Gabon oil outlook clouded by strikes

Strike at Addax Petroleum latest in string of disputes

Pre-salt discoveries give hope of output recovery

West African producer Gabon’s oil industry is growing increasingly turbulent as strikes proliferate and relations with foreign investors come under strain.

The problems, evident in a strike that shut in 22,000 b/d of oil production at Chinese-owned Addax Petroleum last week, come as President Ali Bongo Ondimba prepares for re-election next year, having promised to diversify the economy after succeeding his father, who died in 2009 after 41 years in power.

On taking the reins, the current president sought to broaden a pool of investors that mainly comprised companies from former colonial power France, and to improve the business environment by joining the UK-led Extractive Industries Transparency Initiative (EITI).

The latter marked a departure for a country that was an OPEC member until 1995, when it exited, objecting to the membership fee.

Gabon’s government recently said it hoped to more than double oil production to 500,000 b/d in 10 years, from 210,000 b/d last year. A number of oil majors have made sizeable discoveries in pre-salt offshore structures.

But Gabon’s application to join the EITI, which aims to foster transparency in the resource sector, was rejected in 2012. Amid sporadic unrest on the streets of Libreville, the president’s modernization drive has appeared to falter.

The UK government has repeatedly intervened to support UK investors such as Tullow Oil in disputes with the authorities. This month Prime Minister David Cameron wrote to Gabon’s president saying he hoped such problems would be resolved soon.

Gabon’s daily oil production has been declining for several years. And while current levels might appear sizeable for a country of less than 1.5 million people, oil is its main export.

Workers at two onshore fields operated by Addax — Tsiengui and Obangue — went on strike on April 15 in protest at conditions of work and the dismissal of five workers.

That came after an industry-wide strike in December caused Gabon’s sole oil refinery to close and the shut-in of Shell’s Gamba export terminal.

Meanwhile a string of foreign investors have been involved in tax disputes with the authorities. Tullow’s problems relate to a minority stake in the Onal field onshore license operated by French independent Maurel & Prom.

Tullow says the license was not due for renewal for over a decade, but the authorities used a request by Maurel & Prom to review the license terms as an excuse to effectively lock the UK company out of the field.

The dispute reduced Tullow’s reportable production in Gabon by around 10% last year to 10,700 b/d, with the total also affected by underperformance at two other fields operated by Anglo-French company Perenco.

Tullow has only non-operating stakes in around a dozen onshore and offshore licenses in Gabon. Its hand may have been strengthened somewhat with an oil discovery it made at the Igongo-1 onshore well last July. Tullow has said this should be ready for commercial production using existing infrastructure early this year.

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