29 April 2017

Africa: Dealmaker Nguema Reaches Out to Museveni, Signs MOU On Oil and Gas

Photo: Stephen Wandera/Daily Monitor
Uganda President Yoweri Museveni (R) welcomes President of Equatorial Guinea Teodoro Obiang Nguema Mbasogo at State House to inspect a parade.

Just weeks after linking an oil exploration company to South Sudan and signing an oil information sharing agreement with the government in Juba, Equatorial Guinea President Teodoro Obiang Nguema Mbasogo flew to Kampala to sign a memorandum of understanding with Uganda on oil and gas.

President Nguema arrived in Uganda for a two-day state visit on April 26 at the invitation of President Yoweri Museveni.

The two leaders held talks and signed four memoranda of understanding on trade, cultural and economic, oil and gas co-operation and establishment of a permanent joint commission for co-operation.

Initially, President Nguema's visit had been linked to Kampala's military training mission in the oil-rich Central African country, but it turns that out the veteran leader is assuming the role of dealmaker in the region's oil and gas sector in East Africa.

Uganda's oil and gas sector is expecting inflows worth about $8 billion as the country goes into a race to produce first oil in 2020, hence President Nguema's visit; and that it coincided with a regional oil, gas and logistics convention in Kampala, takes on a bigger significance, analysts argue.

They cite recent deals, which President Nguema and his government have been at the centre of in South Sudan's oil and gas sector.

On March 6, the South Sudanese government signed a deal with Nigerian oil exploration firm Oranto Petroleum to invest $500 million in the country to develop South Sudan's oil Block B3, covering 25,150 square kilometres.

Oranto was linked to Juba by the Equatorial Guinea president, whose government also signed an oil information sharing agreement with South Sudan two weeks later.

While in Kampala, President Nguema addressed the oil, gas and logistics convention, sharing the experience of his country, which has become one of Africa's major producers of oil in less than two decades.

President Nguema, who seized power in 1979, has presided over what has been described as one of the world's "most oil-fuelled corrupt and nepotistic," countries where his sons and other relatives run the oil and other key sectors.

Equatorial Guinea discovered large oil reserves in 1995; within a decade the country's production rose from 17,000 barrels of oil per day (bpd) in 1996 to a record 375,000 bpd in 2005 when it was ranked the third-largest oil producer in sub-Saharan Africa, behind only Nigeria and Angola.

Currently producing 300,000 bpd, Equatorial Guinea has over the past eight years, earned on average $5 billion per year in oil revenues. Oil and gas account for 90 per cent of Equatorial Guinea's GDP, 87 per cent of fiscal revenues and 89 per cent of exports (2015).

With a population of about less than 1.2 million, the country is enormously wealthy but this wealth is concentrated in the hands of a small minority. With oil and natural gas production, the country boasts the highest level of GDP per capita in sub Saharan Africa, at $38,699 per year in 2016.

Despite corruption, nepotism and mismanagement, the country has attracted some of the world's biggest investors in the oil sector -- from China, France, Spain and the US -- because there are good prospects of more discoveries.

ExxonMobil was the first oil major that launched Equatorial Guinea's production phase, with Hess and Marathon Oil soon followed the US oil giant, to develop the country's natural gas reserves.

Public spending driven by oil revenues has seen a construction and infrastructure boom since around 2009; airports and roads have been built, and water supply and electricity services are also better in the country's capital.

Industry watchdog Global Witness says President Nguema and his regime of corrupt officials have kept three-quarters of the population below the poverty line, and accuses him of using the country's oil wealth "to enrich himself and his family, while violently suppressing opposition and ignoring the suffering of his people."

President Nguema's interest in the region's oil and gas is, therefore, generating immense interest among observers.

Speaking at the conference, President Nguema told business leaders and government to develop a logistics industry and create good transport links with other oil producing and exploring neighbours South Sudan and the Democratic Republic of Congo, which require infrastructure to export their crude.

In 2016, the Equatorial Guinea Minister for Mines, Industry and Energy said his country was moving ahead with projects that would make the Central African country a regional hub for petrochemicals, which come from petroleum and natural gas, but also, that his country was on course to becoming to a crude oil and petroleum products storage hub.

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