FILE PHOTO: Cars are seen infront of the head office of Angola’s state oil company Sonangol in the capital Luanda, Angola. June 7,2016. REUTERS/Ed Cropley
June 30, 2021
By Noah Browning and Ron Bousso
LONDON (Reuters) – Angola has accumulated around $1 billion in debt to western oil companies operating its oilfields, with the bill prompting the African country’s recently launched sale of stakes in its flagship offshore blocs, three industry sources told Reuters.
The magnitude of the debt, built up over several years, is a sign of deepening financial woes at state oil giant Sonangol, one of Africa’s largest companies, due to underinvestment in declining offshore fields which worsened during the COVID-19 pandemic.
It comes as global companies rethink their presence in high-cost ventures worldwide in order to meet their climate targets more quickly and could make Angola — with its ageing and complex offshore fields — a less attractive prospect.
An asset auction announced by Angola on June 14, the sources added, is tied to its previously unreported failure to pay so-called cash calls to which it is contractually bound in order to maintain the fields.
“Sonangol has been unable to meet its financial requirements in some of the blocs most needing investment,” a banking source told Reuters, adding the international firms had in some cases taken Angola’s share of production in lieu of declaring a formal default to avoid confronting the host country.
Sonangol and Angola’s ministry of mineral resources and petroleum did not respond to a Reuters request for comment.
Sonangol has offered stakes in 8 fields, including a 10% chunk of its 45% holding in the giant Block 31 which is operated by BP and a 10% stake in the TotalEnergies-operated block 15/06, its oil minister said.
The assets on offer could raise at least $2 billion, two of the industry sources said.
Under an oilfield production sharing agreement (PSA), shareholders are required to pay the field’s operator to cover the costs of maintaining and expanding production.
A host national oil company can opt to pay these cash calls in cash or barrels of oil.
Among the energy majors which operate oilfields in Angola with Sonangol as a partner, Eni, BP, ExxonMobil and TotalEnergies declined to comment while Chevron did not immediately respond.
Nonpayment has come up occasionally since 2014 but dramatically worsened in 2019 and spiked as the COVID-19 pandemic raged last year, the sources said.
“This has boosted Sonangol’s process of divestment in some of these blocs,” the banking source said, adding that the defaulted payments and interest likely runs to more than $1 billion though the total figure was not clear.
The source also noted rising oil prices would brighten the company’s financial prospects.
SLUMPING OUTPUT
An oil company source added: “Sonangol hasn’t paid cash calls for a while”, noting that debts on just one of the 8 fields for which the company offered partial stakes ran above$100 million.
Angola, Africa’s number two exporter where offshore exploration halted briefly last year as the pandemic collapsed global demand, has been struggling to reverse a steady slump in its oil output. Planned monthly exports in July fell to the lowest in at least 13 years, when Reuters tracking began.
Sonangol executive director Joaquim de Sousa Fernandes said the company’s financial commitments through 2027 including developing fields, maintenance, debt servicing and cash calls would run up to $7 billion.
In comments carried by state news agency Angop this month, he declined to estimate the value of the stakes offered for sale.
A Reuters analysis of Sonangol’s annual results showed it made no money from core oil activities in 2019, as billions of dollars of debt repayments ate up profits.
(Reporting By Noah Browning and Ron Bousso; Editing by Veronica Brown and Kirsten Donovan)
Source: One America News Network
