Equatorial Guinea's energy minister has ordered oil and gas companies working in the country to cancel all contracts with Subsea 7, accusing the offshore services company of not complying with the country's local content rules.
According to the statement issued by the Ministry of Mines and Hydrocarbons of Equatorial Guinea, Minister Gabriel Mbaga Obiang Lima announced on Thursday the decision to “mandate all oil operators including but not limited to Noble Energy, Exxon Mobil, Kosmos Energy, Trident and Marathon Oil. The Corporation and other operators terminated all contracts with US oil services company Subsea 7 due to non-compliance with Equatorial Guinea's local content regulations. ”
While the ministry classifies Subsea 7 as a US-based company, Subsea 7 is registered in Luxembourg but has its headquarters in London. The company has subsidiaries in the USA.
Commenting on his decision to cancel the Subsea 7 contract, the minister said: "As a minister, I have an obligation to ensure that the country's laws governing the hydrocarbon sector are complied with."
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“Companies operating in the oil sector have an obligation to work within the confines of our very flexible and pragmatic local content regulations that are market driven and ensure that both investors and our citizens benefit. I commend the leadership of Schlumberger and Technip FMC in taking proactive steps to engage with oil companies and the government to ensure local content concerns are addressed.”
The ministry said it will continue to work with oil companies operating in Equatorial Guinea to break contracts and find new suppliers for companies that have refused to comply with local content regulations.
The ministry further said that an industry-wide compliance review is underway, led by the Director of National Content and external legal advisors to the Ministry.
“The notice will be expanded to all non-compliant service companies as the review continues. Similar measures will be taken, ”said the Ministry.
According to the 2014 National Content Regulation, all contracts must have local content clauses and capacity building provisions, with preference given to local or regional companies when awarding service contracts. Local shareholders must be party to all contracts as prescribed by law. Operators have an obligation to ensure the compliance of their subcontractors, the ministry said.
Offshore Energy Today has reached out to Subsea 7 seeking comment on the situation. We'll update the article if we get a response.
Subsea 7 recently presented its Q3 results, in which it briefly mentioned E.Guinea in relation to the US$120m backlog it had relating to the Fortuna project, offshore Equatorial Guinea.
Ophir Energy awarded the Fortuna FLNG Project upstream construction contract in October 2017 to Subsea Integration Alliance, it is a partnership between OneSubsea, a Schlumberger company and Subsea 7. In addition to the Fortuna contract, it is unclear how many contracts Subsea 7 has in E. Guinea with other operators.
Earlier this year, the ministry ordered oil operators to cancel all contracts with CHC Helicopters, also citing non-compliance with domestic content regulations. Oil companies operating in Equatorial Guinea were given 60 days to unwind contracts and find new suppliers in compliance with local content provisions. It is unclear whether the same terms apply to the Subsea 7 contract.