Equatorial Guinea Oil and Gas Report Q4 2009

Equatorial Guinea Oil and Gas Report Q4 2009

The new Equatorial Guinea Oil & Gas Report from BMI forecasts that the country will account for just
0.03% of African regional oil demand by 2013, while providing 3.55% of supply. African regional oil use
of 2.98mn barrels per day (b/d) in 2001 rose to 3.60mn b/d in 2008. It should average 3.58mn b/d in 2009
and then rise to around 3.96mn b/d by 2013. Regional oil production was 7.84mn b/d in 2001, and in
2008 averaged 10.20mn b/d. It is set to rise to 11.98mn b/d by 2013. Oil exports are growing steadily,
because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an
average 4.86mn b/d. This total had risen to 6.60mn b/d in 2008 and is forecast to reach 8.02mn b/d by
2013. Angola has the greatest production growth potential, with Nigerian exports set to soar if it can
resolve recent quasi-political issues.
In terms of natural gas, the region in 2008 consumed 115bn cubic metres (bcm), with demand of 181bcm
targeted for 2013. Production of 211bcm in 2008 should reach 354bcm in 2013, which implies net exports
rising from 96bcm in 2008 to 173bcm by the end of the period. Equatorial Guinea in 2008 consumed
1.28% of the region’s gas, with its market share set to be 1.04% by 2013. It contributed 3.17% to 2008
regional gas production and, by 2013, will account for 1.86% of supply.
For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a
41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuck
with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and
Dubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect to
see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining
further ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged
and we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.
In 2009, BMI is now assuming a global average gasoline price of US$62.12/bbl, with the fuel having
peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The BMI gasoil forecast is
for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyear
outturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to
be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put by
BMI at US$49.06/bbl, down 43.9% from the previous year’s level.
In 2009, GDP is now forecast by BMI to fall by 4.5%, following growth of 10.1% in 2008. The predicted
2010 decline is 0.5%, followed by growth of 3.2% in 2011, 3.5% in 2012 and 3.7% in 2013. We expect
oil demand to rise from an estimated 1,050b/d in 2008 to 1,340b/d in 2013. State oil company
GEPetrol’s primary focus is to manage the interest stakes of the government in various production
sharing contracts (PSCs) and joint ventures (JVs) with international oil companies (IOCs). Thanks to IOC
investment, oil output is forecast to increase from 361,000b/d in 2008 to 425,000b/d in 2013, before
going into decline. Gas production should ease to 6.6bcm by 2013, down from 6.7bcm in 2008.
Consumption is expected to rise from 1.5bcm to 1.9bcm by the end of the forecast period, providing
exports of 4.7bcm – in the form of LNG.
Between 2008 and 2018, we are forecasting an increase in Equatorial Guinea oil and gas liquids
production of 6.4%, with volumes peaking at 425,000b/d in 2013, before falling steadily to 384,000b/d by
the end of the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by
62.9%, with growth slowing to an assumed 5.0% per annum towards the end of the period and the country
using 1,710b/d by 2018. Gas production is expected to rise to 7.1bcm by the end of the period. With
demand rising by 62.9% between 2008 and 2018, there is scope for exports of around 4.7bcm. Details of
BMI’s 10-year forecasts can be found in the appendix to this report.
Equatorial Guinea now occupies 10th and last place in BMI’s updated Upstream Business Environment
rating, and is one point behind Sudan. It is in a reasonable position to move higher over the medium term.
The country’s score benefits from moderate oil and gas output growth prospects and attractive licensing
terms. The country’s risk environment is somewhat shaky, but this is hardly uncommon in the African
region. The country is also at the bottom of the league table in BMI’s updated Downstream Business
Environment rating, with no high scores and progress further up the rankings unlikely unless the energy
market grows rapidly or refineries are built. It is ranked 10th thanks to low scores for refining capacity,
oil and gas demand, likely refining capacity expansion, nominal GDP and population. Gabon is four
points ahead of it in the regional rankings.

Executive Summary ....5
Equatorial Guinea Energy Market Overview ...7
Regional Market Overview .............9
Oil Supply And Demand.......... 9
Table: Africa Oil Consumption (000b/d) .......... 10
Table: Africa Oil Production (000b/d) 11
Oil: Downstream .... 12
Table: Africa Oil Refining Capacity (000b/d)... 12
Gas Supply And Demand ...... 13
Table: Africa Gas Consumption (bcm) ............. 13
Table: Africa Gas Production (bcm)... 14
Liquefied Natural Gas........... 15
Table: Africa LNG Exports/(Imports) (bcm)..... 15
Business Environment Ranking ..16
Africa Region..... 16
Composite Scores............. 16
Table: Regional Upstream Business Environment Rating.... 17
Table: Regional Downstream Business Environment Rating............. 18
Upstream Scores 18
Downstream Scores ......... 19
Equatorial Guinea Upstream Rating – Overview ........... 19
Equatorial Guinea Upstream Rating – Potential Returns.... 19
Equatorial Guinea Upstream Rating – Risks to Potential Returns...... 19
Equatorial Guinea Downstream Rating – Overview....... 20
Equatorial Guinea Downstream Rating – Potential Returns 20
Equatorial Guinea Downstream Rating – Risks to Potential Returns . 20
Risk Summary ...........21
Political Risk...... 21
Economic Risk ... 21
Business Environment........... 21
Industry Forecast Scenario ..........22
Oil And Gas Reserves ........... 22
Oil Supply And Demand........ 23
Gas Supply And Demand ...... 24
LNG..... 24
Refining And Oil Products Trade........ 25
Revenues/Import Costs.......... 25
Table: Equatorial Guinea Oil & Gas – Historical Data & Forecasts. 26
Other Energy ..... 27
Table: Equatorial Guinea Other Energy – Historical Data & Forecasts ......... 27
Key Risks To BMI’s Forecast Scenario.... 28
Long-Term Oil & Gas Outlook ........... 28
Macroeconomic Outlook 29
Table: Equatorial Guinea – Economic Activity 31
Competitive Landscape.32
Executive Summary. 32
Table: Key Players – Equatorial Guinea Energy Sector. 33
Overview/State Role 33
Table: Key Upstream Players ........ 34
Table: Key Downstream Player..... 34
Company Monitor......35
GEPetrol............ 35
ExxonMobil........ 37
Marathon ........... 39
Hess – Summary 42
Noble Energy – Summary 42
Repsol YPF – Summary ... 43
Glossary of Terms.....44
Oil & Gas Ratings: Revised Methodology 45
Introduction ....... 45
Ratings Overview.... 45
Table: BMI Oil & Gas Business Environment Ratings: Structure ...... 46
Indicators........... 47
Table: BMI Oil & Gas Business Environment Upstream Ratings: Methodology... 47
Table: BMI Oil & Gas Business Environment Downstream Ratings: Methodology ............ 48
Oil & Gas Outlook: Long-Term Forecasts 50
Regional Oil Demand ........... 50
Table: Africa Oil Consumption (000b/d) .......... 50
Regional Oil Supply 51
Table: Africa Oil Production (000b/d) 51
Regional Refining Capacity .. 52
Table: Africa Oil Refining Capacity (000b/d)... 52
Regional Gas Demand .......... 53
Table: Africa Gas Consumption (bcm) ............. 53
Regional Gas Supply............. 54
Table: Africa Gas Production (bcm)... 54
Equatorial Guinea Country Overview 54
Methodology & Risks To Forecasts .... 55
BMI Forecast Modelling.56
How we generate our industry forecasts .. 56
Energy Industry . 56
Cross checks ...... 57
Sources 57