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2026.10.07 | TB | Energy | Panoro & Vaalco: West Africa Oil & Gas

原标题：Panoro Energy & Vaalco Energy – Opportunities for Independent Oil & Gas Producers in West Africa

#energy

Third Bridge · 2026-10-07

Analyst-led • 28 Sep 2026

Companies: CNQ CA, EGY US, PEN NO, KOS US

James Schwartz (JS) Senior Director, Public Affairs, Communications & Sustainability at Ezee Fiber Texas LLC

Georgia Beattie (GB) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

GB [00:00:03]: Welcome to today's Third Bridge Interview entitled Panoro Energy & Vaalco Energy – Opportunities for Independent Oil & Gas Producers in West Africa. My name is Georgia Beattie, and I'm fortunate to be joined today by Jim Schwartz, the former Director of Global Sustainability and Regulatory at Vaalco.

Jim, before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

JS [00:00:37]: I agree.

GB [00:00:38]: Thanks, Jim. If you would, could you please provide a brief introduction to your background and your time in the space?

JS [00:00:46]: My name is Jim Schwartz. I've worked in corporate public affairs, which includes government relations, public communications, employee communications, political communications, regulatory reporting and sustainability in several industries, including pharma, consumer products and energy. In energy, I worked for BP, I worked for Equinor. I was based in Norway for about one year. Then with BP, was also based in the Middle East. Then with smaller companies such as Southwestern Energy, which has now been merged with Chesapeake Energy and then Vaalco. At Vaalco, I led global sustainability, corporate affairs and regulatory reporting.

Questions

00:01:42] What are your thoughts on the current operating environment for independent O&G [oil and gas] companies in West Africa?

JS [00:01:56]: I have a couple of reflections. The first, I would say it's probably the best it's ever been. Secondly, I would say that necessity is the mother of invention. Third, I think the big shift from ESG or sustainability grandstanding to actually improving performance has probably also been a very good thing for West Africa. What I mean by each of those in terms of it's the best it's ever been in that good oil prices for a long period of time into the future will result in increased investment. It has been getting harder and more expensive for the super majors who I worked for, two of them, to generate sufficient level of exploration activity to continue to justify the high level of money they're spending on exploration that's not producing very much. West Africa is a known producing field that has not had a lot of exploration money, has not had a lot of development money for years simply because there were better places to go. Now that those better places to go have all been explored to death and a lot of the easy oil has already been found and discovered, the companies are now having to make more choices.

The choices are they go to a new frontier area like the Arctic, which is big money, big risk, who knows whether you're going to find anything or go to proven basins like West Africa or Gulf of Mexico, but you're discovering harder to find, more costly to produce oil. The Gulf of Mexico has a lot of that. It's a lot of very expensive oil to produce. Until the tax system changes in the United States to enable a company to write off a larger share of the initial facility costs, it's going to remain financially unattractive. To contrast that with West Africa, there is quite a bit of oil. It's quite a bit of oil that I would say is not the super easy to obtain. It's in the medium range, meaning it's easier to get out at a better price than some of the oil in the Gulf of Mexico. As the economics have shifted the focus of exploration, what's really happened is many countries in West Africa have suddenly gotten a lot better looking. I would say that the economic opportunities are now more profound and prolific in West Africa, and that's a good thing. I think the second thing is these countries are a heavy French influence, heavy western European influence.

As I would say, more reality has started to creep in to some of the climate reduction goals on how to achieve certain CO2 reductions over an incredibly short timeframe, people have realised you can kill your country's economy with that aggressive movement. I'd say many countries in Europe have said, "Boy, I don't think we're going to do that anymore." Gabon, heavily influenced by what country of France says was very aggressive in moving in that area. You say, "Okay, why are you telling me this?" The reason is a lot of the oil that's being produced in Equatorial Guinea, Gabon is high sulphur oil, high H2S oil. They wouldn't touch that stuff for years. There would be a national global outcry because the producing fields are located right next to that national marine sanctuary that is featured all the time on documentaries as this wonderful Garden of Eden-like place where these wonderful creatures live. That's all true. They should be protected. It's important to protect beautiful places like that and species but 20, 30, 40 years ago, when these philosophies came in that we can never produce in that area or we can never produce this type of oil, they didn't reflect the fact that the technologies have now been improved dramatically, and you can safely and environmentally responsibly produce that oil, which is the reason of the mini boom that's happening in Gabon and Equatorial Guinea.

They realised that technologies largely developed in the United States and some in western Europe and some in Norway, you can safely produce high H2S oil, which any release of this, the gas, it's deadly to human beings and it's deadly to wildlife, and so it's a very bad thing. There's a lot of ways to manage the production of oil so you're not creating all of this risk and harm. That has been an enormous change in the eyes of the government in these countries because for years, they would have been chastised by their people as for allowing the production of this product. Now they realised they're either going to face bankruptcy or they have to start producing this and, oh, by the way, it can be produced very safely. I think third, the thing that is really driving a lot of the change is they've realised for years because they were dependent on only a few companies to do the production, when any of those companies would pull out… I think Exxon used to be in Gabon, or I think BP was in Gabon and a few others. As they pulled out because they saw better opportunities, they saw their country's fortunes start to really fall. Gabon is a lovely place full of very dedicated, committed government people or people that work for the government, and they want a better future for the country.

Now when I was there, I was seeing more of a long-term view starting to kick in. They realised they had this resource, high H2S oil that can be produced safely and they've got massive problems in the country. You don't have roads. They don't have reliable water, they don't have reliable power, and it's been that way a long time. Now they're realising that, "You know what, if we allow the production of this resource, it can be done safely and responsibly. We might be able to envision and realistically see a 10-, 20-, 30-, 50-year improvement horizon for places like Equatorial Guinea and Gabon and even Ivory Coast that previously were very much caught up in short-term ideas, meaning they didn't know if the country and the company was going to be around one year or two." I think the big changes have been good. The country might be able to invest more in roads, schools, bridges, infrastructure, all the things any developed country needs.

Vaalco has certainly been a stalwart player in Gabon for a very long time. They seem to be finally getting the corruption down to a lower level. I wouldn't say it's entirely gone. In fact, I heard the Chief Operating Officer of Gabon was in jail again for who knows what. It's not uncommon for them to grab some executive from a foreign oil-based company and throw them in jail for a while until they can sort out if they think the person did anything wrong. The volatility of management in these countries is unbelievably high because the percent of people that are petroleum engineers who happen to speak French, if those people exist, they work for Total. They don't want to live in Gabon. They don't want to live Equatorial Guinea. They want to live in Paris. I think there's been a lot of changes there but it's the best environment it's been in a long time.

00:10:38] What are the implications of the higher oil prices as a result of the Middle East conflict?

JS [00:10:50]: I think a real challenge has been the conflict in the Middle East, and I'm only just repeating observations I heard when I was at Vaalco, and I'm reading in the news. Gabon, Equatorial Guinea are not exactly paragons of virtue. There's a lot of corruption in these countries, and they also were the homes… A lot of the oil transport ships were flagged to Equatorial Guinea, Gabon to avoid or evade sanctions. I think the shipping industry is going to be impacted in these countries as the US continues to step up pressure and enforcement on the Middle Eastern situation with Iran. These shadow fleets or flag fleets or ghost ships or whatever you call it, moving oil around to China to Russia and other places were mostly coming out of… They were flagged to these countries. These countries, they're certainly going to find themselves in the bad side of the United States, which is not a good place for any country to be, particularly with the gentleman we have in the White House right now. I think the countries are realising they can't keep playing the shell game of trying to fool much more powerful countries that they're not really cooperating in some way, shape or form. The supply fleet is significantly going to be diminished and under much greater focus by the US and other US-friendly allies.

00:12:26] What do you think has been the most effective way of managing mature assets in offshore West African oil basins?

JS [00:12:41]: Vaalco has done a pretty good job of spending as little as possible for as long as possible and waiting for prices to improve. That's really been the model. No one has gone in and overinvested at the front end and hoped for a 50-year life for a field. That's just not really going to be a sensible move these days. What Vaalco has done, and I'm not going to say it's a bunch of patches and splinters and Band-Aids, but its operations have not received a high, high level of maintenance expense or other improvements because the company tried to sell itself many times. When they recruited me, they've gone through the second or third round of trying to sell itself, and they had no takers. Panoro has done the same thing. BW Energy has done the same thing. Then they realised it's probably better to make the most of what they have than try to sell because they're not going to get the price they want. Vaalco put George Maxwell as the CEO. George is a wheeler-dealer type, and he could see that there were declining fields, they had to do something. They can't really afford, Panoro can't either, big exploration dollars. What you have operating in that area is two types of companies. You really have the Kosmos of the world, which is run by Andy Inglis, and I used to report to Andy Inglis at BP.

Andy is a, "I'm going to get out there and discover it, and then I'm going to sell the asset to somebody else and they can produce it and turn it into a business." He just wants to run an exploration and discovery company. That's primarily what Kosmos is. They're not really an operator. Vaalco is an operator and Panoro is an operator. What Kosmos is trying to do is just discover stuff and sell it to everybody else. Panoro and Vaalco are cut of the same cloth. They're in all three business types you can have in the oil and gas business. You can either be an equity owner which Vaalco is with CNR in Ivory Coast. CNR is the operator in Ivory Coast and Vaalco merely is like an investor in the company. It has no say, it has no nothing. It just gets money. In the Middle East or in Egypt, Vaalco is in a joint venture with the Egyptian government. Theoretically, you're supposed to have 50/50 say in the JV. I would say that's a naive interpretation unless you've been in a JV with any company in a second or third world country. They really want to run the show.

In West Africa, I would say that Vaalco and Panoro are both operators, they have shared interest. They're part of the joint operations meetings every month. They make decisions together. Now everybody has taken more of a long-term view. The first couple of meetings I went to, it seemed like the business was not even anticipating it was going to be around 60 or 90 days from now. Suddenly, when they realised that they needed to get longer-term investment, they're going to invest in some of these big fields, they were going to do many exploration programmes and the company was serious about making it a go, the timeframes all got longer because one operator influences another. That's exactly what's happened where Vaalco has taken a more forceful position in West Africa. Panoro is coming along and more of a follow-on company as is BW.

00:16:45] Which countries do you think are moving in the most favourable direction for operators?

JS [00:16:57]: Ivory Coast and Gabon.

GB [00:17:00]: Why those countries in particular?

JS [00:17:04]: Number one, they both decided it's going to be the ruination of their country to achieve climate reduction goals on a timeframe that France originally proposed and was imposing. They were never going to work because I had meetings with officials in Gabon and trying to explain the tens of millions, if not hundreds of millions of investment it would take to achieve the carbon reduction goals that France was dictating. I said, "Look, if you want to ruin your country, you sign up for these because you're never going to achieve them." I think the sobering up on rapidly achieving climate reduction goals has finally kicked into Ivory Coast and it's kicked into Gabon. Number two, it's the willingness to invest in H2S oil safely. They have not allowed. You could go back and… These are challenging countries to work in because even when they write an official government edict or mandate, it's on handwritten paper and it's a picture of it. You have to get the regulation. I don't speak French. I'd have to have an interpreting company interpret it. Then very often, you're wondering if the interpretation is correct, but they're slowly modernising. I just give that as one small example. Now they're actually producing documents in digital form that someone else can read. It's a small step, but I'd say that the countries are modernising because they're realising their ways of doing things didn't make any sense. The movement into H2S oil is huge.

00:18:52] How would you characterise the state of the offshore facilities that drive production in Gabon?

JS [00:19:10]: The facilities are pretty much engineered, designed elsewhere and everything shipped in, flown in and then put together on site. There really is not much in the way of an oil and gas infrastructure in Gabon or in Equatorial Guinea. It's all Europe-supplied or US-supplied. The facilities themselves are in rough shape. They're very rough shape. There is not a one that would pass any sort of US Coast Guard inspection or US EPA inspection because the climate is brutal. Everything is rusty. It goes bad very quickly because the climate is so hard on anything that's metal. Even if you're repainting it all the time to try to prevent metal and oxidation, the climate is really, really hard on things. I think the bad incident that Perenco had a few years ago where they had an offshore platform blow up, catch on fire, and you had 12-15 people working on board and their choice was to stay on board and be burned to death or jump into shark-infested waters. Pretty much everybody decided to jump into shark-infested waters, and they were all killed. How could they not get off this platform? The ladders going down were rusted closed and nobody had ever tested the supply boat or the lifeboat to see if it could even work or nobody even tested to see if the radio communications could work under any kind of duress or if there was a backup system.

The environment is an HSE nightmare. There is very little concern about human life. You have rusted, broken down offshore facilities. A lot of the stuff doesn't work. It's too expensive to fix anything. In fact, two of the Vaalco platforms did not have working bathrooms so you literally went into a room, opened up a toilet lid and did what you had to do that went right into the ocean. There were no working facilities on most of this. There were no sleeping quarters. It was the worst conditions you can possibly imagine. That was during a lower profit period when the oil price was down USD 50 per barrel or sub-USD 50 per barrel. No one is putting a penny into it. The government looks the other way because they're not going to impose high standards when they are so dependent upon oil money for 70-80% of their country's budget.

GB [00:21:58]: Do you think this will be the maintenance focus for these specific production sites?

JS [00:22:10]: Yes, it would be great if they actually had some maintenance, and it would be great if increased money also meant a philosophical change where there was a greater focus on the preservation and protection of human life. It's just not at a high level. There's a real, I would say, philosophical conflict. I would work with our Head of HSE, who travelled to these countries, and he would come back just full of horror stories about things that they've done. I saw it myself. I would say that a more stable economic environment and better economic future all means good things for human environmental protection because you're going to spend more money because you're now thinking you're going to be in business for 10, 20 or 30 years. Whereas just a few years ago, I don't think anybody thought there would be an oil and gas industry within five years.

GB [00:23:06]: Where do you think the capabilities for this maintenance is going to come from?

JS [00:23:12]: Where is the dollars coming from? Is that what you're asking?

GB [00:23:17]: Yes, or who's actually doing the maintenance?

JS [00:23:23]: The maintenance will be performed and the improvements by the Halliburtons of the world, the big oilfield services companies. The dollars will come from an increased cash flow. All these businesses have rapidly increased cash flow, and they got to pay down some debt, but they really have to put some money into the quality of the offshore facilities because all it takes is one bad spill into that globally famous marine sanctuary and a bunch of porpoises and dolphins and whales end up washing up on the beach and the oil and gas industry is in a real crisis.

00:24:10] In terms of growth in Gabon, Panoro Energy is potentially planning to grow with the MaBoMo phase 2 that's hopefully coming online and a new production hub at Bourdon as well. What growth challenges do you think the company will face?

JS [00:24:35]: I only know of those fields or developments just in a very general and superficial manner. I would say that presumably, they hired the right engineering firms to help them figure out everything from engineering design through logistics to how they're going to make investments and improvements. I would say that the thing I was always surprised by is how long it took everything in Gabon, Equatorial Guinea, Ivory Coast. You would take a normal timeframe in the US, and it would be triple to quadruple in those countries. Whatever they're saying, how quickly they're going to bring these things online, I would say good luck. See if they can hit any of those dates.

GB [00:25:28]: Is that a supply chain or labour issue? What is it that makes those lead times so long?

JS [00:25:34]: It's a combination. There is some supply chain challenges. There's extreme supply chain challenges trying to get stuff there. There's a lot of corruption that occurs in supply chain. You think you're ordering 10 hammers, but only eight show up or maybe seven by the time they get to the warehouse. Where the other hammers go? Somebody stole them along the way. You also have worker and management problems. It's really hard to get people to work there and stay there for any period of time. The volatility of personnel that I saw at Panoro and Vaalco was through the roof. I would say in-country turnover had to be 30-50% among management. Then you got a lot of friction. These are all union-based. It's a union-based workforce that goes and screams to the government every minute and says, "I almost tripped." I almost tripped, not that I did trip walking across an offshore platform or maybe I was onshore getting something in a supply house. I almost tripped. I didn't trip. I'm going to go to a doctor and say, "I think I need one week or two at home to rest," and they would get it. It was just outrageous.

The companies would be frustrated beyond our belief because you have a union workforce that knows how to manipulate the government. The government wants to manipulate the companies in order to provide benefits for its workers, many of whom are all related or second or third cousins of somebody in government. It's a very politically incestuous environment. Any of the executives that go over there would just shake their heads because this is the way we have to play. HR would try to impose new rules, couldn't get it done. I think, too, that the ever-changing nature of regulations is a big problem. In these countries because whenever there's a political change or somebody's brother-in-law or sister-in-law gets put in charge of something because everyone is related, they might decide to take a very harsh posture towards the companies. In fact, there was a lady, she was in charge of environmental resources for Gabon. I think she was a cousin or something of the president. She was really, really harsh, really harsh. You basically have to wait until these people die until you can get a new person to come in that might be more reasonable.

That's exactly what happened, which led to the production of H2S oil. The person who was in charge died because she was whatever, 115 years old because no one ever dies in Gabon. They're just like it's the world's oldest living people. A new person came in. It's not thoughtful government dialogue debate where you're sitting around having very intellectual discussions about should we go this way or that way. You literally have to wait for somebody to die.

00:28:47] In terms of the actual players in the space, such as Panoro Energy or Vaalco Energy, what do you think are the differences and similarities in terms of the offshore operating environments for those players in Gabon?

JS [00:29:14]: I think the biggest issue is the largest player, which is Perenco, is a notorious and recidivist environmental polluter. They pollute the country left and right. They're owned by a wealthy French family that sell all kinds of luxury goods, like fancy purses, women's shoes and all that stuff and Perenco is a very bad operator. They're, what, 60% of the oil production in that country. Whenever they do something bad, it catches global attention, which happens seems like every 9-15 months. It brings newfound global focus on this country or these countries. That's not good for the smaller operators because even if you're operating at a level significantly above Perenco, which doesn't take much, you are also caught up in the accusations and the suspicions that you're operating in an irresponsible manner. I'd say the biggest risk that any oil and gas producer faces in the area is a rogue, much larger operator. That's CNR in Ivory Coast. They're a rogue Canadian company that does all that awful strip mining for oil sands in Canada, and they have bomb threats at their headquarters regularly. I would say Perenco is the equivalent of CNR in Gabon and Equatorial Guinea.

00:30:51] How important do you think it is to have an established major in a country such as Gabon, for example, TotalEnergies?

JS [00:31:04]: It was good to have Total there because obviously, they're French and French-owned and they provided some sense of stability. The French want what the French want, which is good food, good healthcare, good wine and for people to realise they are the most superior people on the planet. If you just agree with all of those things, working with the French is very easy. As Total has eventually withdrawn, its resources pulled out, looked at other places, I'd say that the diminution of political influence of the French country and Total in particular, has been a great thing because France was pursuing a course of environmental responsibility and climate reduction that was unsustainable anywhere. All the little countries in West Africa because of their French political affiliations, had to say, "Yes, we'll do exactly that" when they had no way possible to ever achieve it. I think the reduction of French influence is good. I think the reduction of Total's influence is good because they were the mouthpiece for the French government, and they were pursuing courses of action that made no sense.

It's not uncommon for a country's national oil company to be a vehicle for its political views. I work for Equinor, believe me, the Norwegians have a lot of very strong views on how they think the world should be run, but we were successful in convincing them that was not a good strategy in the US. I'm not sure Norway does that everywhere else. Norway fears the US, so they don't try to shoot their mouth off too much, but they have no problem telling other countries how to run, how to run their country and how they should do this and how they should do that. France had exactly that influence in Gabon, Equatorial Guinea, Ivory Coast. It's diminished its impact and it's realised, I don't want to call them failed policies, but failing policies clearly were causing far more harm than good. It's been a good thing for the people in these countries and for the oil and gas industry.

00:33:29] We've mainly been talking about Gabon. In terms of Equatorial Guinea, at a high level, what did you make of Panoro Energy's June 2026-completed acquisition of Kosmos Energy's interests in Block G in Equatorial Guinea?

JS [00:33:46]: The Kosmos is in the find it, discover it, sell it business, and so a good move for Kosmos. There aren't that many companies doing effective exploration or development in that area. If Kosmos says the reservoir is X size, I believe it. Clearly, Panoro needs to have new fields because this is the… What I would say, there's easy to get oil, which Gulf of Mexico has a lot of, and that's all been discovered decades ago. A lot of the easy to get in western African countries have already been pulled out of the ground slowly over time. We're now getting into the mid-level, hard to get. I would say the field that they just got in Equatorial Guinea is in that mid-level, hard to produce, requires more investment in the offshore facility, may produce a little bit longer. You may have to spend a little bit more on equipment to handle the H2S oil. Good move for Panoro, good move for Kosmos, good move for the country of Equatorial Guinea because high profits initially accelerate corruption.

High profits over time tend to lead to greater focus on bringing about reduced corruption only because people start looking around going, "Why does that oil minister have a net worth of USD 100m in homes in all these different places?" Initial inflows of extreme cash do create corruption. Equatorial Guinea is, I think, still continues in the top five most corrupt companies or countries in the world, but sustained oil and gas money will be a good thing over time in that country. It's not a big country. It's right next to Gabon, you practically swim there.

GB [00:35:53]: What opportunities do you see to extend the life of the Block G asset or potentially increase the recovery factor?

JS [00:36:04]: I don't know anything in depth other than I know it's H2S oil, which means that whatever they were planning for the offshore facility, it's going to cost 20% more for the facility to handle the H2S oil.

GB [00:36:18]: In terms of that additional cost, what is it about how the sulphur is handled that makes it more expensive?

JS [00:36:26]: There's chemical processing and then mechanical processing. Chemical processing is you're just buying chemicals to neutralise the H2S. Then there's mechanical processing. I don't really understand the process, but by the same thing, it takes out the gas right on the platform, burns it off or heats it up or does something to it. We always did chemical processing at Vaalco. You're buying boat loads, mountains of these chemicals and then you're making your own witch's brew. It neutralises the H2S. It just it takes a lot of chemicals. Then the other option is this mechanical option.

GB [00:37:12]: Either way, it's expensive.

JS [00:37:15]: It's safe, but it's expensive. Yes, it's very expensive. You're adding 20% more.

00:37:22] A lot of majors and international oil companies have moved away from Equatorial Guinea over the last decade. What are the other operating or environmental risks that independents face in the country, and how can they be managed?

JS [00:37:45]: I know it took Vaalco a long time to secure transport and trading. It overfocused, I thought its transport and trading on one company, and I think they're Scottish. They're the ones that constantly are in trouble for corruption allegations. Getting the product out of the country, finding somebody to sell it to and then getting paid for the product, which sounds like pretty standard business processes, everything is just harder there because there's just so much corruption, but it was a Scottish company, Macquarie or something. They were the broker and they would manage the ships to pump the oil into and then get it processed somewhere else. I'd say, too, is many of these countries have their own national oil company. Vaalco was forced to, and I'm sure Panoro was too, was forced to buy diesel fuel from the refinery in Gabon. Again, because of the corruption issue, if you buy 100 gallons of diesel fuel, since there's only two or three companies that have the boats or the vessels to supply the diesel fuel to the offshore platforms, first, the refinery is going to skim. It's not going to give you 100 gallons. It's going to give you 95 gallons. Then the shipper is going to take another 5 gallons or 6 gallons.

Then the people on the boat are going to take 2 gallons or 3 gallons. You buy 100 gallons, you might end up with 86 gallons or 87 gallons. That's the way business is done in that part of the world. It was a pretty big challenge to have any sort of consistency, reliability, durability across your supply chain because there's very few choices and the choices that exist are corrupt and you can't switch it out because the government says, "No, no, no, you have to use my cousin Larry's fuel supply boat," and that's the only way you can produce. Government corruption continues to be a big challenge, incredibly limited supply base continues to be a big challenge and I would say, just retention and hiring of qualified workers.

GB [00:40:18]: Can any of these can be better managed by independents that are operating in this region?

JS [00:40:26]: I'm not sure. I think everyone has the same challenge. Although Total being a much bigger company would send people in there for maybe one year or two. It's pretty rough living. I was in Gabon three times, and I got food poisoning every single time and there's no healthcare to speak of. You got to make it so you can get on a plane to Paris to get to a decent hospital. I'm not sure anybody has really figured out the high-volume worker issue because in the little over one year, I was at Vaalco. We went through three country managers in Gabon, two country managers in Egypt. We had one country manager in Equatorial Guinea, but he was not allowed to go into the country because he was under a threat of arrest. Then the country manager we had in Ivory Coast was also decamped to Gabon because he was under threat of country arrest if he went into the Ivory Coast. Other than that, I'd say a pretty calm environment.

00:41:34] As you mentioned, the Ivory Coast is potentially emerging as a new opportunity in terms of oil production in Africa. What is your view on the state of the infrastructure and the environmental safety standards in the Ivory Coast compared to Gabon and Equatorial Guinea?

JS [00:41:59]: It's worse. The country is much more evolved. It's much more advanced and it's modern significantly than Gabon and significantly less corrupt than Equatorial Guinea. The problem is you have a big, bad actor and that's CNR, Canadian Natural Resources. They do whatever they want, and they don't care. Even though Vaalco owned 18% or 22% of the producing field in that area and then paid for all the money to have the new FPSO refurbished in Europe somewhere, maybe it was in the Netherlands, the CNR is not a good operator. They're constantly in trouble with the Canadian government and governments everywhere they operate. They're very much a rogue company. They do whatever they want to. They would much rather negotiate a legal settlement with a country than do the right thing. They were not a good partner for Vaalco in my opinion, only because we owned not a controlling amount, but a significant amount, but we had no vote. We had no decision. They would not verify or allow us to confirm any of the data they ever sent. Conversations talking about things we could do to reduce environmental risk or improve human safety, they went in one ear or out the other. They were just a complete waste of time. I sat on a half a dozen 1-1.5 hours such calls. We'd make proposals, make suggestions. They listen politely and say no to everything.

00:43:49] How do you assess Vaalco Energy as an operation in the Ivory Coast?

JS [00:43:53]: Vaalco is just the tail of the dog there. They have to do whatever CNR says and wants and CNR is not the type to go argue for better days, safer days with a government anywhere, and it holds itself to very low standards. I'd say anybody who's hitched their waggon to CNR, you're just going to have an incredibly high increase in safety incidents even if they track them. That's part of the problem with CNR is they're very arbitrary in what they decide how they do their accounting. Another company would say, "Well, that's a significant safety incident or that's a near miss or that's a hurt worker or this was an environmental spill." At Vaalco, we at least had a standard, and it was the international standard that a spill was defined as, I think, six barrels released out of its primary containment. CNR would never even agree to an international standard on what a spill was. A spill was whatever they told you it was. There was no quantity that they would ever assign to it.

It's really hard doing business with companies like that because you're not operating against internationally well-recognised and accepted standards. I would say good luck. CNR was the kind of company, and I learned this in the oil and gas business, when you make a discovery, and you think about, "I'm going to take a measuring stick and I'm going to put it down into a bucket. Whatever the oil comes up to on the measuring stick will tell me how much oil is in that reservoir." That's what you think, but there are companies that take that measuring stick and they lean it 45 degrees or so. Well, if you have any understanding of physics, what you realise they're doing is they're fabricating greater depth than really exists. CNR was exactly that kind of company. They like to lean the stick.

GB [00:46:03]: In terms of how Vaalco managed to do out of that, how has it performed with those assets overall? How did it manage to be in the region and how much production has it managed to achieve with its assets – the fields?

JS [00:46:12]: When I was there, the company just did the deal and then the FPSO went off to the shipyard for two years to get refurbished. It's back now. The pictures of it after it had been out producing for 20 years, it was a rusted hulk. I'm surprised people were not falling through the floor. It's the environment in that area is really hard on metal and steel. I understand it's back in operation, and it seems to be producing well. Vaalco had a couple of people in the Netherlands for a couple of years kind of watching over the production work and make sure the refurb is done correctly. My understanding… It was an expensive refurb, I think it was USD 400m for the refurb but it'll last 20-25 years. Yes, I'm assuming it went well because the field producing was good. Then Vaalco as part of the deal, bought a little field right next door that was known discovery. They're not going to risk big money on drilling wildcat wells, but it was a known discovery. I think Vaalco is the producer of that. I was reading something the other day, I think it's fairly low production, maybe 5,000-6,000 barrels per day, pretty small.

00:47:32] What do you think are the biggest challenges that the industry is going to face as production hopefully grows in the Ivory Coast?

JS [00:47:45]: I don't think we really have any significant challenges because the government is much more stable, environmental situation is more stable. It's just you're operating in the shadow of the biggest operator who breaks the law all the time. The question is, how much lawbreaking will CNR have to do before the government says too much?

00:48:09] How will learnings in Ghana potentially impact the pace of development in the Ivory Coast? How can producers in the Ivory Coast leverage that experience?

JS [00:48:25]: I think the only thing that could impact is across those three or four countries that are oil and gas producing is the supply base is just not that big. If all four decided to really invest in oil and gas production at the same time, there is not enough suppliers to supply it.

00:48:42] How would you characterise the oilfield service industry across the regions we've discussed?

JS [00:49:02]: It's good quality, stable. If you can find people that are French speakers, they get a real premium for that. There's enough people willing to go in there and work if they're going to get 200% to 300% of their normal rate, which Vaalco had to pay in most cases. I would say the quality of the workforce seemed okay. These were not the sharpest, best people. They were very good for those countries. They were just, I would say, would be average in a more developed country. I don't think any of them would have survived being in Scotland because no one can survive being around Scottish people and their great love for not spending money more than six months or one year.

00:49:50] Who are the biggest companies that you see established in West Africa in terms of the service industry? Which companies are investing more in this region?

JS [00:49:59]: Halliburton tends to be the largest. Weatherford is a big player. NOV is a big player. The energy services firm, they do the thinking, do the plan, supervise the project, but they tend to be located in better places to live and work. They'll just fly in for a period of time. They're there for whatever it takes, one year, two years, three years and then they're done, they move on to the next project. The quality of the energy services firms is global and it's high quality and it's very good.

00:50:37] Is natural gas flaring an issue for oil producers in West Africa?

JS [00:50:48]: Yes, of course, it is. This is the big problem where Vaalco is facing, should we fold the tent and sell or go on is you have to have your… Your motors on offshore platforms were powered either by diesel fuel or they're powered by natural gas. Vaalco did not have enough natural gas to power its natural gas engines. It was killing them economically to keep shipping out all this diesel fuel, and then you lose 15% of it in the transportation process because of these corrupt buggers that's stealing it all the time. The company had argued for years with the government to allow it to drill some natural gas wells. The government kept saying, "No, no, no. We want you to keep buying our very expensive diesel fuel that's priced at 2x the price you could get anywhere else." The company was caught in a classic conundrum. They knew they needed to get their own natural gas supply. The country would not allow them to drill the wells in order to get the natural gas supply because the country liked the revenue and the profits that came from selling it overpriced diesel fuel. The company was able to convince the country that it really needed to drill these natural gas wells because it would result in a reduction of CO2 emissions, which was part of the project I led when I was there.

We built a case, and we said, well, this is the amount of CO2 emissions that are coming from all of the diesel fuel that we're having to build and go out there we're having to use for all these big motors in the offshore, and we can't make it any more efficient. We cannot deliver the goals, the mothership your country, France wants unless you allow us to shift to cleaner burning natural gas. We caught them between a rock and hard place. We said you can't achieve what the French government wants you to achieve unless we switch to natural gas. We showed them the reduction, and we published the graphs on all of this. We made it very public. They got backed into a corner and they said, you know what, after we've given this much thought and consideration, we've concluded that we're going to command Vaalco to drill natural gas wells, so they have natural gas. That's the only way you can get these countries to do it is to embarrass them or paint them into a corner. The only option is the option you want.

00:53:36] On the downstream side, there's a new refinery that has transformed Nigeria's fuel balance dramatically. Where else could we see downstream investments in West Africa?

JS [00:53:56]: I'm not sure I heard or seen it. All of these countries have these great ideas. They're all big idea… They're going to build a solar farm. They're going to build a wind farm. You're like, "Really, is there any wind in your country? No, but we're going to build it anyway," like what? I would say they have a lot of big ideas for improvement. They lack the infrastructure, the dollars, the know-how, the technical capabilities. I think they get money to go to France and they go up there and they attend a few seminars and they drink too much wine and they come back with all these big ideas and they realise none of them can be implemented. That's the biggest challenge of working in these countries is talking people down from crazy ideas.

GB [00:54:40]: In terms of downstream investments, there are obviously refineries in West Africa.

JS [00:54:48]: There's not been any new refinery capacity or anything in any of these countries for years and highly unlikely there ever will be. Too much political opposition. They've got the corruption system built too well. They build a new refinery, that means they have to go pay people off and figure out who's going to get what share or what. Right now, it's all benefiting certain people. I don't think they want to upset any of that because they like it.

00:55:17] Which countries in the space do you think are going in the wrong direction, and which are going in the right direction?

JS [00:55:30]: Gabon in the right, Equatorial Guinea coming along because it has to. Ivory Coast is moving out faster and farther than the other two.

00:55:43] What are 2-3 key things we should monitor as signposts for development in the energy sector in West Africa over the next one year or so?

JS [00:55:59]: Leading indicator is environmental regulations coming out of France. Another leading indicator is crackdowns by more powerful countries on this ghost or shadow oil shipping fleet because if you can't move the product through all of these Gabonese, Equatorial Guinea flagged vessels, that's going to really reduce shipping and so you got a supply chain constriction. I think number three, I'd look at is there enough quality talent if all of these countries decide to go all in on oil and gas development? Is the supply chain big enough? Is there enough good people that are willing to go in there at 200-300% of their normal rate for two, three, four years to build all of this stuff? Vaalco saw that was a real challenge. We would compete and have to negotiate with other companies. For example, there's one really good offshore driller, and they've got the best crew, the best drilling rig. You'd have to talk to the other companies all the time to say, "Well, are you guys going to keep drilling or could we have the ship for this period of time?" The companies ended up forming these informal cooperative treaties to not create too many constrictions with a very small supply chain base. That's something that's not formal. It's not formal at all. It's not the suppliers organising because they're hypercompetitive. The ones buying their services had to organise as to not create artificial economies with the small supply chain base.

00:57:53] Could you elaborate on why the environmental regulation coming out of France will have an effect on or be a signpost for development?

JS [00:58:04]: It's France and Europe. France and Germany and some of the Netherlands go crazy again and say, "Oh my God, the world is going to end in one year or two unless we stop all fossil fuel production." It's crazy stuff we've seen over the last three or four years because these little bitty countries do not have enough policy analysts, do not have enough policy expertise. They are very beholden and hugely admirable of whatever policies or positions these western European countries take because they're the big brother. They're the big sister. They're going to follow what the big brother or the big sister says. They don't have the know-how to really think through and do the economic calculations on what could happen to their interests if they actually did some of the things that are being proposed. It was a challenge.

I was a Head of Sustainability. I had many meetings there trying to say, "You can't really shift to 50% or tell us to shift to 50% wind farm production because there are no wind farms. The nearest wind farm is in Kenya, and there's no transmission line to get the electricity from Kenya to Gabon. How are we supposed to go to 50% wind farm based?" You would have these conversations with people, not try to hide your incredulity or try very hard to hide your incredulity to help them work through it, and they would go, "Oh, yes, we didn't see that. We didn't figure that part out." I'm like, "Okay." That was every meeting in Gabon, Equatorial Guinea and Ivory Coast. They go to France, they drink too much wine. They buy their wife too many nice clothes and purses. They'd come back and they'd have these crazy ideas, and you would spend months talking them down from crazy ideas.

GB [01:00:18]: We will now conclude the Interview. Thank you so much for time. I've really enjoyed the Interview.

JS [01:00:24]: Thank you. Bye-bye.

GB [01:00:26]: Thanks. Bye.

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