We expect oil production in Gabon to fall slightly in 2013 to 243,000 barrels per day (b/d), compared to 244,000b/d in 2011. Over the course of our forecast period, we expect production to continue trending downward to reach 235,000b/d in 2017. Although a planned offshore licensing round and continued offshore exploration - including recent discoveries - hold upside risk to our forecasts, without additional volumes from new discoveries Gabon's oil production is set to decline as output falls from maturing fields. Efforts to develop the country's gas potential hold the prospect of further gains, as does a proposed new refinery that would allow the country to become a net exporter of refined products. Yet we highlight enduring labour sector tensions, underscored by a recent strike, as well as troubling reports of negative developments in Gabon's business environment as downside risks to efforts to attract new investment to its oil sector.
The main trends and developments we highlight for Gabon's oil and gas sector are as follows:
- BMI expects oil production to fall from 246,000b/d in 2012, to 235,000b/d in 2017, as increased production elsewhere fails to offset the declines from maturing fields.
- Planned deepwater exploration and a proposed regulatory overhaul in advance of the deepwater licensing round set for June 2013 hold the largest upside risk to our outlook, although the commercialisation of any discoveries following the licensing round may be outside our current forecast. The introduction of more attractive terms ahead of the offshore licensing round may not be enough to support strong interest in the country's bidding round, tentatively set for June 2013, despite prospective offshore acreage. Reports that the government is using audits to demand clawback provisions and increase its equity stakes in existing licences could undermine the country's attractive business environment and undermine interest in the blocks on offer.
- With tensions between oil sector works and the government still high following mass strikes which saw nearly all production offline for several days in 2010 and more limited disruptions following a recent week-long strike in March, the government's efforts to revamp its regulatory framework could be undermined by labour unions.
- However, reports in late March that the government was in advanced talks with oil companies such as Shell and Total for some of the 42 blocks open for bidding suggest interest - at least among larger international oil companies (IOCs) - remains, despite above-ground developments. Yet, rising stakes for the state could limit the attractiveness of Gabon's acreage to smaller independents.
- Oil minister Etienne Ngoubou confirmed the goal of fiscal reforms was to increase the share of oil profit remaining in Gabon to 35-45% in 20 years. He estimated that less than 20% remains currently. Under the new licensing terms, Ngoubou disclosed that the newly created Gabon National Oil Company would receive 10-20% equity stakes in both new acreage and as part of the renewal of existing licences.
- With Gabon's existing refinery scheduled to be shut down in 2016, at the same time as the new facility is to come online, the country would not only avoid the need to import expensive refined fuels, but would also gain the capacity to become a fuel exporter. However, until a final investment decision (FID) is made on this project, we have chosen not to include it in our forecast despite having already assessed its potential impact.
- BMI estimates that gas production will continue to rise in line with consumption over the next decade, mainly as a result of reductions in flaring rather than new fields being brought online. The government's nascent Gas Master Plan is likely to see increased use of gas as a feedstock for power and according to the government will expand upstream activity to harness non-associated gas resources. The government continues to pledge a reduction in flaring; however, continued investment in infrastructure to harness and transport gas remains necessary.
At the time of writing we assumed an OPEC basket oil price for 2012 of US$109.50 per barrel (bbl), falling to US$104.40/bbl in 2013.