Africa & Energy (merged)
Posted: Sat 24 Jun 2006, 19:25:52
MIAMI, United States (UPI) -- Oil production in Central African countries is expected to drop by 15 percent in the next three years, the Bank of Central African States said in a recent report. Production levels in five of the six nations in the Central African Economic and Monetary Community, or CEMAC, will drop from 59.3 million tons this year to 50.6 million tons in 2009, the bank said, adding that the decline was due to an 'absence of any new discoveries.'
Five CEMAC nations -- Cameroon, Chad, Congo Republic, Equatorial Guinea and Gabon -- are oil exporters. Only the Central African Republic does not produce oil. Equatorial Guinea, the lead producer in CEMAC, is expected to experience a production decline from 18.6 million tons this year to 16.2 million tons in 2009.
Gabon, whose economy would be hardest hit by the decline, according to experts, could experience a 27 percent reduction in production in the next three years, falling to just under 10 million tons in 2009.
Chad is the only country expected to increase production in the coming years, said the bank report, with levels increasing to 8.6 million tons in 2007. Levels then are forecasted to level off at 7.7 million tons by 2009.
The central bank`s and International Monetary Fund`s economic forecast for the region predicts that CEMAC oil producers will also experience a strain on central bank and state coffers amid the production decline, despite a constant near-record global price per barrel.
As a result, growth for CEMAC nations is expected to average some 2.5 percent per year until 2010. Such minimal gains would signal a need to slash state budgets and would hamper poverty reduction efforts in those countries in the coming years. A minimum of 7 percent gross domestic product per year is needed in that region for efficacy of poverty programs there.
While each of the five producers will handle its own production declines separately, all the CEMAC nations, including the Central African Republic, will feel the sting of less oil output. The nations share a common currency and rely on the revenue in their central bank located in Cameroon, Anna-Marie Gulde-Wolf, an IMF economic adviser specializing in Africa, told United Press International.
'A big part of what is going to happen is linked to fiscal policy [in CEMAC],' she said. 'Our recommendation is to have a fairly rapid adjustment ... by cutting the budget [in CEMAC nations] in the next three or four years.'
Belt-tightening will likely come at the expense of some social spending in the coming years, she noted, though the impact will unlikely be disastrous.
'I don`t think there will be any crisis ... this is something that can be adjusted [to],' she said.
Cameroon will mostly likely weather the decline better than other CEMAC producers, said Gulde-Wolf, as the country has the most diversified economy of any of the other countries in the region. In addition to oil, Cameroon exports cocoa, coffee, other mineral resources and boasts an emerging manufacturing and agricultural sectors.
Gabon, on the other hand, would be hit the hardest by the decline. The nation doesn`t have an economic sector as diversified as Cameroon, though may draw on a line of IMF credit during lean production years.
The decline in CEMAC production levels, meanwhile, should not bode poorly for prices at U.S. pumps, said John Kilduff, senior vice president of the energy risk management group at Fimat USA Inc.
'It`s sort of a mixed bag ...obviously we [the United States] are in position where we need more crude oil, but when we look to the future those nations aren`t on our concern list,' Kilduff told UPI.
He noted that the United States doesn`t buy much of its oil from CEMAC nations. For example, Chad produces an estimated 84,000 bpd destined for U.S. shores.
He also speculated that increased production in Nigeria and Libya in the coming months and years would offset any CEMAC oil declines.
'Still,' he cautioned, 'any time we see these declining production levels, it`s disturbing.'
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Five CEMAC nations -- Cameroon, Chad, Congo Republic, Equatorial Guinea and Gabon -- are oil exporters. Only the Central African Republic does not produce oil. Equatorial Guinea, the lead producer in CEMAC, is expected to experience a production decline from 18.6 million tons this year to 16.2 million tons in 2009.
Gabon, whose economy would be hardest hit by the decline, according to experts, could experience a 27 percent reduction in production in the next three years, falling to just under 10 million tons in 2009.
Chad is the only country expected to increase production in the coming years, said the bank report, with levels increasing to 8.6 million tons in 2007. Levels then are forecasted to level off at 7.7 million tons by 2009.
The central bank`s and International Monetary Fund`s economic forecast for the region predicts that CEMAC oil producers will also experience a strain on central bank and state coffers amid the production decline, despite a constant near-record global price per barrel.
As a result, growth for CEMAC nations is expected to average some 2.5 percent per year until 2010. Such minimal gains would signal a need to slash state budgets and would hamper poverty reduction efforts in those countries in the coming years. A minimum of 7 percent gross domestic product per year is needed in that region for efficacy of poverty programs there.
While each of the five producers will handle its own production declines separately, all the CEMAC nations, including the Central African Republic, will feel the sting of less oil output. The nations share a common currency and rely on the revenue in their central bank located in Cameroon, Anna-Marie Gulde-Wolf, an IMF economic adviser specializing in Africa, told United Press International.
'A big part of what is going to happen is linked to fiscal policy [in CEMAC],' she said. 'Our recommendation is to have a fairly rapid adjustment ... by cutting the budget [in CEMAC nations] in the next three or four years.'
Belt-tightening will likely come at the expense of some social spending in the coming years, she noted, though the impact will unlikely be disastrous.
'I don`t think there will be any crisis ... this is something that can be adjusted [to],' she said.
Cameroon will mostly likely weather the decline better than other CEMAC producers, said Gulde-Wolf, as the country has the most diversified economy of any of the other countries in the region. In addition to oil, Cameroon exports cocoa, coffee, other mineral resources and boasts an emerging manufacturing and agricultural sectors.
Gabon, on the other hand, would be hit the hardest by the decline. The nation doesn`t have an economic sector as diversified as Cameroon, though may draw on a line of IMF credit during lean production years.
The decline in CEMAC production levels, meanwhile, should not bode poorly for prices at U.S. pumps, said John Kilduff, senior vice president of the energy risk management group at Fimat USA Inc.
'It`s sort of a mixed bag ...obviously we [the United States] are in position where we need more crude oil, but when we look to the future those nations aren`t on our concern list,' Kilduff told UPI.
He noted that the United States doesn`t buy much of its oil from CEMAC nations. For example, Chad produces an estimated 84,000 bpd destined for U.S. shores.
He also speculated that increased production in Nigeria and Libya in the coming months and years would offset any CEMAC oil declines.
'Still,' he cautioned, 'any time we see these declining production levels, it`s disturbing.'
Link