Gabon in talks with more IOCs on offshore exploration after sector rejig: official

Gabon is holding talks with a handful of oil majors about following BP, Shell and ExxonMobil into its deep-water offshore, after learning from past mistakes and reforming its regulatory framework, a senior energy ministry official told Platts, part of S&P Global Energy, on Oct. 12.

The Central African country, an OPEC member with a 100-year history of oil exploration, has had its crude production flatline in recent years amid underinvestment in exploration. The country pumped 230,000 b/d in September, according to the Platts OPEC Survey, around the same level as in 2016.

Speaking on the sidelines of the Africa Energy Week conference in Cape Town, Freedy Nzue Nzue, senior advisor at the petroleum ministry, said Gabon's government "understood the weaknesses we had in the past," particularly when it came to incentivizing new offshore drilling, and was now holding talks with "three or four" oil companies about a potential entry.

It follows deals with ExxonMobil last year and with BP and Shell this year, which it hopes will lead to production-sharing contracts.

Nzue said Gabon had rejigged its fiscal regime to incentivize ultra-deepwater exploration, in which a single well can cost as much as $200 million. The country is also weeks away from unveiling a new hydrocarbon code, which will be among the most competitive in Africa, he said.

"We discovered that our fiscal regime wasn't attractive enough for companies to drill," Nzue said. "If the return on investment is too small, that means that the government needs to work on the royalty and some of these aspects."

The ministry has also introduced Memorandums of Understanding that give oil companies 18 months to evaluate opportunities before committing, he said, replacing a more rigid approach based on production sharing contracts in the first instance.

And rather than holding wide licensing rounds like some of its rivals, Gabon's government is instead holding talks with targeted companies on a case-by-case basis.

The official also shrugged off concerns about Gabon's investment climate three years after a coup d'etat ousted President Ali Bongo and brought Brice Oligui Nguema to power in Libreville.

"In terms of business and investment, it has been stable," Nzue said of the change of government, pointing to stabilization clauses and Libreville's strong track record of respecting contracts, even those agreed pre-independence from France in 1960.

"Knowing that this industry represents 50% of our GDP, we don't play with it. If we play with it, we are dead," he said.

Meanwhile, recent acquisitions by state-backed Gabon Oil Co., including the audacious pre-emption deal for UK-based Assala Energy in 2024, have also raised concerns about Gabon's appetite for investment beyond the deep water.

"There is a lot of competition in Africa we need to deal with," Nzue said, noting that Senegal, Ghana and others had joined the ranks of oil exporters in recent years. "We need to find a way to have some flexibility to attract investors."

BEAC concerns

Nzue also played down concerns about the Bank of Central African States, which sets monetary policy for six regional countries, including Gabon, and angered the oil industry last year with hefty demands for restoration funds and complicated foreign exchange policies.

Demands that $10 billion be deposited in its accounts by oil companies drew a response from the US Chamber of Commerce and even the Trump administration, which has gone to bat for American energy companies internationally, while an industry source told Platts at the time it would "kill investment."

However, earlier this year, talks between BEAC and IOCs appeared to fade out.

"The [Economic and Monetary Community of Central Africa] and BEAC are not against investment in the oil and gas industry, no matter what you hear," Nzue said.

But he said the bank "has decided not to be able to intervene in this situation," instead leaving countries to hold direct negotiations with energy investors about issues including restoration funds, which will be covered in Gabon's new hydrocarbons code.

"If we need to back up our companies, who want to do investment in Gabon, to make sure they will not be afraid of BEAC, we will do it," he said.