Oil triggers Equatorial Guinea boom

BBC News, Friday 17 August 2001, 16:37 GMT 17:37 UK

A new gas discovery in Equatorial Guinea has renewed discussions about how the country's oil wealth should be shared out.

Equatorial Guinea has become one of the world's fastest growing economies.

Just last month, the government forecast that the economy would grow 72.5% this year, in a continuation of a boom spurred by the discovery of oil in the early 1990s.

The International Monetary Fund (IMF) believes that the economy will grow 52.7% this year.

But as Texan oil company CMS Energy discovers a significant new off-shore gas field, questions remains as to when the country's poor will see the benefits of a booming economy.

Flow of dollars

Equatorial Guinea is a tiny country, nestled between Cameroon and Gabon on the West Coast of Africa.

Since the discovery of large oil and gas deposits off Bioko in the mid-1990s, the country has experienced an economic boom, with US companies investing about $5bn over the past five years.

Currently, Equatorial Guinea produces between 200,000 and 250,000 barrels of oil a day, making it the third biggest producer in Africa, following Nigeria and Angola.

But given its population of about half a million people, Equatorial Guinea has significantly more reserves per capita, Texan oil company CMS Energy's vice president Ken Keag told the BBC's World Business Report.

Average per capita income has risen from less than $370 in 1995 to $2000 last year.

Money for who?

The problem is that few of its people appear to be better off.

The country has been rich since about 1999, one diplomat said. It is not visible in the population, this is obvious.

One reason is that contracts—as is typical in these cases—have been structured so that oil companies take an early share of the profits to help them recoup their investment.

Mr Keag admitted: The petroleum sector...is still in a position where a large proportion of revenues generated are going to the oil companies.

The government's share of the oil revenues is increasing.

The IMF estimates are that the government will take 24.3% of gross oil revenues this year, compared with 16.4% in 1998.

While its share will rise to 30.7% in 2003, it will still fall short of the 45% to 50% enjoyed by Angola and Nigeria. There, the state has an average 57% stake in large oil licences.

Crumbs for the poor?

Even if these contracts are renegotiated—as President Obiang Nguema is said to want—the question is likely to remain as to how the money will be used.

Some money is coming through to the people, but it is still just crumbs. Really, the money, which comes from oil stays inside the family, Juan Nzo of the opposition party, Convergence for Social Democracy, said.

The oil companies say they want to see the benefits filter through to the poor of Equatorial Guinea.

We along with the investor community are keen to see as soon as possible the government's plans to utilise the significant revenues they are now gaining, Ken Keag told the BBC's World Business Report.

He added: In EG, we are and can continue to scratch more than the surface and bring real benefits.