains that more than 80% of the country’s GDP comes from the hydrocarbon sector and this scenario is not expected to change in the medium term. It is for this reason that we invite all actors in the sector to adopt whatever measures are necessary to save “the goose that lays the golden eggs.”
Distributed by APO Group on behalf of African Energy Chamber.

SOURCE
African Energy Chamber

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Presidency Refutes Afenifere’s Deceitful Statement on President Bola Tinubu’s Midterm:

Published

10 hours ago

June 5, 2025

The Gleamer

Chief Sunday Dare

The statement from a factional Afenifere group raises serious concerns about a penchant and deliberate attempt to find faults and trade in deceit instead of objectivity. The group has found it challenging to accept that under the Renewed Hope Agenda of President Bola Tinubu, Nigeria’s comeback story is firmly underway.

The rebellious Afenifere claims that President Bola Tinubu’s administration’s performance over the past two years has witnessed a regression in human development, economic mismanagement, and democratic backsliding.

This is a jaundiced view, echoing the view of opposition politicians, one of whom the group supported in the 2023 election.

A balanced assessment based on available data reveals a more objective and progressive picture, with significant achievements amid the challenges expected from a country like Nigeria with decades-old problems.

Beyond its confounding conclusions based on prejudice, the statement raises the following issues. With the ensuing point-by-point clarification, it will become clear that the group’s position is neither grounded in facts nor logic.

Economic Reforms and Their Impact

The factional Afenifere’s claim that Tinubu’s economic reforms, particularly the removal of fuel subsidy and the floating of the naira, have led to “unmitigated sufferings” and “economic deforms” seeks to draw attention to some of the challenges but overlooks the macroeconomic gains. The removal of the fuel subsidy, announced on May 29, 2023, saved the government over $10 billion in 2023 alone, reducing fiscal strain and redirecting funds to other sectors. Unifying the foreign exchange market and the naira’s floatation aimed to address distortions in the currency market, boosted foreign reserves to $38.1 billion by 2024 and achieved a trade surplus of N18.86 trillion for the country.

Under the Tinubu administration, Nigeria’s annual inflation rate fell to 23.71% in April 2025 from 24.23% in the prior month. Food inflation, the most significant component of the inflation basket, remained elevated but moderated to 21.26% from 21.79%

While these figures indicate stabilisation, the immediate impact on ordinary Nigerians is not lost. The government’s cash transfer programme, which provides funds to the poorest households and benefits over 5.7 million households, is a credible outreach.

However, dismissing the twin policies as “unforced errors” ignores the unsustainable nature of the previous subsidy regime and multiple exchange rate systems, which were draining public finances. A more balanced critique would acknowledge the necessity of reform while emphasising the need for better-targeted social safety nets.

As of today, the Tinubu administration has recorded over 900,000 beneficiaries of the Presidential Loan and Grant Scheme, over 600,000 beneficiaries of the Students’ Loan Scheme, NELFUND, N70,000 minimum wage, NYSC monthly stipend increase from N33,000 to N77,000, Free CNG kits distributed to thousands of commercial drivers across Nigeria with CNG buses rolled out in partnership with state governments, leading to a significant drop in transport costs. The administration also recorded over $10 Billion FX debt cleared, Federal account allocation to states growing by 60%, enabling more local development projects, N50 billion released to end the perennial ASUU strikes, and over 1,000 PHCs revitalised nationwide with an additional 5,500 undergoing upgrades.

The administration also disbursed N75 Billion in palliative funds to states and LGs for food distribution and cash transfers, over 150,000 youths are being trained in software development, tech support and data analysis under the 3 Million Technical Talent (3MTT) project, over 20,000 affordable housing units under construction under the renewed Hope cities program launched across Nigeria, N200 Billion in Loans to farmers and agro-processors. Other gains: over two million Nigerians are now connected to new digital infrastructure and community broadband hubs and public WiFi projects, 3.84% GDP growth in Q4 2024 (highest in 3 years), over $50 Billion in new FDI Commitments, Net Foreign Exchange Reserves up from $3.99 Billion (2023) to $23.11 Billion (2024), over $8 Billion in new oil and gas investments unlocked, and over $800 million realised in processing investments in solid minerals in 2024 and inflation as at April was down to 23.17%.

It is now pertinent to inquire from opposition leaders about alternative strategies they would propose in contrast to this administration’s extensive list of significant achievements currently benefiting Nigerians in real-time.

Cost of Governance and the Oronsaye Report

The assertion that the Tinubu administration has failed to implement the Oronsaye Report and instead increased governance costs is inaccurate. The Oronsaye Report, which recommends the merger or scrapping of government agencies to reduce expenditure, has not been fully implemented and has drawn criticisms; it must be noted, however, that the administration has made some efforts to improve fiscal discipline. The fiscal deficit was reduced from 5.4% of GDP in 2023 to 3.0% in 2024, and the debt service-to-revenue ratio dropped from nearly 100% in 2022 to under 40% by 2024. The government also recorded over N6 trillion in revenue in Q1 2025, partly due to removing Ways & Means financing and fuel subsidies. These steps demonstrate fiscal prudence and will eventually translate into immediate, tangible relief for citizens. The administration is working earnestly to address these optics and prioritise cost-cutting measures, including implementing the Oronsaye Report, to restore public trust.

Allegations of Prebendalism and Corruption

Afenifere’s claim that the administration favours “the privileged and connected” through corrupt palliative distribution and mega-project allocations is questionable. Reports of palliatives being mismanaged or distributed through unverified channels have no doubt surfaced, raising concerns about transparency.

The administration has taken steps against corruption, such as suspending Humanitarian Affairs Minister Betta Edu in January 2024 over alleged fund diversion, signalling some commitment to accountability. Critics may argue that more systemic action is needed, but dismissing all the efforts as propaganda overlooks these initial steps.

Without abusing Presidential powers, the administration is working on expediting action on all pending investigations and prosecution of corrupt practices. At the same time, critical agencies are collating credible evidence on ongoing corruption litigations. It must, however, be noted that in 2024, the Economic and Financial Crimes Commission (EFCC) secured a record-breaking 4,111 convictions, marking its most successful year since its inception. They recovered over N364 billion and significant amounts in foreign currencies, including $214.5 Million, $54,318.64, and 31,265 Euros.

The EFCC achieved its single most significant asset recovery in 2025, with the final forfeiture of an Abuja estate measuring 150,500 square meters and containing 725 units of duplexes and other apartments. The EFCC concluded the final forfeiture and handed the estate to the Ministry of Housing in May 2025.

Democratic Concerns and Centralisation

Afenifere’s accusation that the Tinubu administration is pursuing a “one-party state totalitarianism” and undermining democratic institutions is unsupported and lacks merit. The claim of neutralising the legislature and judiciary is also a false alarm.

The public should note that the Supreme Court has upheld opposition victories in states like Kano, Plateau, and Abia, suggesting judicial independence. The Independent National Electoral Commission (INEC) has faced criticism for allegedly appointing individuals said to be ruling party affiliates, but no evidence confirms these appointees are card-carrying APC members.

The allegation that the Tinubu government cracks down on peaceful protesters is primarily unfounded. It is a regurgitated rhetoric deployed under previous administrations as a reflection of broader challenges in Nigeria’s democratic culture.

The issue of the State Police is more complex than the oversimplified approach of the factional Afenifere’s statement. Every administration policy is subject to security impact assessment before implementation, and there is a difference between the State Police being widely advocated and a Police State that critics may blame the Federal Government for if implemented without caution.

Security and Social Welfare

Contrary to the impression created, the administration’s security record is impressive. Over 13,500 terrorists, bandits, and insurgents have been neutralised and 7,000 arrested in the past year, though there is still some news of abductions and violent attacks. The administration’s proactive response to security-related matters has paved the way for more farmers to return to their farms, impacting food production and supply.

The administration also embarked on agricultural initiatives, including tractor procurement, fertiliser distribution, and increased mechanisation.

The government has also not relented on its Regional Development drive as the administration succeeded in establishing Development Commissions across 6 Geopolitical zones (South West, North West, North Central. North East, South East and the Niger Delta) to empower communities and accelerate developments.

Political Climate and 2027 Elections
The claims of government-sponsored conflicts within opposition parties lack concrete evidence and should be ignored.

Economic reforms are undoubtedly laying the foundation for long-term stability, with GDP growth at 4.6% in Q4 2024 and a Fitch B credit rating upgrade as evidence. Moody’s Investors Service’s latest upgrade of Nigeria’s rating from Caa1 to B3, with a Stable Outlook, indicates that the Tinubu administration is on the right path.

The government is not oblivious to some discontent and difficult times among Nigerians. There is an urgency to deliver more tangible results, which is guaranteed given the impressive performance of the administration in just two years.

Afenifere’s statement saw the cup as half empty. On the contrary, it’s half full. Under President Tinubu’s administration, some of Nigeria’s hydra-headed problems are being tackled headlong.

The administration has achieved fiscal improvements, such as reduced deficits and increased revenues, which will eventually translate into meaningful microeconomic relief for most Nigerians in the short term, even as the government moves to address these issues with greater empathy and transparency.

The administration’s demonstrable priorities are securing the nation, fixing the economy, and improving human capital development.

Responsible citizens and political leaders must work collaboratively with the administration to address the challenges and counter disinformation, as highlighted in the admonition against fake news and deceptive AI videos.

Under President Tinubu’s leadership, Nigeria is turning the corner. From stabilising the naira and curbing inflation to reducing debt burdens and

expanding access to education and health, the administration delivers bold reforms with actual results. With improved security, regional inclusion, anti-corruption measures, and institutional rebuilding, Nigeria’s comeback story is not yet complete — but it is firmly underway.

– Sunday Dare is the Special Adviser to Mr. President on Media and Public Communications.

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