OPEC member Angola was Africa’s top oil producer six years ago when oil prices crashed in 2015-2016, slashing oil-producing countries’ revenues and forcing international oil companies to reconsider their exorbitant spending plans made at $100 oil.
Half a decade after the price crash that began in 2014, Angola is now the third-biggest oil producer in Africa, behind Nigeria and even behind conflict-ridden Libya.
Angola is now betting on reviving its oil industry and jumpstarting its oil-dependent economy, which has been in recession for five consecutive years.
Apart from aiming to attract investments in oil, Angola is looking to sell up to 30 percent in its state oil firm Sonangol next year, after restructuring the company to create more transparency and root out corruption.
The stake in Sonangol is estimated to be worth around US$6.4 billion, Sonangol board member Baltazar Miguel told Bloomberg.
The partial privatization of Sonangol, as well as a stake in the national diamond company Endiama, are part of a much wider privatization program that the OPEC oil producer has already launched.
The proceeds from selling by end-2022 stakes in nearly 195 state-held enterprises, including Sonangol, Endiama, banks, and national airline TAAG, are expected to shore up the government finances and revive the economy that has been suffering since 2014.
Angola was still struggling to recover from the previous oil crisis when the 2020 shock hit the oil market, oil prices, and company plans on capital expenditure. Related: Oil Prices Steady Despite Surprise Crude Build
Angola’s economy, in which oil production and supporting activities account for 50 percent gross domestic product and around 89 percent of exports, slipped into recession in 2015. Five years later, it has yet to exit that recession.
In 2020, Angola was one of the most hit oil-producing economies as low oil prices and lower production due to the OPEC+ pact shrank oil revenues, while its currency, the kwanza, has further depreciated against the U.S. dollar.
Angola’s oil production was declining even before the OPEC+ agreement had it reduce its output, as the African producer was competing for lower-cost development projects with other deepwater basins such as Brazil—and lately Guyana—and losing.
Back in 2015, Angola’s crude oil production was 1.8 million barrels per day (bpd). This figure has dropped to 1.247 million bpd in 2020, not only because of the OPEC+ cuts in which the country takes part.
Angola will need foreign and government investments to discover up to 57 billion barrels of crude oil by 2025, according to a new energy strategy it unveiled last year. Angola’s upstream regulator ANPG issued a forecast for oil production from existing fields, which showed that after peaking in 2008 at nearly 2 million bpd, Angola’s oil production would continuously decline as oilfields mature, to just above 500,000 bpd by 2028, if no new discoveries are made.
European majors Total and Eni are continuing their drilling and development activities in Angola, but this may not be enough for a major turnaround in oil production as mature oilfields are depleting. Earlier this month, Eni announced a new light oil discovery in Angola’s deep waters, pursuing exploration opportunities close to existing infrastructure, which suggests it aims to keep development costs low.
A stable regulatory environment and wisely using the proceeds from the ongoing privatization program could be Angola’s best bet to revive its ailing economy, which has not seen growth since 2015.
This year, Angola’s economy is forecast to expand, albeit by just 0.4 percent, for the first time in six years, the International Monetary Fund (IMF) said in its Regional Economic Outlook for Sub-Saharan Africa earlier this month.
“This latter projection has been revised downward significantly since October because of delayed investment and maintenance in the oil sector,” the IMF noted.
By Tsvetana Paraskova for Oilprice.com
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