After its licence expires in 2026, Exxon Mobil Corp (XOM.N) will cease production of oil in Equatorial Guinea and depart the nation, according to two persons familiar with the situation.
The decision is part of a larger effort by major oil companies to decrease crude output in West Africa and redirect funding toward projects in the Americas and lower-carbon natural gas developments on the continent.
Carbon emissions are a problem in this high-cost area, according to Gail Anderson, the director of research for Sub-Saharan Africa at energy analysts Wood Mackenzie.
One of the individuals stated on Monday, under the condition of anonymity to discuss sensitive material, that Exxon had reduced its output in the nation to less than 15,000 barrels per day (bpd).
Due to water entering the ageing vessel, it had to evacuate the employees from the offshore production platform Zafiro this year.
The major market for Equatorial Guinea’s oil shipments is Europe, which has been searching for substitute oil sources since sanctions against Russia were put in place this year.
Equatorial Guinea is a part of the Organization of the Petroleum Exporting Countries (OPEC), and Exxon’s oil production there peaked at more than 300,000 bpd eight years ago. Since then, it has been decreasing.
OPEC quotas are difficult for Africa to meet because of a lack of investments in the production of crude.
OPEC members Angola and Nigeria, the top two producers, saw their output drop by a third to 2.1 million bpd in the month of October from 3.2 million bpd in 2019. It has dropped 41% in value since 2013.
Research by the consulting firm Deloitte revealed the region’s proportion of oil cash flows is also decreasing.
Cash flow for oil producers in the Middle East and Africa has decreased from 50% over 2010 and 2020 to 30% of globalised flows during the past two years.
Due to widespread oil theft, foreign oil producers Chevron Corp (CVX.N), Shell Plc (SHEL.L), and Exxon withdrew from Nigeria and sold most of their assets to local businesses.
As per OPEC forecasts, production in the Americas will increase to 28 million bpd next year, adding to the 2.3 million bpd from the pre-pandemic norms, as crude production in West Africa declines.
The United States, Canada, Guyana, and Brazil, among other countries where Exxon has boosted investment in oil production, account for a large portion of the rise.
An Exxon official confirmed the company’s decision to decommission Zafiro and remove the platform, but she declined to further.
Depending on government and business clearances, Exxon might build a third platform dubbed Jade and recover a few of Zafiro’s production to reach roughly 25,000–30,000 bpd, according to one of the persons.
While the continent’s crude oil output is declining in West Africa, liquefied natural gas (LNG) production is on the rise and could increase in other parts of Africa.
As Europe attempts to replace supply from sanctions-blocked Russia, major producers are investing in gas and LNG.
Deloitte claimed increasing global demand may cause gas output in Africa to increase by 30% by the end of the decade.
Early this month, the $8 billion Coral South floating LNG consortium, led by the Italian oil company Eni (ENI.MI) and Exxon, shipped its first LNG cargo to Mozambique.
The first LNG shipment from Chevron’s Alen gas facility in Equatorial Guinea was exported last year.
