Subsea 7 Has All Its Offshore Contracts Canceled in Guinea

The Energy Minister of Equatorial Guinea Ordered Oil and Gas Companies Operating in the Country to Cancel All Contracts with Subsea 7, Accusing the Offshore Services Company of Violating the Country’s Local Content Rules.

According to a 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 canceled all contracts with the American 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 US.

Commenting on his decision to cancel the Subsea 7 contract, the minister said: “As minister, I have the duty to ensure that the country’s laws governing the hydrocarbons sector are complied with”.

“Companies operating in the oil sector have an obligation to work within the framework 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 measures to engage with oil companies and the government to ensure that local content concerns are addressed.”

The ministry stated that it will continue to work with oil companies operating in Equatorial Guinea to unwind contracts and find new suppliers for companies that refuse to comply with local content regulations.

The ministry also mentioned that a compliance review of the entire sector is ongoing, led by the National Content Director and external legal advisors from the Ministry.

“The notice will be expanded to all service companies that are not in compliance as the review continues. Similar measures will be taken,” the Ministry said.

According to the National Content Regulation of 2014, all contracts must contain local content clauses and provisions for capacity building, with preference for local or regional companies in the award of service contracts. Local shareholders must be part of all contracts, as prescribed by law. Operators are obligated to ensure compliance by their subcontractors, the ministry stated.

Offshore Energy Today reached out to Subsea 7 for comments on the situation. We will update the article if we receive a response.

Subsea 7 recently reported its 3Q results, in which it briefly mentioned Equatorial Guinea regarding the US$ 120 million order book it held, related to the Fortuna project offshore Equatorial Guinea.

Ophir Energy awarded the upstream construction contract for the Fortuna FLNG Project to Subsea Integration Alliance in October 2017, a partnership between OneSubsea, a Schlumberger company, and Subsea 7. Besides the Fortuna contract, it is unclear how many contracts Subsea 7 has in Equatorial Guinea with other operators.

Earlier this year, the ministry ordered oil operators to cancel all contracts with CHC Helicopters, also citing non-compliance with national content regulations. Oil companies operating in Equatorial Guinea were given 60 days to unwind the contracts and find new suppliers in compliance with local content provisions. It is unclear if the same terms apply to the Subsea 7 contract.