In a bid to safeguard foreign exchange reserves in the region, the Bank of Central African States (BEAC) imposed stricter rules on currency transfers and payments in January 2022 - a move it has been unwilling to reverse despite opposition by energy stakeholders and leaders. Recent regulation significantly impacts dollar-dominated industries - such as the oil and gas sector -, and reform is imperative to regain foreign investor confidence in West African oil and gas.

The upcoming African Energy Week (AEW): Invest in African Energy conference – scheduled for November 4-8 in Cape Town – will delve into the West African region’s vulnerability caused by foreign exchange regulations. Centered around facilitating investment in African oil and gas, the event unites regional energy leaders, financial institutions and foreign investors to discuss strategies for improving business environments; facilitating cross-border deals; and reassuring investor confidence.

AEW: Invest in African Energy is the platform of choice for project operators, financiers, technology providers and government, and has emerged as the official place to sign deals in African energy. Visit aecweek.com for more information about this exciting event.

E&P Remains Top of the Agenda

Member countries of the Central African Economic and Monetary Community (CEMAC) – namely, Cameroon, Chad, Central African Republic (CAR), Equatorial Guinea, Gabon and the Republic of Congo – have all implemented targets to increase hydrocarbon exploration and production through regional collaboration. Gabon aims to produce 220,000 barrel per day (bpd) in the short-term while Congo plans to increase oil production to 500,000 bpd within a year and double gas production within two-three years. Equatorial Guinea also plans to increase regional gas monetization, with agreements with Cameroon to develop the Etinde gas field already in place.

Recent E&P developments are critical for achieving these goals. In Gabon, independent oil and gas company Perenco has spud an appraisal well to assess the quantity of resources at the Hylia South West field. The asset is currently producing 6,000 bpd and the new appraisal well aims to determine its full potential. Independent oil and gas company Vaalco Energy extended the life of the Etame field in Gabon with the replacement of an aging FPSO with an FSO alongside platform upgrades. Now, the project will produce beyond 2030. Energy major TotalEnergies has extended its presence in Gabon by another 25 years, while signing a new contract for the Baudroie-Mérou Marine G5-143 permit, effective until 2047.

In Cameroon, Perenco has kicked-off a five-well drilling campaign at the Kita Eden field, located in the northern Rio del Rey basin. Discovered 40 years ago, the field has been equipped with a specially-designed shallow water barge. Energy major Chevron is developing the YoYo Block in Cameroon’s Douala Basin, with a bilateral treaty signed between Cameroon and Equatorial Guinea in 2023 paving the way for the field’s joint development with the neighboring Yolanda field. The fields development aligns with Equatorial Guinea’s Gas Mega Hub (GMH) project – aimed at monetizing stranded gas resources across West Africa. Chevron signed a Heads of Agreement in 2023 to progress with the next phase of the GMH.

Meanwhile, Vaalco Energy is nearing FID for the 20 million-barrel Venus development in Equatorial Guinea’s Block P. Following the completion of the joint operating agreement, the company expects to progress with the FEED study, aiming for FID in Q3 or Q4 this year. In Congo, energy major Eni began feeding gas into the Tango LNG facility in December 2023, representing a milestone for the project. Tango LNG is expected to start production in 2024, only 12 months after reaching FID. Perenco also expanded its presence in the country in 2023, acquiring Eni’s participating interests in several permits.

Investment Hinges on Policy Reform

All of these developments demonstrate the potential of West African oil and gas. However, to ensure these finds translate into tangible project developments, CEMAC countries need to prioritize an enabling environment and attracting foreign investment through pro-business policies. CEMAC member countries hold some of the lowest positions in the World Bank’s latest Ease of Doing Business index (2020). Out of 190 countries, Cameroon is 167; Gabon is 168; Equatorial Guinea is 178; Congo is 180; Chad is 182 and CAR is 184. Ineffective fiscal policies are largely to blame as they make it difficult to invest, featuring high tax rates, weak Production Sharing Contracts, and delayed project approval timelines. Additionally, BEAC’s foreign exchange regulation makes it challenging for foreign currency accounts to be domiciled in the region, further impacting FDI.

“Forex has to be something that we are serious about and that is why the African Energy Chamber (AEC) is convening the Africa Energy Finance Summit at AEW, where we will unite governments from across the region to discuss issues relating to enabling environments. We have got to incentivize growth,” stated NJ Ayuk, Executive Chairman of the AEC.

As foreign investment becomes more competitive than ever with FDI shifting towards fewer, capital-intensive projects, incentivizing investment becomes imperative. The judiciary has a role to play in this area, as it provides comfort and long-term security for operators in the region. The judiciary, through reviewing how systems approach labor, arbitration, disputes and how companies are treated, will essentially make it easy to invest. Meanwhile, a shift from resource nationalism to independent systems is expected to further reinstate investor confidence in CEMAC oil and gas, with transparency allowing countries to attract a broad investor base and lessen the volatility of international capital flows. Addressing these challenges, providing fiscal incentives for foreign companies and cutting red tape will not only facilitate cross-border deals but enable member countries to meet their E&P targets.

In addition to foreign exchange policies, local content laws have become restricted with the BEAC regulation, failing to incentivize growth and opportunity for local players. CEMAC countries have the chance to leverage local content to stimulate the development of new fields, attract new investments while making the market increasingly competitive. Policy reform will, therefore, not only attract foreign capital to the region but enabling the growth of domestic markets,

Conversations around improving the investment environment across the CEMAC region will be a key topic during this year’s AEW: Invest in African Energy conference in Cape Town. Under the theme, Energy Growth through an Enabling Environment, the event integrates the entire African energy value chain with the objective to increase investment and make energy poverty history by 2030. Join the conference today and be part of the conversation.