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Angola owes foreign oil field operators some $1 billion, Reuters has reported, citing unnamed sources, adding this level of debt had forced the country to put up stakes for sale in several offshore oil and gas blocks.
Sonangol announced the tender for the stakes in mid-June and many saw it as a litmus test for the oil industry, which has become a lot more cautious with its investments amid growing government and shareholder pressure to become more environmentally responsible.
"Sonangol has been unable to meet its financial requirements in some of the blocs most needing investment," a source from the banking industry told Reuters.
The state-owned company earlier this month sold the stakes it held in eight offshore blocks saying the move was part of a reassessment of its portfolio. It also aimed at ensuring Sonangol could meet its exploration and production targets, the chair of the company’s upstream executive committee said at the time, as quoted by Xinhua.
Sonangol has financial needs amounting to $7 billion until 2027, according to executive director Joaquim de Sousa Fernandes. These are related to field development, equipment maintenance, and debt payments to banks and under cash calls.
The debt owed to foreign field operators was accumulated over the past few years, which were marked by insufficient investment in the maintenance of producing fields on the part of Sonangol. Then the pandemic last year made an already bad situation worse, making it even harder for Sonangol to meet its contractual obligations to foreign field operators, which include supermajors Eni, BP, Exxon, and Chevron.
"The international companies have been very tolerant ... declaring a default would put Sonangol in a non-voting position within the concession and when you're dealing with a host country that is very delicate," the Reuters banking source said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.