Angola has piled up approximately $1billion in debt to Western oil companies handling its oil fields. According to three industry sources, the huge bill has pushed the African nation into beginning a sale of stakes in its flagship offshore blocs.
The debt has been on an upward trajectory over the years and it is a clear picture of the nation’s growing financial woes at Sonangol, an African oil giant. The situation is further said to have been triggered by the underinvestment in declining offshore fields that got worse during the COVID-19 pandemic. This also comes at a time when international organisations are rethinking their place in high-cost ventures worldwide in a bid to meet their climate targets speedily. Experts indicate that this could make Angola a less attractive prospect.
On June 14 Angola announced an asset auction which sources said is linked to a former unpublicised failure to pay alleged cash calls that must be met in order to maintain the oilfields.
“Sonangol has been unable to meet its financial requirements in some of the blocs most needing investment,” a banking source said, adding that global firms had in some cases seized Angola’s share of production instead of announcing a formal default to avoid confrontation with Angola. Sonangol and Angola’s Ministry of Mineral Resources and Petroleum are yet to respond to the issue.
The company, “Sonangol has offered stakes in eight fields, among them a 10 percent chunk of its 45 percent holding in the giant Block 31, which is operated by BP and a 10 percent stake in the TotalEnergies-operated block 15/06,” the oil minister said.The assets on offer are projected to raise about $2bn, two of the industry sources said.
In any oilfield production sharing agreement, shareholders must pay the field’s operator to cover the maintenance and expansion production costs. The host national oil company is free to settle these cash calls via cash or oil barrels. Part of the energy firms running Angola oil fields alongside Sonangol as a partner include Eni, BP, ExxonMobil and TotalEnergies and Chevron.