Oil company Sonangol to manage industry development and maximize revenue on the production that remains, yet the firm is currently barely able to generate a profit because of its overwhelming debts and is badly in need of reform. These non-core assets are to be sold off to create a leaner company that focuses on developing its own upstream assets and its refining and distribution operations. The government is also planning to divest some of the many offshoots that are connected with the Sonangol brand but which are based around the world. These include Hong Kong-based China Sonangol International Holding, in which it holds a 30% stake. Sonangol’s role as the Angolan oil industry regulator has already been spun off into a new organization, Agência Nacional de Petróleo, Gás e Biocombustíveis (ANPG), which will organize future licensing rounds. The government is also keen to sell equity in the parastatal, possibly via an initial public offering (IPO), with a 30% share the most widely quoted figure. This has proved to be more controversial and progress has been slow, especially as the government fears it will be unlikely to gain full value for equity sales during the pandemic.
Angolan oil production has steadily declined over the past decade, from close to 2m barrels a day (b/d) to an average of 1.25m b/d last year, while output averaged just 1.05m b/d this January. ANPG forecasts that production will fall to 500,000 b/d by 2028 if no new discoveries are made. All talk of challenging Nigeria in its position as the biggest oil producer in Africa has faded away. Offshore production has been particularly badly affected, with far less capacity brought on stream than has been exhausted. This is partly because most remaining prospective acreage is either deep-water or ultra-deep water, on which upstream activity is far more expensive. Few new exploration wells have been drilled, although Total is currently working on what will be the world’s deepest ever well, at more than 3,200m below sea level. These costs can be borne in an era of the $100 barrel but an average price of $58/barrel over the past five years is generally not sufficient to tempt investors into deep water exploration. Low oil prices over the course of the pandemic have intensified the pressure on the government to reform Sonangol and attract more oil and gas industry investment.