In 1993, Richard Auty coined the term “resource curse” to describe the failure of resource-rich states to translate their natural resource wealth into sustainable social and economic growth.2 Around the same time, U.S. oil companies discovered significant oil reserves off the coast of Equatorial Guinea (EG), Africa. Instead of benefiting from the ever-increasing understanding of the nature and trappings of the resource curse, however, EG has become a classic case study of the negative impact vast oil wealth can have on the residents of oil-rich nations.
Equatorial Guinea’s Gross Domestic Product is estimated at approximately $10.4 billion dollars;3 yet, more than 75% of its approximately 500,000 citizens live on less than two dollars a day, with limited access to healthcare, education, or running water.4 Western oil companies have eagerly invested in Equatorial Guinea, despite its record of endemic corruption and human rights violations, in part because of the lax regulatory regime and favorable financial arrangements made available by the government for oil exploration and production.
In November 2006 the EG government adopted the Decree Law No. 8/2006 of November 2006 (Oil Law) to govern its oil and gas industry, raising minimum royalties and granting the state an increased participation in contracts.