Exxon’s exit marks reversal of fortune for Equatorial Guinea

Good morning and welcome to Energy Source, coming to you this morning from a bustling CERAWeek conference in Houston.

The annual gathering of the biggest names in the oil and gas industry kicked off on Monday with ExxonMobil and Saudi Aramco delivering bullish forecasts for fossil fuel demand and questioning the pace of the energy transition.

Aramco’s Amin Nasser took aim at forecasts by the International Energy Agency that oil demand would peak by 2030, saying there was little chance this would happen due to surging demand in the developing world.

“We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately, reflecting realistic demand assumptions, as long as essential,” he told the audience, who clapped enthusiastically.

Energy Source sat down with Exxon’s chief executive Darren Woods, who discussed how oil demand is at record levels despite a tepid world economy. “[It] is amazing to me,” he said, forecasting higher oil prices ahead if global growth picks up due to imbalances between supply and demand.

Woods also defended Exxon’s decision to seek arbitration against Chevron over its $53bn deal to buy Hess — an unusual move focused on control of a prized oilfield in Guyana. “Business is business,” he said when asked whether the clash could dent its relationship with Chevron, a close partner in projects in Kazakhstan and Australia.

But for our main story this morning we travel to Africa, where the remarkable success Exxon has enjoyed in Guyana has caused it to reconsider its investments on the continent.

Our west Africa correspondent Aanu Adeoye reports.

Thanks for reading — Jamie

When the oil stops freely flowing

Equatorial Guinea is separated from Guyana by the Atlantic Ocean and almost 8,000 kilometres. Yet the latter is beginning to eat the former’s lunch in a manner that could have far-reaching economic and political repercussions for the tiny central African country.

ExxonMobil’s announcement last month that it was leaving the country of 1.7mn people had been telegraphed for some time but it was nonetheless significant when the oil giant confirmed the speculation.

Despite Exxon’s history of doing business in Equatorial Guinea for almost three decades, the company decided to cut its losses altogether after a safety incident in 2022 decimated its output. That year, water leaked into a production vessel at the Zafiro field, Exxon’s main asset in the country, forcing the platform to be retired two months later.

Before the incident, Exxon pumped 45,000 barrels a day out of the country; afterwards it dropped to 15,000 b/d. These are small numbers by Opec standards, but Exxon’s production was a significant proportion of Equatorial Guinea’s total output of 52,000 b/d. The company’s assets will be transferred to GEPetrol, the national oil company.

Here’s where Guyana comes in. Exxon is departing Equatorial Guinea to focus on fast-growing markets that are not capital intensive, such as the South American nation.

It almost marks a reversal of fortunes for Equatorial Guinea, which was once a hotbed of promise when Mobil discovered oil there and Exxon increased production after its takeover in 1999. But oil production has been steadily declining in recent years, down more than 80 per cent from the boom years.

Equatorial Guinea has struggled to attract foreign investment into its oil industry in recent years. A mixture of global divestment from fossil fuels and local complications such as ownership requirements and an elevated political risk climate have deterred would-be investors.

The Exxon situation is a case in point. Equatorial Guinea wanted a foreign company to take over the assets from Exxon and has been wooing international oil companies including Eni, the Italian producer, and several Nigerian companies, according to a former senior US official familiar with the matter. None have shown any interest so far.

Over the years the country’s oil wealth has mainly been utilised to the detriment of ordinary citizens. Under President Teodoro Obiang, who has ruled since 1979, it has been used to buy the loyalty of the military and other elites. As questions over succession loom, his son and vice-president Teodoro Nguema Obiang Mangue (known as Teodorin) has become the country’s de facto leader. Teodorin, who is known for his flamboyance and has been the subject of corruption investigations in countries including the US and France, faces a monumental challenge to attract investors and keep the gravy train moving.

There is also a geopolitical balancing act to be navigated. US officials have said China, the country’s biggest development partner, has designs on building a naval base in the coastal city of Bata where it has already constructed a commercial port; Washington has warned Equatorial Guinea not to grant that wish. Teodorin, who has reflexively shown antipathy towards western interests, partly due to the investigations, could seek investment from non-western sources for the oil industry.

“This is a very volatile year in Equatoguinean politics and I think they have to be very careful not to alienate the western majors,” says the former senior US official.

Please, let us go

The last time I was on the pages of Energy Source, I wrote about international oil companies exiting all or parts of their Nigerian operations as the business environment in Africa’s largest producer has become more difficult.

Those divestment of assets are subject to regulatory approval and international oil majors and their would-be Nigerian successors are now sounding the alarm that authorities are dragging their feet on letting them head for the exit. It’s a departure from the sentiment of nine months ago, when oil executives privately said they were hopeful that new President Bola Tinubu would champion business-friendly moves in their favour. That has not been the case.

The government agency in charge of approving these deals, the National Upstream Petroleum Regulatory Commission, has denied slowing down the exit process, saying instead that these deals must follow “due process”.

But considering one of the deals — Exxon’s $1.3bn sale of four blocs to Seplat Energy — has been awaiting approval for more than two years, there are questions over how much time the agency requires. (Aanu Adeoye)

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.