Gazprom probes Equatorial Guinea for oil and gas

Gazprom probes Equatorial Guinea for oil and gas

Gazprom, the world’s largest producer of natural gas, and Russia’s largest enterprise, has disclosed that it is considering a plan to explore for gas and oil in Equatorial Guinea.

A Gazprom spokesman told Mineweb that Gazprom’s deputy chief executive, Alexander Medvedev, was in Equatorial Guinea this week, and met the President, the Minister of Power, and the head of Sonagas, Guinea’s national gas company. They agreed to study joint projects for development of local gas infrastructure, gas supplies for electricitry generation, and production of liquefied natural gas (LNG) for export.

Sonagas is the national gas company of the Republic of Equatorial Guinea with activity directed on development of projects in the field of extraction, processing and transportation of gas and LNG. Suntera, a commercial joint venture between Russia’s Itera and the Indian Sun Group, is a co-signatory of the memorandum of understanding with Gazprom and Sonagas.

Itera, the second string Russian gas producer, told Mineweb that it is very early days in its African strategy. “We do not exclude cooperation with Gazprom on African projects,” said Evgeny Ostapov. “We have signed with Gazprom the agreement on cooperation on the Bratsky deposit [in Russia], and we have good relations.” Itera was also a participant in President Vladimir Putin’s recent trip to South Africa. “I can say only that our SA trip was more familiarization than of some practical use. We are looking closer to the country, and the available possibilities there.”

Gazprom’s foray into Guinea is its first formal venture in sub-Saharan Africa. In July, Gazprom capped six months of negotiations with Sonatrach, the state gas production company of Algeria, to sign a detailed plan of cooperation with the Algerians. At the time, Gazprom’s board chairman Dmitry Medvedev, the Kremlin chief of staff, met with Chakib Khelil, Energy and Mining Minister of Algeria, and addressed what Gazprom reports as “issues of multilateral cooperation in the oil and gas sector, including liquefied natural gas supply, and examined the possibility of implementing joint projects in international energy markets.” Particular attention was paid, Gazprom says, “to cooperation in the LNG sector, with Sonatrach to be potentially involved in the Baltic LNG project.

A source close to Gazprom explains that ties between the Russians and Algerians go back many years in the Soviet period, when Moscow supplied an estimated $10 billion worth of arms on postponed credit terms; and through Soviet prospecting organizations, helped Sonatrach find some of the major gas deposits it is currently exploiting. The recent joint memorandum anticipates that Gazprom will assist Sonatrach in finding fresh reserves within the country, and cut its pipeline costs in getting products to Algeria’s ports. Algerian gas remains more expensive to produce, and to consume, than Russian gas.

According to the source, Gazprom is looking to negotiate a geographic market carve-up of natural gas that will increase Gazprom’s penetration of the Spanish and Portuguese markets; at the same time, the combination of the two suppliers should fully occupy the European market, and make it difficult for any other gas producer — notably Iran, Kazakhstan, or Turkmenistan — to entertain the idea of competing in the westward direction. Gazprom and the Iranians are looking to negotiate a parallel carve-up of the eastern Asian market.

South of Guinea, the only other notable Russian oil venture to date was marked by the signing in April of a joint oil and gas exploration venture in Namibia between Sintezneftegaz of Moscow and PetroSA of South Africa. The Russians acknowledge also the potential for joint ventures in Angola, where LUKoil, Russia’s largest oil producer and exporter, is negotiating concessions. Nobel Oil, a Russian oil junior, is actively pursuing concessions in Angola also, but is reluctant to talk about it.

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