Reuters reports that Total’s CEO Patrick Pouyanné was in Luanda to snip the ribbon on a $16 billion oil project, after nearly two decades of securing the initial rights. No information is provided highlighting when he or his peers will commence oil exploration in Angola.
Africa’s second-largest crude producer is facing a steep decline unless it can revive exploration in what was once one of the world’s most exciting offshore prospects. This development is as a result of fields getting old, and the scarcity of mega-projects like Total’s Kaombo on the horizon.
Angola’s state-oil company, Sonangol is negotiating contracts for new blocks with oil majors and the country plans to hold an auction next year, the first tender for exploration rights since 2011.
The success of the projects is especially important for a country like Angola where oil accounts for 95 percent of exports and around 70 percent of government revenues. Luck will also play a part, as it always does in exploration where finding oil can never be guaranteed.
According to the country’s oil ministry, without new projects, output could fall to 1 million barrels per day by 2023, down from 1.5 million today and nearly half of what Angola was producing a decade ago. Angola risks having its OPEC quota cut and is struggling to ensure the long-term feed for its $10 billion liquid natural gas plant.
Despite its oil wealth, Angola struggles to provide basic services to a mostly impoverished population that is growing at 3 percent a year. President João Lourenço, who won an August 2017 election, promised an “economic miracle”, but falling oil production means a third consecutive contraction is expected in 2018, even while annual inflation runs at 18 percent.
In a bid to turn things around, the country is looking to partner with international oil companies, offering better fiscal terms and more collaboration. Angola is also offering tax breaks to encourage companies to link existing marginal discoveries to operating production platforms, considering the time from exploration to first oil on new areas is anything from five to 10 years.
Although there are signs the measures are working, some oil experts think the costs are too high for the country. An oil specialist at the Catholic University in Luanda, José Oliveira said “if Angola gives away too much it could create problems further down the line”.
Given its imminent production decline and a lack of money or expertise to lead the drilling campaigns itself, the country seems to have limited options.