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UK Private Equity Firm Looks To Buy Stake In Angola's Oil Major Sonangol

UK-based private equity firm is interested in buying a stake in Angola’s state-owned oil company Sonangol, Bloomberg has reported, citing a source from the firm, Gemcorp.

After the Angolan government establishes a procedure for the sale of up to 30 percent of Sonangol—a privatization deal that could fetch $6.4 billion—Gemcorp will evaluate a possible acquisition, the head of investments at Parvoleta Shtereva told Bloomberg.

Angola is the second-largest oil producer in Africa, after only Nigeria, but it has been experiencing reserve depletion for lack of investment incentives that would draw foreign oil companies in. Like its fellow OPEC members, the country has also suffered the consequences of two oil crises in less than a decade, after a production boom in the early 2000s.

The country last year released a plan that calls for the discovery of up to 57 billion barrels of recoverable oil by 2025 to boost production, which stood at just 1.2 million bpd of as November 2020, after the rest of OPEC pressured the country to stick to its quota under the OPEC+ production cap agreement.

If no new discoveries are made, Angola will be producing just 500,000 bpd by 2028 because of field depletion. To avoid that, the government of Joao Lourenco has embarked on an ambitious reform drive, part of which would be the sale of a minority stake in state operator Sonangol.

“Any valuation of the company needs to take into account Angola’s depleting oil fields and high costs of production, as well as Sonangol’s opaque pre-export finance contracts,” one London-based energy analyst told Bloomberg. “A sale of non-core, non-oil assets will attract some interest from local private investors in Angola, but a privatization of core oil assets will mostly be shunned by international investors,” Robert Besseling, from Pangea-Risk, said.

By Irina Slav for Oilprice.com

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