The Impact of COVID-19 on Sub-Saharan Oil Producers
The Impact of COVID-19 on Sub-Saharan Oil Producers: Spotlight on Angola
It’s been 4 months since the outbreak of COVID-19 triggered factories and industries to close across China – and Sub-Saharan oil producers, such as Angola, are starting to feel to strain. Angola is currently the second-largest African crude oil producer, and the resource accounts for 90% of its exports and 60% of government revenues.
Of those crude oil exports, approximately two-thirds are shipped to China.
As Chinese industry paused for most of Q1, the sharp decline in oil exports has caused the Angolan government to rethink its planned economic reform strategy, designed to lift the nation out of its fifth year of recession.
In its place, there are now ongoing discussions to review the National Budget, making a vital adjustment in the reference oil price from US$55 per barrel to US$35 (accounting too for the global drop in oil price).
Angola’s Minister of Finance, Vera Davis de Sousa
Alongside news that national oil production is likely to fall from 1.8m to 1.36m bpd, Minister of Finance, Vera Davis de Sousa, also revealed that they would be freezing 30% of its goods and services budget and that CAPEX would be suspended until the budget review has taken place. There is significant optimism that this will only be temporary, with the Angolan Sovereign Wealth Fund providing some short-term relief by agreeing to offer $1.5bn to be recouped via increased tax.
Whilst the challenges of the first half of the year seem imposing, there have been some recent wins for the nation’s oil and gas sector, with three offshore frontier blocks being awarded by ANPG at the end of January. Blocks 27, 28, & 29 are all located in the deepwater Namibe Basin and were made available during Angola’s 2019 Licensing Round. Details of working interest as follows:
Block 27: 35% Sonangol, 65% remains open to negotiation by interested companies
Block 28: 60% ENI, 20% Sonangol, 20% remains open to negotiation by interested companies
Block 29: 46% Total, 24.5% Equinor, 20% Sonangol, 9.5% BP
Plans are also underway for Angola’s 2021 licensing round with PGS recently competing an offshore multi-client 3D Kwanza Shelf survey.