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Angola on offer
A licence round and the selection of a contractor for the construction of a re nery in Cabinda are positive steps for Angola as production declines, write Ed Reed and Ian Simm
angola
wHat:
a namibe basin-focused licence round will be of cially launched in october.
wHy:
bolt-on projects by majors do not offer enough to turn around declining production.
wHat nExt:
luanda has demonstrated its desire to turn around its hydrocarbon industry is paying off.
AN announcement setting out a new bid round in Angola comes amid the country’s broader push to overhaul its investment climate and, crucially, boost oil production. e depths of the oil crash came at a time when it had become clear that Angola’s 2011 bid round – focused on the Kwanza Basin – had largely failed. e invitation-only o ering had garnered substan- tial signature bonuses for Angola’s co ers but poor results saw the initial excitement ebb away. Luanda had been relying on the move into the Kwanza to provide the next wave of production, as it had in the past by moving into deeper waters in the Congo Basin.
e failure of this step, combined with steep decline curves from deep water production, has led the country’s output to slide. Output peaked at 1.9 million bpd in 2008. Despite the stated ambition of reaching 2 million bpd, new invest- ments have been slow in coming and, in 2018, production had slipped to 1.47 million bpd. As of April, this was 1.41 million bpd.
With only limited additions in the near term – from Total’s Kaombo project and Eni’s Block 15/06 – output is expected to fall below 1 million bpd by 2023, the country has warned. e new bid round could cover as much as half of Angola’s production in 2025.
“Oil production has declined as elds have matured, capex spending has dwindled and new projects have not been sanctioned. at has been attributable, in part, to Sonangol’s inability to pay its share of costs when participating in joint ven- tures, which has depressed investor con dence to fund new activities,” a partner at Bracewell’s, Adam Blythe, told AfrOil.
ere are a number of small-scale bolt-on projects, led largely by Total, but these are likely to slow the decline, rather than reverse the trend. Following on from Total’s Zinia 2, CLOV Phase 2 and Dalia Phase 3 plans, announced since May 2018, ExxonMobil recently agreed to rede- velopment work on Block 15. is aims to add around 40,000 bpd of output to the block, from a reported 200,000 bpd. is block saw the sharp- est declines of any of the licences in Angola in 2018, down 15.5%.
“Angola is facing a major problem in the fast depletion of its oil resources. It is crucial to attract new investors. Most of the remaining reserves are in deep and ultra deepwaters and, as such, are very costly to extract. Bad governance and corruption issues must also be addressed
– and there are some signs that progress is under way,” said Verisk Maplecro ’s senior Africa ana- lyst, Maja Bovcon.
licence round
Proposals for the licence round were set out in a presentation at the Angola Oil and Gas confer- ence in Luanda last week. is covers one block – Block 10 – in the Benguela Basin, and another nine in the Namibe Basin. ese are Blocks 11, 12, 13, 27, 28, 29, 41, 42 and 43.
A number of blocks are also available through direct negotiations. ese include 10 blocks in the Kwanza, three in the Namibe and two in the Congo basins. Additional o erings are planned for 2020, 2021 and 2022.
“ e planned licence round will be a good barometer. ere has been a lot of recent politi- cal, legal and regulatory reform in Angola so all of that should help with investor con dence and appetite,” said Blythe.
The round will be officially launched in October, with companies having just over a month to evaluate the blocks on o er. Awards are to be made in December, while agreements will be negotiated from January to March 2020. Licences should be signed by April.
Angola will continue to be dominated by the majors, although there have been some signs that smaller companies are interested in working in the country. Maurel et Prom announced a deal in October 2018, buying a stake in Blocks 3/05 and 3/05A from Mitsubishi’s Angola Japan Oil Co. (AJOCO). Tullow Oil has also expressed an interest in the country, attending the conference last week.
Bracewell’s Blythe went on to note progress had also been made on decommissioning, reducing some of the uncertainties around Angolan investments. The country requires companies to provide funds for abandonment costs ahead of time, and make a plan for how this should be accomplished.
“ ere had been long running confusion and disputes about how the funds should be held and who should hold them. Following a court deci- sion and a new law [Presidential Decree 91/18], more clarity has been given to this matter. While the law provides that the abandonment accounts should be held by Sonangol, this is done through as escrow account, which provides visibility on the funds. While transition to this new approach is still ongoing, it is helping to ease oil company
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