Equatorial Guinea’s participation in the Opec production cut and its application to be a member are an attempt to revive its oil sector and be more involved in global oil supply dynamics. The country started oil production in 1991 and currently produces about 243,000 barrels of oil per day , ranked 35th globally and seventh in Africa.
Recent licensing rounds have been unsuccessful and there are no planned projects with final investment decision in the country. The only significant planned project is the Fortuna floating liquefied natural gas development. Opec membership could spur activities in its dwindling oil sector and revive interest in its upcoming 2016/2017 bid round.
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Flexibility in license negotiations and incentivised fiscal terms could be key to encouraging further investment in the country’s hydrocarbon sector and increasing participation in its upcoming license bid round. Opec participation will further support policy alignment with other members enhancing Equatorial Guinea’s investment appeal.
Equatorial Guinea’s agreed Opec-aligned production cut represents about five percent of its 2016 production, at 12,000 bd. While this oil production cut is insignificant on the international level, it shows an intent to fully collaborate with Opec policy. Formulating policies that align with Opec members will aim at attracting investment and development to its ailing oil and gas sector.
Joining Opec would boost Equatorial Guinea’s international prestige but more importantly give it a seat at the table of a key global organization shaping industry policy. This influence could also bring with it numerous benefits if it is able to partner with fellow member national oil companies for technology, investment and long-term strategic planning.
Even more powerful, Opec membership coupled with a more inviting stance towards international oil companies through reforms and incentives like lowering its fixed cost recovery and royalty rates could spur a more promising future for oil production in the country.
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