Angola Courts Investors With Oil-Block Auction, Fuel Boost
(Bloomberg) -- Angola unveiled plans to boost refining and auction oil blocks as it seeks to attract investors back to its struggling energy industry.
Crude output in the southern African country dropped steeply after investment dried up during oil’s 2014-2017 crash. And despite being the continent’s No. 2 oil producer, Angola imports most of its gasoline, with its sole refinery meeting just 20% of fuel demand. President Joao Lourenco has vowed to change that.
The country will “intensify the replacement of reserves in order to smooth the deep decline of oil production, ensure self-sufficiency in refined products by building new refineries and increase production capacity” at existing plants, Lourenco said Tuesday at a conference in the capital, Luanda.
The strategy includes constructing a new refinery in the northern city of Soyo, which would be the third proposed plant following plans for a 200,000 barrel-a-day refinery in Lobito and a smaller facility in Cabinda. The country also intends to initially auction 10 oil-exploration blocks in early October, with more to follow.
Angolan oil production was about 1.45 million barrels a day last month, ticking up after dropping to the lowest in at least 12 years. Without investment in new projects, the Oil Ministry has said output could fall to as low as 1 million barrels a day by 2023.
“A lot of investment dried up in 2014 when oil prices fell,” said Adam Pollard, an analyst at consultant Wood MacKenzie Ltd. “It’s starting to come back now with a few projects being sanctioned, but you had a few years with very little money being spent.”
French major Total SA and Italy’s Eni SpA began pumping from new areas in Angola in the past year. However, the government will need to secure further investment in the industry to bolster an economy that’s limping after three years of decline.
Lourenco took office in 2017, with an agenda to revive finances by attracting foreign investment, tackling corruption and selling assets. A series of presidential decrees followed, showing a “really quick” move toward reforms, according to Pollard. However, the pace “has slowed a little bit,” with few investments materializing apart from Total’s Kaombo project, he said.
Ensuring that Angola’s energy industry thrives once again is certainly a significant undertaking. The country has suffered persistent fuel shortages lately, some of the worst in its history, which state oil company Sonangol attributed to a lack of foreign-currency reserves for imports.
Lourenco fired Sonangol’s chairman last month as he sets a course to revamp a company that’s the focus of his pledge to fight corruption, and the main engine of the oil-focused economy.
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