IMF Gabon agreement a testament to Gabon’s likely quick recovery post Covid-19 and oil crash
On April 9th, the IMF and the Government of Gabon reached an agreement for a $147m facility that is meant to help Gabon address the challenges that have arisen due to the global Covid-19 pandemic.
Prior to the pandemic, Gabon’s economy, that is driven primarily by the country’s 210,000 bpd oil and gas sector had a projected growth rate for 2020 of 3.7% according to the African Development Bank. This is slightly higher than the regional Central African (CEMAC) average projection that stood at 3.5% and hence a testament of Gabon’s performance amongst its peers. Despite an overall improvement of the entire economy justifying Gabon’s strong pre Covid-19 growth projections, the oil sector’s recent increase in daily output by 11.9% in 2019 played a major part in the improved projections. New discoveries offshore Gabon like BW Offshore’s Dussafu licence or American minor Vaalco’s South East Etame license were brought online into production in record time. “This is also the result of reforms in the sector under the leadership of H.E. Ali Bongo Ondimba, which includes the country’s new Hydrocarbons Code of 2019 which I am certain will further boost investment into the oil and gas sector” said Leoncio Amada Nze, Executive-President of the African Energy Chamber in the CEMAC region.
The adjusted post-covid GDP growth rate projection for 2020 for Gabon stands at -1.2% according to the IMF. Whist this is far from the initial 3.7% projections at the start of the year, it is significantly better than that of some of Gabon’s oil producing peers who are forecasting growth rates of up to -10% in some cases.
Longer term projections for Gabon’s GDP Annual Growth Rate are estimated at 2% in 2021 and 3.2% in 2022 on the assumption that the ongoing global pandemic comes under control later this year.
This projected fast recovery is a testament to both Gabon’s government’s success in enhancing the competitiveness of its oil sector in particular and its entire economy at large and its success in containing the Covid-19 pandemic. Gabon is likely to more than proportionately attract investment into its oil and gas sector and to see activity resume quicker than in other oil dominant economies post covid-19. As of the Q4 2019, Gabon had the second highest number of rigs offshore behind Nigeria in the entire sub Saharan Africa. The new Hydrocarbons Code ushered in reduced bureaucracy, it incentivised E&P companies to move quickly into a drilling phase by reducing government charges prior to the establishment of hydrocarbons in commercial quantities. Even local content regulations were reviewed, with an emphasis placed on making them progressive rather than prohibitive. The new local content rules are aimed at increasing overall Gabonese take per barrel of oil whilst at the same time enabling a transfer of knowhow and technology and fair returns for international oil companies. They encourage cooperation between local E&P companies who can now easily access marginal field acreage with international service providers seeking to partner with Gabonese E&P companies.
“Gabon continues to be an interesting investment frontier for us. We acknowledge the reforms made by Gabon so far, and the resulting successes achieved. We however encourage the government to continue in that spirit by adopting additional measures like the extension of PSCs as outlined in the AEC’s Common-sense Energy Agenda against covid-19 and the oil price war”, said Verner Ayukegba, a Director with Johannesburg based DMWA Resources.