The up and downside of Angolan oil

The Angolan oil sector is expected to generate record production within three years. National output is expected to rise from the current level of 1.7 b/d to between 2.1m and 2.2m b/d by 2016, according to a recent report by credit ratings agency Moody’s. Most of the new production will come from the Lower Congo Basin.

Two thirds of current output and most fields due to come on stream in the near future lie in ultra-deepwater acreage. Similarly, blocks in the planned new licensing round are located in the Kwanza and Namibe ultra deepwater basins.

Hopes are high that further discoveries will be made in these basins, which are geologically very similar to the Campos Basin offshore Brazil, which has yielded a string of discoveries over the past few years.

“Our objective was to check the progress of the recovery works of the breakdown of this plant in Soyo.‘ José Mario Botelho de Vasconcelos, Angola’s Oil Minister

The round will offer 12 offshore blocks, 10 onshore blocks in the Congo and Kwanza river basins; seven in the southern half of the Namibe Basin; and five in the Lower Congo Basin. In the long term, it is possible that Angola will overtake Nigeria as Africa’s biggest oil producer, unless the latter manages to tackle the various problems that continue to curtail its own output.

Sonangol has signed concessions to explore blocks KON 2, 4, 11 and 12 in the onshore Lower Congo and Kwanza basins. The State Oil Secretary, Aníbal Silva, said: “The concession included prospecting, exploration, development and production of liquid and gaseous hydrocarbons…and allows the national concessionaire to carry out a preliminary assessment of existing resources and determine their potential.”

The oil majors that partner Sonangol on many of the country’s main upstream projects are also stepping up their investment in the country. In July, for instance, BP announced that it would invest $15bn in Angolan upstream projects over the next decade.

The Angola LNG project continues to disappoint. The scheme, which is located in Soyo in northern Zaire Province, was completed last June but has suffered from operational difficulties since the start.

Visiting the site in August, Oil Minister José Maria Botelho de Vasconcelos said: “Our objective was to check the progress of the recovery works of the breakdown of this plant in Soyo.

“We had the opportunity to gather all national firms involved in the project such as Sonangol concessionary, Sonagas, and the Ministry of Oil so as to jointly find feasible solutions for the functioning of the plant.”

Such problems are relatively rare at LNG plants, particularly on new schemes. Angola LNG is owned by Chevron (36.4%), Total (13.6%), BP (13.6%), Eni (13.6%) and the state oil firm Sonangol (22.8%).

In August, the United States Securities and Exchange Commission issued US oil company Cobalt International Energy with a formal warning relating to its operations in Angola. The Commission stated that the company could face enforcement action for breaches of “certain federal securities laws”.

Cobalt had been active in Angola since 2008 in a consortium that included Sonangol, plus two privately owned Angolan companies, Nazaki Oil & Gas and Alper Oil. Nazaki was at least partly owned by three senior government officials via a holding company.

Investigators in the US allege that there have been conflicts of interest with individuals simultaneously involved in the government, Sonangol and private oil companies, and that Cobalt should have carried out due diligence on its counterparts before entering into a consortium with them.

A Cobalt statement insisted that the company did not know about the involvement of government officials in Nazaki and would fight any attempt to bring charges against it.

However, in late August, it announced that both Nazaki and Alper had transferred their interests in the venture to Sonangol, adding that it “no longer has any relationship with Nazaki or Alper”, although oil on the block in question would still come on stream in 2017 as planned.
Cobalt now holds a 40% stake in the venture and Sonangol the remaining 60%.