Angola Tries to Jump Start Oil Exploration to Halt Output Drop
(Bloomberg) -- Angola’s state-run oil and gas company is ramping up efforts to lure foreign investors and halt a decline in crude output.
Once Africa’s biggest oil producer, output has tumbled in recent years due to under-investment in new projects and natural declines at aging fields. If it fails to halt this decline it will put severe strain on an economy heavily reliant on revenue from oil exports, already dealing with a weakening kwanza and about to receive a financial bailout from the International Monetary Fund.
Angola emerged from a civil war in 2002 to become one the world’s fastest-growing economies, mostly because of oil. The days of sky-high growth in sub-Saharan Africa’s third-largest economy came to end after the 2014 oil-price crash. President Joao Lourenco, who came to power last year, is attempting to revive the economy by tackling corruption, attracting foreign investment and selling assets.
State-run oil producer Sonangol is seeking investment through talks ahead of a license round next year. The company is targeting exploration in as many as 10 offshore blocks in 2019 -- the first tender for exploration rights since 2011. The government also transferred the role of concessionaire from Sonangol to a new agency earlier this year and offered tax breaks to companies developing marginal fields.
Angola was pumping around 1.49 million barrels a day last month, down from around 1.87 million barrels a day in September 2014. Without investment in new projects, output could fall as low as 1 million barrels a day by 2023, the oil ministry says.
Oil Minister Diamantino Azevedo said in an interview that the country plans to keep production stable at around 1.4 million barrels a day through 2022. To do that he’s going to need investment from international oil companies, willing to take potentially costly bets on unexploited reserves in deep and ultra-deep water.
Exploration activity in the country fell to a single offshore rig earlier this year, a level last seen in 2005, according to Baker Hughes data. Production followed, dropping to a 12-year low.
Since then, Sonangol has been in discussions with some of the world’s biggest oil companies over more than a dozen blocks, according to analyst Adam Pollard at consultant Wood MacKenzie Ltd. Pollard said this indicates “a marked change and also a reflection of the more investor-friendly approach of the current administration.”
Below are some of the companies in discussions with Sonangol or already operating:
|Bp, Eni, Equinor||46, 57||In negotiations|
|Exxon Mobil||6 blocks in Kwanza, Namibe basins||In negotiations|
|Eni||15/06, Vandumbu field||Production started|
|Total||48, Lower Congo Basin||Exploration restart planned|
|Total||32, Kaombo Norte FPSO||Started up in July|
|Total||32, Kaombo Sul FPSO||Planned 2019 startup|
Sources: Wood Mackenzie, companies
BP and Eni declined to comment however Eni announced Monday that it had started production from the Vandumbu field. Total did not immediately respond to a request for comment.
Equinor spokesman Erik Haaland declined to confirm any specific details but said the company is “interested in maintaining long-term production in Angola,” and is “considering new business opportunities in light of that.”
Over the medium-to-long-term, the country’s oil production will likely fall because of lengthy periods of under-investment and natural declines in maturing oil fields, Bloomberg Intelligence analyst Patricio Alvarez said.
Meanwhile, the government said its actions will stabilize output.
“We are committed to maintaining a certain balance of our production, in creating the environment so that there is more investment in Angola -- essentially in exploration,” Azevedo said. “We took action in the legislative point of view, we are taking action in the organizational models,” Azevedo said. “All of these measures combined will contribute to greater stability in oil production.”
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