Gabon+Petroleum


 * China Likely To Continue Petroleum Investments In Gabon Over The Next Five Years Despite Legal Issues And Declining Oil Output **

It is likely China will continue petroleum investments in Gabon over the next five years despite legal issues with China’s Addax Corporation. Gabon is a mature oil producing country, having peaked its total production in 1997 and now has a declined oil output of about one-third of what it had in 1997; according to IHS Global Insight Gabon has 2 billion barrels worth of oil reserves. In June 2013, China’s Addax, which is a subsidiary of China’s Sinopec, faces a legal dispute with the Gabonese government about failure to comply with the country’s laws. Despite this legal issue, it is highly likely China will continue petroleum investments in Gabon.
 * Executive Summary: **

Gabon is a mature oil producing country, placing sixth behind Nigeria, Angola, Sudan and South Sudan, Equatorial Guin ea and Congo-Brazzaville. According to the U.S. Energy Information Administration, oil accounts for 65 percent of Gabon's economy and 75 percent of export revenue. According to the Oil & Gas Journal Gabon has 2 billion barrels of proven oil reserves and more than 90 percent of output is exported, or around 250,000 bbl/d, on average. The chart to the right shows Gabon's oil production from 1995 to 2012; in 1997 it peaked at about 370 thousand barrels a day and in 2012 dropped to about 250 thousand barrels a day. Of the 90 percent of Gabon's oil production being exported, 59 percent is destined for Asia and Oceania.
 * Discussion: **

China's Sinopec, through its subsidiary Addax Petroleum, is involved in Gabon through petroleum exploration and production activities. In June 2013 Addax Petroleum found itself in a legal dispute with the Gabonese government over an oilfield; Gabonese Oil Ministry officials allege that Addax failed to pay customs duties and comply with other laws. If China's Addax is found in violation of Gabonese law then they could potentially lose their mining license which would put the Chinese at a strategic disadvantage. Yet it would also be a strategic mistake if Gabon decided to cut China out because to date China has pledged USD 820 thousand for infrastructure projects that correspond to mining investments and they would potentially ruin a win-win relationship.

** Analytic Confidence: **
Analytic confidence is medium. Source reliability ranges from medium to high. There is no conflict between sources. The analyst had low expertise on the subject, worked alone while also collaborating with a group, and did not use a structured analytic method. The subject is moderately complex and the deadline was moderately easy to meet.


 * Analyst: ** James Gibson