Sonagas to pursue plan in Equatorial Guinea
By Matthew Green in Abuja
Published: February 27 2009 02:48 | Last updated: February 27 2009 02:48
Sonagas, Equatorial Guinea’s state gas company, says it will push ahead with plans to partner with Eon Ruhrgas, the German utility, to create a West African gas hub, as it dismissed concerns that the project will struggle to source enough supply.
The volcanic island wants to transform itself into a centre for gathering gas from neighbouring Nigeria and Cameroon as well as from its own reserves to boost its exports of liquefied natural gas.
Serapio Sima Ntutumu, deputy director-general of Sonagas, said he hoped to reach a final investment decision on the scheme by June with a consortium comprised of Sonagas, Eon, Union Fenosa of Spain and Portugal’s Galp Energia.
“We want to be fast,” Mr Ntutumu told the Financial Times on the sidelines of an oil and gas conference in Abuja, Nigeria’s capital. “It’s a huge project. Unemployment will disappear, the government will have more money.”
Eon, Europe’s leading gas company, signed a memorandum of understanding setting out its commitment to developing the scheme and building a second LNG export facility in Equatorial Guinea last month as part of a wider strategy of diversifying its sources of gas.
European governments consider West Africa as a potential route to reducing their dependence on Russia, which supplies a quarter of gas consumed in the EU.
Mr Ntutumu declined to give an estimate for the cost of the project, which will require huge investment in pipelines and processing facilities at a time when falling oil prices are forcing energy companies to review many projects.
Equatorial Guinea is hoping to source gas from new discoveries in its waters and from gas currently flared as waste by ExxonMobil, the US major, from its Zafiro deepwater oilfield. The government will have to convince its partners that it can persuade neighbouring states to make up the difference needed to make the project viable.
Past attempts to broker deals to pipe gas to Equatorial Guinea have delivered scant results. Nigeria has ambitious plans to harness a greater share of its vast gas reserves for domestic use as well as feed a growing export market. Cameroon would also need substantial incentives to participate.
Members of the consortium, who have pledged to help develop a “master plan” to commercialise Equatorial’s Guinea’s gas, will also have to weigh the risks of stepping into one of Africa’s fastest-growing but most volatile energy frontiers.
Huge offshore oil discoveries have boosted Equatorial Guinea’s oil production from almost nothing a decade ago to about 380,000 b/d, ranking it behind only Nigeria and Angola among sub-Saharan African producers.
But the rapid expansion has been accompanied by tensions between the government and companies. Senior officials are unhappy with the terms of a contract they have with the UK’s BG Group, sole purchaser of the country’s existing 3.4m tonnes of LNG output. The government has also publicly criticised ExxonMobil for flaring gas.
Copyright The Financial Times Limited 2009