Equatorial Guinea Oil & Gas Report Q1 2014 - New Market Research Report

From: Fast Market Research, Inc.
Published: Fri Nov 29 2013

Although the start of a number of small fields and continued interest in West Africa's deepwater are positive trends for Equatorial Guinea's oil and gas sector, the temporary recovery in oil production will gave way to gradual downtrend, placing the country's heavily oil dependent economy at risk. While the resources may have been identified to support an expansion of the country's LNG export capacity, uncertainty over the market and infrastructure has seen an investment decisions repeatedly delayed. Notwithstanding the risk of new discoveries, we expect both oil and gas production in the West African nation to gradually head lower over the course of the decade.

The key trends and developments in Equatorial Guinea's oil and gas sector are:

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* Since having peaked in 2005 at 376,000b/d, oil production in Equatorial Guinea has failed to engineer a strong enough recovery to permanently return to growth. While output fell to 297,000b/d in 2011, volumes have since managed notable gains on the back of the start of smaller fields offshore. We estimate production will continue rising averaging 346,000b/d for 2013 and continue to make incremental gains before peaking at 376,000b/d in 2015.
* The start of new fields such as Carla and later Alen, will deliver gains over the course of our forecast period, but in our view are not enough to sustain the recent recovery in production. While we see some upside from prospects under appraisal, such as Noble's Diega and potential liquids from Ophir's gas rich Block R, we see do not believe development of these prospects alone will be able to offset falling volumes from currently producing fields. Beyond 2016, we anticipate a steady decline in production unless further investment is made in exploration and production (E&P) with new discoveries being brought online.
* Equatorial Guinea recently announced the awarding of a number of onshore and offshore blocks to small and mid-sized players. Traditional international oil companies (IOCs) and players from Brazil, Africa, and Asia were among the winners. In announcing the awards, officials said other blocks would be put up for auction as additional 3D seismic data was made available. Supported by high prices, we expect deepwater drilling to remain a key strength of the country's oil and gas sector on the back of rising interest in West Africa's offshore potential.
* Gas production rose to 6.8bcm in 2011, according to the latest historical data from the EIA. BMI forecasts that production will to fall to 6.5bcm in 2013 and decrease steadily over our 10-year forecast period unless more investment is made in existing fields and new prospects. While a number of small liquids rich discoveries are due to come online associated gas from these developments is largely destined for reinjection at the well-site rather than for use to supply domestic or export markets.

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