European energy companies and Equatorial Guinea must juggle regional politics and sensitivities over existing deals for their ambitious new gas plan to succeed.
Sub-Saharan Africa’s third biggest oil producer, a magnet for US oil companies, hopes to become a regional gas hub by selling the gas now burnt off, or flared, at its oilfields, exploiting other deposits and buying supplies from Nigeria and Cameroon.
Lured by the prospect of large gas reserves and driven by uncertainty over future supplies, Germany’s E.ON Ruhrgas, Spain’s Union Fenosa and Portugal’s Galp Energia have joined the government’s 3G consortium to get more gas from West Africa, Reuters says.
In the long run we need to integrate new supply sources and liquefied natural gas (LNG) will play a very significant role,” said Dietrich Gerstein, head of LNG at E.ON, the biggest foreign partner with a 25% stake.
“The 3G will be a very significant cornerstone in this next step to securing LNG supplies for our systems and for our regasification terminals,” Gerstein said at a gas conference in Equatorial Guinea in late March.
The consortium will first look at how to increase Equatorial Guinea’s gas output from current annual production of 3.7 million tonnes of LNG, gas frozen to a liquid for export on tankers.
Equatorial Guinea has 1.3 trillion cubic feet (tcf) of proven gas reserves and probable reserves of over 4.4 tcf, according to the Oil & Gas Journal.
The draft plan on how to get the most gas out of the region is expected by October.
“Hopefully the 3G will kick start it. You could be talking a total of three trains (production lines) … 10 million tonnes per year,” one Equatorial Guinea energy expert said.
Current LNG production comes from EG LNG, a company operated and 60 percent owned by Houston-based Marathon Oil Corp, which freezes gas from the Alba field.
More gas is expected to come from the Zafiro field, which Exxon Mobil operates and has been criticised for flaring. Noble Energy and Ophir Energy, two smaller exploration companies, have also made significant finds.
Optimists argue the country has enough gas for a second train but many say the project hinges on bringing gas in from neighbouring countries.
“The current reserves in Equatorial Guinea (do) not make investment in a second train viable which means that the country will have to look for feed gas from other countries, notably Nigeria and Cameroon,” said William Ngwa of PriceWaterhouseCoopers.
Gabriel Obiang Lima, Equatorial Guinea’s vice energy minister and son of President Teodoro Obiang Nguema Mbasongo, will visit Nigeria and Cameroon in April to try and convince them of the benefits of the scheme.
Relations between the countries remain tense and draft agreements have previously been agreed but not implemented.
Cameroon and Equatorial Guinea still contest their maritime border and Malabo says the gunmen who attacked it in February came from Nigeria’s chaotic Niger Delta.
“Political negotiations for cross border supply of gas can be very complex when the various sovereign interests (are) taken into account,” Ngwa said.
Industry executives at the conference complained it was unclear whether companies which had already spent millions of dollars finding the country’s gas would get a return on their investments.
Lima said it was too early to say how the consortium would operate, but tried to allay fears 3G would raid the resources the other energy companies found.
“That is not the function of 3G,” Lima told executives before warning them the government had the final say on how the resources are exploited.
“The ministry will ensure that everyone is compensated.”