New Members Empower OPEC
The return of Gabon to OPEC and Congo Republic’s recent membership of the Organization of the Petroleum Exporting Countries are among the most significant changes having transpired the oil producer organization over the past two years.
The presence of Gabon and Congo – both African nations – within OPEC may be looked into from various aspects. In light of the significance of new members joining OPEC studying the conditions of each of these nations in the global energy markets and their impacts on OPEC’s future outlook would be important.
Gabon
The Gabonese Republic, a country at the Equator in West-Central Africa bordering the Atlantic Ocean in west, is bordered by Equatorial Guinea, Cameroon, and the Republic of Congo.
With an area of 267,668 km², the country is somewhat larger than the United Kingdom, or slightly smaller than Colorado State in the U.S.
Gabon has a population of estimated 1.5 million people. The capital of Gabon and its largest city is Libreville. Spoken languages are French (official) – a legacy of French colony – and a variety of Bantu languages. Gabon was under French colony from 1886 to 1960.
Gabon's economy is dominated by oil. Oil revenues constitute roughly 46% of the government's budget, 43% of the gross domestic product (GDP), and 81% of exports. Oil production is currently declining rapidly from its peak of 370,000 barrels per day in 1997.
Some estimates suggest that Gabonese oil will be expanded by 2025. In spite of the decreasing oil revenues, planning is only now beginning for an after-oil scenario. The Grondin Oil Field was discovered in 50 m (160 ft) water depths 40 km (25 mi) offshore, in 1971 and produces from the Batanga sandstones of Maastrichtian age forming an anticline salt structural trap which is about 2 km (1.2 mi) deep.
The Rabi Kounga oil field is an oil field located in Gabon’s Ogooué-Maritime Province. It was discovered in 1985 and developed by Royal Dutch Shell. It began production in 1989 and produces oil. The total proven reserves of the Rabi Kounga oil field are around 440 million barrels, and production is centered on 150,000 b/d.
Despite being one of the largest sources of oil production in Gabon, Rabi Kounga has seen its recovery drop in recent years.
Sitting atop two billion barrels of known oil reserves, Gabon is ranked the fifth among Saharan African petrostates. It follows Nigeria, Angola, Sudan (both Sudan and South Sudan) and Uganda.
Gabon’s OPEC membership has been through ups and downs. It first joined OPEC in 1975, but it quit in 1995 due to the organization’s rejection of its request for lower production levels.
More than two decades on, Gabon decided to rejoin OPEC. Its request was accepted during the 169th ministerial meeting. Gabon officially joined OPEC in July 2016.
A major issue pushing Gabon to join OPEC anew was the falling oil prices in 2014 onwards because when OPEC was taking steps to help shore up oil prices Gabon followed in Indonesia’s footsteps and filed request for membership.
With an output of 200,000 b/d, Gabon is currently the smallest OPEC member state. The Gabonese government has made huge efforts to explore offshore oil fields, but International Energy Agency (IEA) estimates show Gabon’s oil output is on the decline. Gabon has generally seen its oil production fall over the past two decades.
[Gabon Crude Oil Production] .
Congo
The Republic of Congo’s request for OPEC membership was approved at the 174th ministerial meeting. Also known as Congo Brazzaville, the Republic of Congo is located in central Africa. It neighbors Gabon, Cameroon, Central African Republic, Democratic Republic of the Congo and Angola’s exclave of Cabinda.
Brazzaville was discovered in 1884 by Italian explorer Pietro Paolo Savorgnan di Brazzà, and then known as Pierre Paul François Camille Savorgnan de Brazza following French naturalization. De Brazza ruled in Congo for 11 years. Congo remained a French colony up to 1960. After winning independence, it was under Marxist rule up to 1992 when a brief civil war broke out in the country.
Congo’s economy depends on agriculture, industry and services, but oil extraction and sales constitute a major source of income for the country.
In early 1980s, increased oil revenues help Congo finance major exploration projects. That led to an average 5% economic growth rate, one of the highest rates in Africa. However, in the following years the government was forced to spend its oil money on certain sectors, which caused a huge income shortage. That was the consequence of low oil prices and the resumption of armed conflicts in December 1998. Congo’s economy was seriously harmed and a big budget deficit came up. After that, despite oil price hikes in global markets, the Congolese government was faced with major economic hardships since 2003. In 2008, the oil sector made up 65% of gross domestic product (GDP), 85% of state revenue and 92% of exports in Congo.
Congo is currently known to have about 1.7 billion barrels of oil with an output of 300,000 b/d. Congo has also gas which is fully consumed domestically.
The following graph shows oil production in Congo over the past two decades.
[Republic Of The Congo Crude Oil Production]
Congo is now the third largest African producer of oil in Sub-Saharan Africa. The Congolese government announced its decision to join OPEC in January 2018 as part of its efforts to increase its oil output. However, Congo has suffered losses in recent years due to a slump in crude oil prices. Consequently, state revenues have been cut by a third since 2015 while liabilities have been on the rise.
International Money Fund (IMF) estimates show that Congo’s economy heavily depends on oil production because about 87% of Congo’s export revenue and roughly 80% of state revenue come from oil sales.
Therefore, increased investment in the upstream sector and making revenue from the downstream sector through power generation and boosting gas capacity and refining, top the agenda of Congo’s oil ministry.
The main buyers of Congo’s oil are China (43%), the European Union (28%), the United States (12%), Australia (9%), India (6%) and Malaysia (2%). Since Congo’s major oil and gas exploration and production is offshore the country needs to attract investment and technology in this sector. Although a number of foreign companies like Italy’s Eni and France’s Total are operating oil projects in this country, Congo continues to face problems with regard to attracting foreign investment.
Equatorial Guinea
The Republic of Equatorial Guinea is located in western Africa, between Cameroon and Gabon. It has an area of 28,050 square kilometers. Major oil find in 1996 and ensuing extraction significantly raised state revenue and brought economic prosperity to the country. Oil sales turned the country of 1.27 million into Africa’s richest nation in terms of gross domestic product (GDP). Nonetheless, wealth distribution has been very unbalanced in the country with a few people benefiting from petrodollars.
Earlier known as an exporter of coffee, wood and cocoa, Equatorial Guinea became the third largest producer of crude oil in Sub-Saharan Africa, after Angola and Gabon, since 2004.
Equatorial Guinea sits atop 1.1 billion barrels of oil, one of the largest oil reserves in Sub-Saharan Africa. It is currently exporting 176,000 b/d of oil.
Equatorial Guinea was admitted as an OPEC member during the OPEC 172nd ministerial meeting of the Organization in May 2017.
After winning full membership of OPEC, it invited other African producers to follow suit as a show of unity to support their oil resources.
Gabriel Obiang, the minister of energy, mines and industry, underlined the significance of cooperation among oil producers due to exploration across Africa. [Equatorial Guinea Crude Oil Production]
Equatorial Guinea recorded its highest oil output in 2005 at 380,000 b/d. Although the country has seen its oil output decline since 2005 onward, it intends to increase its oil recovery by drilling 12 blocks of its offshore oil fields. The target set for oil production is 500,000 b/d in three years.
Geographic Diversity
OPEC membership of Gabon and Congo can help diversify oil resources of this organization as well as its geographic extent. Meantime, under conditions where oil prices have been heavily fluctuating in recent years, forcing OPEC to resort to cooperation with non-OPEC producers to boost energy prices, the membership of new countries will definitely empower OPEC.
In fact, OPEC will become more influential with a higher number of member states. However, that would have an impact on global markets and secure the interests of member states when OPEC makes decisions apart from any politicization and only in favor of collective interests.