Post #249

💡Resource Nationalism Index [ EQUATORIAL GUINEA ] Equatorial Guinea is one of Africa's richest nations judging by its GDP per capita (top 5), in terms of which it is even ahead of South Africa. But how did such a small country become so wealthy? The key here is oil and gas. Let's observe how successful (mostly) extraction policies may look like in our "Resource Nationalism Index" series. The policies of Equatorial Guinea in relation to its natural wealth are: ⏩"Process It First" – 4/10 🔸Equatorial Guinea does not impose an outright ban on exporting unprocessed oil or gas. 🔸Crude oil is exported without domestic refining, as the country historically lacked large refining capacity. 🔸Natural gas is exported mainly after processing into LNG or methanol, but this is done by necessity of transport, not due to a legal ban on raw gas exports. ⏩ "Share With the State” – 7/10 🔸The state typically partners with private companies via Production Sharing Contracts (PSCs), under which the government claims a share of production depending on production volumes 🔸Equatorial Guinea’s laws provide for domestic supply obligations, although the local market is very small. The Hydrocarbons Law ensures the state can take oil or gas in kind to satisfy national consumption before exports. 🔸For crude oil, historically the domestic requirement was minimal (since there was no refinery). ⏩ “We’re in Too!” – 8/10 🔸Under the Hydrocarbons Law and model contracts, the state, typically through GEPetrol (the national oil and gas company), is entitled to a free 20% equity stake 🔸Other local shareholders must hold equity interests in the relevant companies of at least 15% of their share capital ⏩ “The Money's Yours, the People Are Ours" – 6/10 🔸There is no fixed percentage of contracts that must go to local companies, but the policy mandates a strong preference and requires additional justification if foreign contractors are engaged instead of locals. 🔸Expatriate-to-national workforce ratio indicates a maximum of 30% expatriates vs. 70% nationals in the workforce ⏩“Just Pay Up" – 7/10 🔸Companies must pay the state a royalty at a minimum rate of 13% of gross production for oil 🔸Bidders for new blocks are encouraged to propose higher or sliding royalties – the rate can escalate with higher daily output 🔸For gas, royalties also apply (often lower than oil’s rate, depending on contracts), but all such details are contract-specific. ⏩"You Come – You Build" – 5/10 🔸Extractive companies are legally obliged to fund local development, spending on social welfare projects each year as per their contract ⏩“We’ll Do It Ourselves” – 6/10 🔸The government actively promotes domestic processing of its resources by investing alongside companies in downstream projects mainly through the state-owned SONAGAS and GEPetrol, offering tax incentives for value addition, and instituting policies (even regional bans) to encourage local beneficiation 🔸The government promotes a Gas Mega Hub initiative on EG's Bioko Island and the creation of local oil refinery ⏩“Come Here, You Bast*rd!” – 10/10 🔸Equatorial Guinea’s government maintains firm control over all its territory 🔸In the hydrocarbon sector, there have been no known instances of illegal oil production – all oil operations are offshore and tightly guarded by the state and international operators. Illegal bunkering or theft is not reported as a major issue. The result is 6.2.The only parameters that fall behind are local processing (the absence of an oil refinery) and weak community development obligations. The latter is pardonable, given that all oil extraction takes place offshore. #ResourceNationalism Devils Below