Tag Archive

After two decades, Gabon returns to OPEC

Comments (0) Africa, Business, Featured

Tullow Oil in Gabon

The West African nation becomes the smallest producer of oil in the cartel, producing only 200,000 barrels a day.

More than 20 years after Gabon left OPEC in a dispute over its budget contribution, the West African nation has rejoined the oil cartel.

Gabon returns to the Organization of Petroleum Exporting Countries amid a two-year oil glut that has reduced the cartel’s power to prop up global oil prices.

Gabon was the second former member to rejoin OPEC this year, following Indonesia, which quit in 2008 then returned in January.

Gabon is the smallest producer among OPEC’s 14 member countries. It produces 200,000 barrels of oil per day, but according to the International Energy Agency, the nation’s output is declining.

Gabon, which joined OPEC in 1975, left in 1995 after the cartel refused its request to reduce its financial contribution to the organization, making it more proportionate with its production. At the time, Gabon produced about 340,000 barrels of oil per day, about one percent of total OPEC production.

Struggling with oil slump

Like other OPEC members, Gabon is struggling with the slump in global oil prices, and rejoining the cartel enables the country to strengthen its ties with countries that share similar challenges.

In response to the slump, Gabon is also working to shift more of its economy to agriculture. The nation, with a population of less than 2 million, currently imports nearly all of its food.

Working with Olam International Ltd., the Gabonese are trying to persuade young people to take up farming.

Farming in Gabon

Farming in Gabon

“We need to foster development of an agro-industry here,” Gagan Gupta, country head at the Singapore-based company’s Gabon unit, told Bloomberg. “It’s about creating human capital.”

As part of the effort, about 2,500 Gabonese will observe cocoa farming in Ivory Coast, learn techniques at a palm-oil plantation in Asia, or train as bulldozer operators in Morocco, Gupta said.

Unemployment high, despite growth

Olam also will work with Gabon to develop nearly 250,000 acres of oil-palm plantations.

According to the World Bank, Gabon is an upper-middle-income country that experienced strong economic growth during the last 10 years, mostly from oil and manganese production.

In 2015, oil accounted for 70% of Gabon’s exports, and 20% of the nation’s gross domestic product. Economic growth weakened to 4% in 2015 because of the drop in oil prices, forcing the government to cut investments designed to promote economic diversity.

Even though Gabon’s economy has been growing, it has failed to create enough jobs, the World Bank said. Unemployment in 2010 was more than 20%.

Nations seek production freeze

OPEC, meanwhile, has seen its global clout diminished. The cartel has attempted to negotiate a deal with Russia to freeze production levels in order to prop up prices. However, OPEC disunity has stalled the effort so far.

In June, Venezuela oil minister Eulogio del Pino said talks might revive in September, when Iran reaches pre-sanction output levels. Iran, freed last year of international sanctions that limited production, has sought to boost output and has resisted limits.

Del Pino said he also would propose that OPEC adopt “production ranges” that would allow production to fluctuate, rather than talking about an unpopular production ceiling.

Venezuela has suffered badly from the oil price collapse production declines. Del Pino said recent rains that helped power production have prompted a recovery.

In 2014, OPEC abandoned its policy of limiting oil production to shore up prices.  Steep price declines followed. Oil, which sold for $110 a barrel in 2014, slumped to a low of $26 per barrel earlier this year. It recovered somewhat this spring with prices mostly in the range of $45-$50 in recent months.

OPEC nations, led by Saudi Arabia, have been willing to absorb the financial impact of plummeting oil prices in order to preserve market share and hurt competitors with higher productions costs, such as U.S. shale producers.

OPEC also accounts for a smaller share of global production that in the past, when the cartel dominated the marketplace. Total OPEC production is nearly 37 million barrels a day while non-OPEC production is nearly 57 million barrels daily, according to Global Risk Insights.

Read more

Oil-dependent Gabon seeks to diversify industry

Comments (0) Africa, Business, Featured

gabon oil worker

The African nation looks for private investment as it creates infrastructure to grow timber and mining production.

Gabon is making progress with its ambitious strategy of industrializing its economy by 2025, but plunging oil prices may slow its advances.

Gabon’s goal of economic diversification took on new urgency in 2015, when the plunge in oil prices sent shock waves through the economy of the nation of 1.8 million people located on the Atlantic coast of equatorial Africa.

In 2010, Gabon adopted a sweeping Strategic Plan Emerging Gabon, designed to diversify its economy and make its industry more competitive. With 80 percent of its export revenues coming from oil, the country is attempting to increase timber production and mining.

The plan calls for major investments in infrastructure and services to establish the Gabon Special Economic Zone with as many as 10 economic areas around the country.

Timber processing is key

Gabon’s industrialization plan relies heavily on improving the timber industry.

Forests cover nearly 85 percent of the country and it is home to more than 400 tree species.

In 2010, the government decided to halt exports of raw logs as a way of encouraging domestic processing, which would in turn increase profits and create more jobs. By 2012, about one third of logs were being processed in Gabon.

France is the largest importer of processed wood projects from Gabon, accounting for 42 percent of sales while Asia accounts for 3 percent.

Timber revenues triple

Since the halt, timber revenues have tripled from $66 million in 2009 to $190 million in 2014.

Gabon also created a special economic zone, Nkok, in Libreville, to make it easier for foreign companies to do business in the country.

The Nkok zone attracted 62 investors in 2013, including 40 percent in the timber industry. The number of timber processing factories increased from 81 in 2009 to 114 in 2013 while the number of jobs nearly doubled to more than 7,000.

The boost in the timber sector also resulted in the startup of transportation companies to haul logs.

Timber awaiting processing in Owendo, Gabon

Timber awaiting processing in Owendo, Gabon

Growth in mining sector

Mining is another sector that Gabon is attempting to grow.

Following the creation of a metallurgical complex in Moanda, production of manganese increased to $305 million. At the same time, the country went from small-scale production of gold – about 30 kilograms in 2009 – to produce more than 1,200 kilograms in 2014.

The economy grew about 4.1 percent in 2015, and the African Economic Outlook projected similar growth in 2016.

Economic challenges persist

Nevertheless, Gabon’s economy “is facing mounting headwinds,” the International Monetary Fund (IMF) said in early 2016.

According to the IMF, falling oil prices have resulted in a slowdown in non-oil sectors including construction, transportation and services.

The slowdown has led to a government budget deficit of 2.3 percent of Gabon’s gross national product in 2015, after posting a surplus of 2.5 percent the year before. At the same time, the nation saw a trade deficit of 1.9 percent in 2015 compared to a surplus of 8.3 percent in 2014.

Slower growth forecast

The IMF predicted economic growth of only 3.2 percent in 2016, largely because of declining oil production. However, growth in the agricultural sector could help increase the growth rate to about 5 percent in 2017-18.

IMF directors noted that Gabon has made progress authorities in developing the country’s infrastructure since 2010.

They emphasized the need to continue to foster diversification so that Gabon will be less vulnerable to fluctuating oil prices.

As revenue to the government tightens, IMF directors recommended that Gabon officials focus on high-impact infrastructure projects and structural reforms that will increase productivity and improve the labor force.

Gabon improves regulatory climate

At the same time, Gabon officials have acknowledged that the regulatory environment could be better for business.

Gabon President Ali Bong Ondimba pledged to “radically improve” the business climate by streamlining the regulatory process for investment through a National Agency for Investment Promotion and with establishment of a National adjustment for Competitiveness Pact to facilitate and speed up establishment of business operations.

Ondimba said the country must encourage private investors to step up as public investment declines.

“We must ensure that everyone plays their part. The government facilitates the business environment and the private sector that invests and recruits. If everyone plays his role, we will (achieve) growth and the creation of 20,000 jobs per year,” he said.

One bright spot for investment in Gabon’s efforts came in April, when AFRICA Finance Corporation, based in Lagos, Nigeria, announced it was investing up to $140 million in the Gabon Special Economic Zone to help fund infrastructure projects including a new mineral terminal.

Read more

Shell upbeat on Gabon Leopard Marin discovery, sees gas play

Comments (0) Africa, Business, Latest Updates from Reuters

CAPE TOWN (Reuters) – Royal Dutch Shell’s Leopard Marin discovery offshore Gabon may be a new commercial gas field, a senior company executive said on Thursday.

“Leopard is the first potentially commercial multi-TCF (trillion cubic feet) find in a new gas play and I think that is very exciting for us and for the government of Gabon,” Alastair Milne, Shell’s vice president exploration for Sub-Saharan Africa, told an industry conference in Cape Town.

Read more