June 7, 2018

Noble Energy agreement with E-Guinea’s govt opens new door to gas monetization in West Africa

Noble Energy agreement with E-Guinea’s govt opens new door to gas monetization in West Africa


Thanks to a landmark agreement signed last month between Noble Energy and Equatorial Guinea’s Minister of Mines and Hydrocarbons, the West African country has a renewed shot at fulfilling its ambitions of a second era of development, this time fuelled by natural gas.

The agreement, signed May 10 and including the state-owned GEPetrol and third-parties, will see Noble Energy pumping 600 billion cubic feet of natural gas from the offshore Allen field to the already-established Punta Europa integrated gas complex. In a strategic move, the Minister of Mines and Hydrocarbons of Equatorial Guinea H.E. Gabriel Mbaga Obiang Limaat the same time announced his plans to build a natural gas Megahub operating from Punta Europa that will be the groundwork for Equatorial Guinea to rise as a significant player in the global LNG exports market. The Megahub will aggregate the production of any existing and new natural gas discovery in the country.

The country’s gas revolution will have a dramatic impact on all aspects of Equatorial Guinea’s economy — providing opportunities for economic diversification, creation of local content and jobs, and ensuring that the state-owned gas company, Sonagas, will take a leading role in the development and marketing of LNG.

Once the agreement comes into effect, Noble’s natural gas output will go from being injected for enhanced condensate recovery to fuel the Marathon Oil-operated Alba Liquefied Petroleum Gas plant and EGLNG’s Liquefied Natural Gas (LNG) facility, located at Punta Europa. This is no small project. Today, Equatorial Guinea’s only LNG facility receives natural gas-feed from the ageing Alba field and production is estimated to decline dramatically by as early as 2020.

Under the agreement, a 65-kilometre pipeline will be built to connect Noble’s operations to Punta Europa. The rest of the upstream facility will require only minor modifications to be able to operate in this new fashion. Further, the pipeline will be designed with the capacity to receive not only Alen’s output, but also that of surrounding fields. The remainder of the fields in blocks 0 and 1, where the Alen field is located, will also be able to provide feedstock for the country’s gas-processing facilities with little to no investment. This answers not just the need for further feedstock but also limits the country’s dependency on a single upstream project.

In all, this single development brings assurance to the continuity of Equatorial Guinea’s gas-based economic development strategy. In an official statement, Gary W. Willingham, Noble Energy’s executive vice-president, said that “this project will transform the Alen platform into an offshore hub for potential development of additional gas fields nearby.” First production from the project is expected to come online as early as 2020.

The Big Picture

These developments are representative of something bigger than figures. After all, we have been hearing Equatoguinean leaders speak of gas-fed industrialization and a gas-based petrochemical revolution for years. What the Noble deal and the natural gas Megahub represent beyond its economic potential, is a statement to the industry and the international community that is best encapsulated in the words of Gabriel Mbaga Obiang Lima at the Africa Oil and Power, London conference: “This will prove to the world that Equatorial Guinea doesn’t just talk”, he said in the announcement.

This is a fundamental message to industry players that are weary of delayed negotiations and bureaucratic difficulties. A message that we stated as fundamental in our analysis of Equatorial Guinea’s natural gas policy in “Big Barrels: African Oil and Gas and the Quest for Prosperity,” and that is now strongly materializing.

It seems that Equatoguinean leaders are finally gearing up for a true gas-based revolution and at quick pace. According to the minister, if we account for existing gas-processing infrastructure, the final goals of the natural gas Megahub are already 25 percent to 30 percent complete. Gabriel Obiang was clear during his address: the project is to be complete by “2020 or even before.” Further, the Punta Europa Megahub opens the door, not just to boost Equatorial Guinea’s LNG production exports, but to bring in gas production from neighbouring countries to produce LNG. The dream of turning Bioko Island into the Singapore of West Africa seems more alive than ever.

Just a few days before his speech at AOP London, Mr. Obiang Lima signed a Memorandum of Understanding with Shell Gas & Power Developments, stating the intent to undergo a joint evaluation and development of business opportunities in the country’s gas industry at the same time that the MMIE is evaluating the sale of LNG to independent and state-backed oil companies and traders from 2020 onwards.

Building Bridges

One thing seems certain — advances in the country’s natural gas, energy and economic policy could not have been accomplished so swiftly and successfully without the cooperation of OPEC and non-OPEC members.

Their contribution in gathering information and sharing know-how helped in reviving declining oil and gas fields, which in all helped Equatorial Guinea rise up from the oil price slump that sent its budget and those of many other oil nations into disarray just a few years ago. Mr. Obiang Lima said that the participation of international organizations is a fundamental tool for progress and that African nations should strive to be at every high-level negotiation table, non-least in matters of energy. The application for OPEC membership made by the Republic of Congo in January followed precisely on the influence and experience of Equatorial Guinea within the oil cartel.

The Equatorial Guinea-promoted LNG2Africa program, which is fostering intra-African LNG trade and use for power generation and industrial development, or the LNG sales agreements signed with Ghana, Burkina Faso and others, now come full circle with the advances in Equatorial Guinea’s internal natural gas industry and strengthen the country’s stand to become an LNG hub for the whole of Africa. It seems we are finally seeing a move from words to action in the small West African nation, and that represents great opportunity for all involved.

NJ Ayuk JD/MBA is a leading energy lawyer and a strong advocate for African entrepreneurs, he is recognized as one of the foremost figures in African business today. A Global Shaper with the World Economic Forum, one of Forbes’ Top 10 Most Influential Men in Africa in 2015, and a well-known dealmaker in the petroleum and power sectors. He is the founder and CEO of Centurion Law Group.