Subsea 7 ejected from Equatorial Guinea

Equatorial Guinea has cancelled all contracts with Subsea 7, it was announced on the 21^st November, citing non-compliance with local content regulations.

The country took a similar move against Canada’s CHC Helicopters in July.

Equatoguinean Minister of Mines and Hydrocarbons Gabriel Mbaga Lima announced the Subsea 7 cancellation at a conference in South Sudan.

“As minister, I have an obligation to ensure the laws of the country governing the hydrocarbon sector are complied with.

“Companies operating in the oil sector have an obligation to work within the confines of our very flexible and pragmatic local content regulations that are market driven and ensure that both investors and our citizens benefit.”

The impact on operations is not yet clear and Subsea 7 has not issued a response to the move by Malabo. The company won US$120 million of work on the proposed Fortuna floating LNG (FLNG) plan in October 2017 but this project has fallen by the wayside and prospects were looking dim even before the loss of the upstream contractor.

In 2015, Subsea 7 noted it had won two contracts via its i-Tech unit in Equatorial Guinea, for three and five years, respectively.

A Subsea 7 representative, Julie Taylor, told NewsBase Intelligence (NBI) that the company was aware of the concerns from Malabo and that it would “continue to take proactive steps to engage with the oil companies and government in Equatorial Guinea to ensure these local content concerns are resolved”.

She went on to confirm that the company’s operations in the country were limited to “a small volume of i-Tech Services activities”.

At the same event, the minister – the son of the president – took care to note “proactive steps” by Schlumberger and TechnipFMC “to engage with the oil companies and government to ensure local content concerns are resolved”.

These two service companies were praised for working “with local companies and their commitment to train, develop and promote our citizens as well as setting up a robust workplace nationalisation programme which demonstrates their willingness to ensure that the benefits of oil contracts are shared with our citizens”, by Mbaga Lima.

A review of the sector is under way by the director of national content, the statement continued, warning that other noncompliant companies would also face contract cancellations.

The ministry’s statement said it would work with operators in the country to sever contracts and find new suppliers.

Regulations passed in 2014 required all contracts to have local content clauses and provide for capacity building.

Where possible, preference is required to be given to “local or regional” companies for service contracts. Furthermore, local shareholders must be part of every contract.

Recent statements from Equatorial Guinea have said FDI in 2019 is expected to surpass US$2.4 billion, with 11 wells to be drilled.

Source: Newsbase