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Angola’s new President Joao Lourenco continues with reforms aimed at reversing the country’s oil production decline, by creating an agency that will sell and manage oil blocks instead of state oil firm Sonangol.
Lourenco signed on Thursday a decree to create a National Agency of Petroleum and Gas, expected to launch next year and be fully operational by the end of 2020. The new agency would break the almost complete monopoly of Sonangol in Angola’s oil industry, since the state oil firm is also currently responsible for the approval, management, and holding of oil block sales. Under the previous management of Isabel dos Santos—daughter of Lourenco’s long-serving predecessor Jose Eduardo dos Santos— Sonangol has been slow to approve projects and company investments, the new president and his team have concluded.
Earlier this year, OPEC member Angola halved the tax rates on development of oil discoveries with less than 300 million barrels of reserves as Lourenco is trying to incentivize oil and gas investment in the African country. Angola cut the petroleum production tax on so-called marginal fields—those with less than 300 million barrels of reserves—to 10 percent from the typical 20 percent tax. The tax reforms also halved the petroleum income tax on marginal fields to 25 percent from 50 percent.
For gas reserves, Angola is introducing a new legislation for gas fields outlining the legislative and tax framework for companies to explore for, extract, and sell natural gas. Under the gas tax regime, petroleum production tax will be 5 percent and petroleum income tax 25 percent.
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Angola—whose economy has suffered from the low oil prices in recent years—has also been struggling to attract international investments in its deepwater higher-breakeven oil resources.
Angola’s oil production had been declining in recent months, but it recovered in July, rising by 11,700 bpd from June to average 1.456 million bpd, according to OPEC’s secondary sources in its monthly report. Still, this production level compares to average output of 1.637 million bpd for 2017.
Last month, France’s Total started up oil production at the Kaombo area, which is currently the biggest deepwater development offshore Angola. Production at the Kaombo development is planned to reach an estimated 230,000 bpd at its peak, which would be a welcome boost to Angola’s oil production that could offset declines at ageing fields.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.