IMF loan to aid Gabon’s recovery from oil price crash and coronavirus

The International Monetary Fund (IMF) and the Government of Gabon have reached an agreement for a $147 million facility to help the country address the challenges that have arisen due to the global COVID-19 pandemic and oil price crash.

The African Energy Chamber said on Tuesday that the IMF and the government entered into the agreement on 9 April.

According to the African Development Bank, Gabon’s economy, primarily driven by the country’s 210,000 bpd oil and gas sector, had a projected growth rate for 2020 of 3.7 per cent before the pandemic.

This is slightly higher than the regional Central African (CEMAC) average projection that stood at 3.5 per cent which is 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 per cent in 2019 played a major part in the improved projections.

New discoveries offshore Gabon like BW Energy’s Dussafu and Vaalco’s South East Etame projects were brought online in record time.

Namely, BW Energy last March produced first oil from the Tortue Phase 2 field development and Vaalco completed its drilling campaign on the Etame Marin permit.

Leoncio Amada Nze, executive president of the African Energy Chamber in the CEMAC region, said: “This is also the result of reforms in the sector under the leadership of [Gabon president] 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”.

The Chamber said that the adjusted post-COVID GDP growth rate projection for 2020 for Gabon stands at -1.2 per cent according to the IMF. Although this number is far from the initial 3.7 per cent 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 per cent in some cases.

Longer-term projections for Gabon’s GDP annual growth rate are estimated at 2 and 3.2 per cent in 2021 and 2022 respectively, on the assumption that the ongoing global pandemic comes under control later this year.

“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 entire sub-Saharan Africa”, the Chamber stated.

Also, the new Hydrocarbons Code ushered in reduced bureaucracy, provided incentives for E&P companies to move quickly into a drilling phase, and even local content regulations were reviewed making them progressive rather than prohibitive.

The new local content rules are aimed at increasing overall Gabonese take per barrel of oil while at the same time enabling a transfer of know-how 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.

Verner Ayukegba, a director with Johannesburg based DMWA Resources, said: “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”.