Interview: Serge Toulekima
How has the recent drop in oil prices affected Gabon, and how is the industry responding?
SERGE TOULEKIMA: Most oil-exporting countries have been affected by the drop in oil prices and Gabon is no different. Many oil companies are finding their profits squeezed and are cutting back on spending.
The main reasons for the current cycle of falling oil prices are increased production from the US, sluggish oil demand due to the slowdown of China’s economy and a long period of high oil prices. Between 2008 and 2015, US oil production has increased from 5.1m barrels per day to over 9m barrels per day. China, the world’s largest oil importer, has recently been struggling to maintain its economic growth above 7% and its demand for oil is falling.
In addition, the Organisation of the Petroleum Exporting Countries has decided not to curb production to keep the price up because they believe that they are better positioned to cushion the impact of low prices than US producers. Gabon can learn from this by making our oil sector more competitive and reducing the cost of oil production so that projects are viable even at low oil prices.
How is the oil refinery project developing?
TOULEKIMA: This is a very challenging project. Most refineries in the world today are faced with thin profit margins due to oversupply of refining capacity and sluggish demand in the developed world. In recent years, we have seen the developing world becoming the centre of gravity for the refining industry. Gasoline and diesel prices now fluctuate with the developing world’s rising thirst for crude oil and fuels. At the same time, governments in different parts of the world continue to expand on their existing refining capacity in order to sustain employment and reduce their reliance on imported fuels.
The project is facing challenges related to the cost of labour and some key infrastructure. Nevertheless, the government is doing its best to overcome these, and we also know that our partner Samsung has an impeccable track record in constructing and operating refineries. In light of this, I am optimistic that we will pull it off, but the project is still in its early stages. We need to complete a few more studies, such as an environmental assessment and a detailed design, before reaching the final investment decision.
What additional measures can be deployed to reduce the costs of oil production?
TOULEKIMA: Today hydrocarbons discoveries are being made across the continent. No single country can claim to be the sole producer of oil and gas. Gabon has to compete against other countries for investment capital, which flows freely across the globe. If the cost of doing business here is high, investors will look elsewhere. We must focus on creating an environment in which it is possible to contain project costs and stay competitive.
The risk premium must also be continuously driven down. This requires an environment where above-and below-ground risks are properly managed.
What have been the recent developments in terms of oil exploration?
TOULEKIMA: We have had some exploration successes in recent years. Eni found a significant gas deposit in a shallow water block near Libreville, while Shell and Total have both proved the presence of hydrocarbons in the deepwater basin. Nevertheless, Gabon’s deep offshore acreage remains mostly unexplored. The government recently awarded nine production-sharing contracts targeting blocks with water depths ranging from 1500m to 3500 m.
Historically, Gabon has focused on producing and exporting crude oil. Now we could be at a turning point where the country moves towards becoming a gas producer and liquefied natural gas exporter.
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