Bidders are awaiting clarification on implementation of a new hydrocarbons code. Gabon has postponed the closing date for its current offshore licensing round twice since its launch, as uncertainty surrounds the introduction of
The round, which covers 34 deep and ultra-deep-water blocks, was launched last November, with a closing deadline set for April. However, this was first pushed back to June and then 30 September.
Both the licensing round and the hydrocarbons code were detailed at last year’s Africa Oil Week in Cape Town. The revised code was welcomed by international oil companies (IOCs) because its terms were considerably more favourable to them than those in the previous hydrocarbons code enacted in 2014.
That code gave the state more control of the industry and authorised the parastatal Gabon Oil Company to take a 15pc equity stake in new projects, with the aim of maximising government revenue. But the introduction of this tougher approach coincided with the global oil price crash, which quashed foreign companies’ interest. No blocks were issued under the 2014 code.
By 2018, senior officials had sounded out established operators and potential new investors over the fiscal and contractual changes required to stimulate fresh interest. That appeared to reap dividends for the IOCs.
There is plenty of incentive on the Gabonese side to make the relationship with IOCs work, given the country’s crude production is now running at around 200,000bl/d, compared with over 350,000bl/d two decades ago, and is expected to slip further without fresh discoveries and new developments.
When oil minister Pascal Houangni Ambouroue detailed the new code at Africa Oil Week, he said companies would no longer be subject to 35pc corporation tax. Royalty rates and the state’s share of profit oil would also be trimmed, and companies would be offered longer contract periods and greater negotiating freedom.
Source: Petroleum Economist
He was confident it could be enacted by December, despite the tight deadline. But industry figures attending the conference were not so sure, and their doubts were subsequently confirmed. By mid-February, the code had yet to be approved by parliament or ratified by the president, effectively putting the bidding process on hold.
Who is in control?
Gabonese officials insist the delay is unconnected to the political situation. But the country’s ability to push through new legislation has been severely affected by the absence of President Ali Bongo Ondimba, who suffered a stroke shortly after he arrived in Saudi Arabia on a visit in late October.
After initial treatment there, he was transferred to Morocco for convalescence and rehabilitation. He made a short New Year’s television broadcast and then returned home briefly to swear in a new prime minister and government team-before flying back to Morocco.
The 59-year old president’s illness creates uncertainty over the long-term evolution of political power and influence. An attempted coup by a small group of members of the armed forces in early January 2019 was quickly put down, but highlighted the potential for volatility in his absence.
Bongo has been an active head of state, personally making the key strategic choices about foreign and economic policy, the framework for business and measures to protect the environment-a subject in which he takes a particular interest.
During his absence, key decisions have been handled by a powerful trio-his half-brother and head of special services at the Republican Guard Frederic Bongo, supreme court president Madeleine Mborantsuo and Brice Laccruche Alihanga, the head of the president’s office. It remains unclear to what extent Bongo, who succeeded his father in 2009, will be able to fully resume his role as leader.
Foreign investors had already been unsettled by the expropriation, in February 2018, of the operations of the power and water utility SEEG, which is 51pc owned by French group Veolia. Previous events in the energy sector also give rise to concern. In 2013, the Gabon government claimed breach of contract and took over the Obangue field, operated by Addax, a subsidiary of China’s Sinopec. This dispute was referred to the arbitration court of the International Chamber of Commerce. It is against this background that Ambouroue is trying to rebuild IOCs’ confidence through more generous terms.