GABON: U.S. OIL COMPANY SELLS ASSETS DUE TO OIL

UNCLAS SECTION 01 OF 02 LIBREVILLE 000504 SIPDIS DEPARTMENT FOR AF/C FOR LISA KORTE E.O. 12958: N/A TAGS: EPET ENRG EIND TPHY GB SUBJECT: GABON: U.S. OIL COMPANY SELLS ASSETS DUE TO OIL SECTOR TRENDS LIBREVILLE 00000504 001.2 OF 002 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxx PLEASE CANCEL LIBREVILLE 504 CABLE WAS SEENT IN ERROR xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxx LIBREVILLE 00000504 002 OF 002 Perenco has been aggressively developing new reservoirs, and this new acquisition is in line with their recent expansions, including the Loche East Field site in 2007. Its partnership with the Gabonese Government is strong, as it is the gas provider to the power plants in Libreville and Port-Gentil, which results in approximately 680,000 cubic meters of gas per day used. Perenco also works closely with Total Gabon. -------------- VAALCO'S PAYOFF -------------- ¶9. (C) Another U.S. company, Vaalco, is staying in Gabon. It has invested significantly in exploratory drilling both offshore and onshore in Gabon, and despite setbacks, recently discovered a successful development well expected to increase its production significantly. In 2008, Vaalco invested $14.9 million in exploration, spending $2.5 million alone on unsuccessful Gabonese prospects. Undeterred, Vaalco allocated additional funds in early 2009 for more exploratory drilling in Mutamba, which is a promising onshore development, as well as a new prospect offshore. Its methods have reaped recent rewards, with a successful discovery in late 2008 in Ebouri field which started production in April ¶2009. The new well set a production record for the company, with 24,993 bpd from the Etame Marin block, a statistic which is now the average for the site. -------------- COMMENT -------------- ¶10. (SBU) Gabon's oil sector has languished due to overexploitation and new technological needs, but Vaalco's new wells indicate that persistence and willingness to explore additional sits could have a long-term payoff for U.S. companies. Economic diversification is high on the new President's agenda, but encouraging new investment in the oil sector will remain a critical priority as he attempts to put Gabon back on sound economic ground. REDDICK