Equatorial Guinea Oil & Gas Report Q3 2016 - New Market Research Report

Equatorial Guinea's oil output will see smaller decline rates over the coming years on the back of several smaller projects. However, maturing fields and a lack of new significant discoveries will continue to push the production volumes to the downside over our entire forecast period . Ophir's Fortuna FLNG project provides the most important upside to the country's gas production and net exports. While the company targets a FID by end - 2016 , we highlight risk s to the project due to slowing global demand for LNG and the large wave of LNG projects coming online within the next few years.Latest Updates and Key ForecastsEquatorial Guinea is forecast to see its oil and gas reserves stagnate or increase slightly over our forecast period to 2025 owing to maturing fields and lack of new significant discoveries. There is upside potential coming from a string of recent exploration activities offshore, as well as the new reduced-oil price environment attracting investors to lower-risk and lower-cost ventures such as Equatorial Guinea. This is reflected in our slightly improved oil reserves outlook this quarter for the coming years.In mid-January 2015, the Equatoguinean government ratified the production sharing contract for Block EG-06, signed with ExxonMobil and GEPetrol.We expect a smaller decline in production over 2016-2017 relative to recent years thanks to increased production from the Aseng and Alen projects and the Alba B3 Compression unit. However, the oil sector in Equatorial Guinea continues to face secular decline. In the absence of significant improvements in the fiscal terms on offer and broader regulatory stability, the country will be unable to draw investment into its prospective deepwater acreage.This quarter we have pushed back first gas production from the Fortuna floating liquefied natural gas (FLNG) project to 2020 from our previous estimate of 2019 based on Ophir's updated FID and first production date forecasts. The agreement with Schlumberger fell through in early 2016 and Ophir is now looking for alternative financing sources leading to delays in FID and first production at the project. The 3.4bcm project will still make the largest contribution to Equatorial Guinea's gas production over our forecast period.Negotiation of the mid-stream chartering agreement with Golar is near complete: Golar LNG has already been selected as partner for the floating liquefaction concept for the Fortuna project. The Development and Production plan was submitted to MMIE on schedule and in accordance with the PSC in March 2016. The company is finalising offtake agreements for Fortuna FLNG and is in the process of signing heads of agreement (HoA) for liquefied natural gas (LNG) offtake.There are still risks to the project's realisation, given the negative LNG industry environment at the moment with a large amount of LNG plants coming online within the coming years and the slowing demand for LNG in Europe and Asia, and with full sales and purchase agr

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