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“RSSD is an early-stage greenfield project,” Sber-
bank CIB noted on July 28, describing the price
Lukoil paid as “probably below Cairn’s historical
exploration costs.” Its analysts commented that
the company was “entering into an interesting
project at a fairly low initial cost.”
Previous estimates put the initial capex for
Sangomar’s development at $4.2bn, which
translates into $1.7bn for Lukoil’s share, Sber-
bank noted.
It also warned that the development of San-
gomar would require a substantial capex outlay
from Lukoil of $1.7bn over 2020-2023. The deal
should therefore have an impact on dividends,
which are paid from free cash flow (FCF) under
the dividend policy, it said.
BCS Global Markets on July 28 pointed out
that unlike Lukoil’s past attempts to produce oil
in the region, this project was already past the
exploration phase and that the block was already
known to hold significant reserves. The Sangomar block includes three offshore fields (Image: FAR)
“Previous attempts offshore were in Sierra
Leone and Cote d’Ivoire, and generally did the RSSD fields. It also said it believed that inves-
not result in success,” BCS GM writes, noting tors should be positively inclined towards this
that Lukoil booked $2bn in losses on these news.
explorations. Should the investment pay out, “then per-
Given the company’s previous unsuccessful haps Lukoil will have found another option for
runs offshore Africa, BCS GM said it was a pos- using its substantial FCF to deliver value-added
itive development that Lukoil was entering the growth to investors,” BCS GM said, reiterating
Senegalese project for the purpose of developing its Buy recommendation for the company. ™

Angola offers local companies tax

breaks in onshore licensing round

ANGOLA ANGOLA’S government is looking to give local
investors an advantage in its upcoming onshore
licensing round, in the form of tax breaks.
According to the state press agency ANGOP,
the National Agency of Petroleum, Gas and
Biofuels (ANPG) has said that any domestic
company that wins in the upcoming auctions
for nine onshore blocks will pay a petroleum
income tax of 30% instead of the usual rate of
50%. This plan gives Angolan firms an extra
incentive to participate in the bidding round,
as international oil companies (IOCs) will still
have to pay a tax of 50%, ANPG officials said last
week.
It will also bring the new deals into line with PGS is supporting this year’s licensing round onshore Angola (Image: PGS)
existing production-sharing contracts (PSCs),
they added. PSCs usually set petroleum income welfare initiatives, they stated.
tax rates at 65.75% for IOCs and 30% for domes- The upcoming licensing round will cover
tic investors, they explained. three blocks in the Lower Congo Basin (CON-
The ANPG officials also stated that Luanda 1, CON-5 and CON-6), as well as six blocks in
was offering favourable terms beyond the tax the Kwanza Basin (KON-5, KON-6, KON-8,
breaks to local investors. Angolan firms that KON-9, KON-17 and KON 20). The winners
submit winning bids will not be obliged to pay of the auctions will have the right to negotiate
signature bonuses or provide funding for social exploration contracts for the relevant sites.

P12 www. NEWSBASE .com Week 30 29•July•2020