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Angola bounces back after slump in fuel production
LUANDA, June 23, 2019 (BSS/AFP) – Angola is bouncing back after its fuel
production slumped last year to a decade low as President Joao Lourenco
steers reforms vital to the country’s economy and wins approval from oil
majors.
“It is a new era. I see a growing interest from investors,” says Guido
Brusco, vice-president for sub-Saharan Africa of Italian giant ENI.
“We should come back to 2012/2013 to see the same level of interest” as
that now being shown by investors, Brusco told AFP on the sidelines of a
conference earlier this month in Luanda.
France’s Total, the premier operator in Africa’s second-largest oil
producer after Nigeria with output of 650,000 barrels per day, confirms as
much.
“There is a business environment which could lead us soon to sign several
agreements,” says a Total spokesperson. “A new page of Angola’s petrol
industry is clearly opening.”
The arrival of Lourenco, who succeeded Jose Eduardo dos Santos who ruled
for 36 years, has marked a radical step for the OPEC-member country.
When Lourenco took office oil prices were struggling to come back from a
slump going back to 2014 but he has launched a string of initiatives in order
to tackle falling production.
With oil Angola’s primary resource, that was an overriding priority given
that production of “black gold” last year slid just below 1.5 million bpd,
its lowest level for 10 years — the consequence of low prices and a freezing
of new projects.
“We were in an environment of low prices and firms found it difficult to
get responses from (state producer) Sonangol to advance dossiers,” an oil
sector source who requested anonymity told AFP.
Before embarking on reforms Lourenco first spent several months consulting
the industry to pinpoint means of relaunching activity.
A series of policies, including tax perks, were introduced, enshrined in
several presidential decrees which, Brusco says, have managed to “improve the
investment climate.”
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Brusco says he served on a committee to deliver proposals to that effect
“and the government endorsed those proposals.”
– Tax perks –
Those decrees have allowed the development of resources which had
previously been unviable and to relaunch exploration programmes.
The results of the favourable legal framework soon emerged.
Within 12 months, Brusco says, ENI had discovered five fields.
“Total and other actors are reevaluating a number of dossiers they had put
on hold as unviable but which today could function,” given the tax
advantages, says the oil sector source.
Those include so-called satellite fields near to blocs which have already
been exploited.
Britain’s BP and US rival ExxonMobil are also angling for new investments
in Angola, according to Adam Pollard, senior upstream analyst for sub-Saharan
Africa with Wood Mackenzie.
“We have already seen new projects sanctioned by Total (Zinia 2, CLOV
Phase 2 and Dalia Phase 3) and Eni, BP and ExxonMobil are also planning new
investments,” said Pollard.
Lourenco has also wielded a new broom at Sonangol, bringing changes to an
influential firm which is also the biggest contributor to state coffers.
First, the president laid off COE Isabel dos Santos, daughter of the
former head of state amid suspicions of financial wrongdoing — which
Africa’s richest woman roundly denies.
Lourenco has also removed from Sonangol one of its key tasks — granting
exploration and drilling permits, with that task now performed by new
separate entity, the National Oil and Gas Agency (ANPG).
Lourenco explains such reforms are designed to “restructure” the sector in
Angola and “create the conditions for making private investment attractive.”
And that is not all.
Lourenco vowed to top industry players earlier this month that Angola is
going “to intensify efforts to renew reserves and temper the large decline of
oil production.”
In order to turn the sector around dozens of new blocs are set to be sold
off in the coming months.
Luanda recognises an urgent need to advance. Without new projects coming
on stream production could slide below a million bpd by 2023, the Ministry of
Oil warns.
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