Mitigating The Impact Of Covid-19 On Angola’s Oil And Gas Sector

H.E. Diamantino Pedro Azevedo, Minister of Mineral Resources, Petroleum and Gas, discusses the impact of COVID-19 on the country’s oil and gas industry, highlighting efforts to mitigate the effects of the pandemic on the sector and unpacking the Ministry’s short, medium and long term outlook for the post-pandemic period.

What have been the key developments in the oil and gas sector in Angola in the last twelve months, in particular regarding the state of emergency imposed by COVID-19?

H.E. Diamantino: Over the last twelve months the extractive industries have materialized and expedited their reforms with the consolidation of the role of the National Oil, Gas and Biofuels Agency (ANPG) as the National Concessionaire, and the execution of Sonangol-EP’s Renewal Program.

Within the scope of the Concession Award Strategy for the 2019-2025 period, the tender for oil and gas blocks began; the blocks being one in the Benguela Basin and nine in the Namibe Basin.

Furthermore, in this period an agreement for the construction of the Cabinda Refinery was reached, the bidding was launched for the Soyo Refinery and the review of the technical and financial feasibility studies is underway for the construction of the Lobito Refinery.

In the last twelve months, the strategies for exploration in areas of development and marginal fields have begun to materialize. In this sense, the declarations of Marginal Fields have been approved for the Paje field, Astrea and Juno fields in Block 31, N’singa field (already in production), Lifua, Kambala and N’dola Sul fields in Block 0.

The state of emergency imposed by Covid-19 has had a huge effect on operational activities, leading to the suspension of drilling activities and substantial limitations on production activities in general.

What measures has the Ministry taken to mitigate the impact of the pandemic on the sector, and how would you evaluate the efficacy of these initiatives so far?

H.E. Diamantino: Along with the various initiatives taken in coordination with the national health authorities, ACEPA (Association of exploration and production companies) and AECIPA (Association of contracted companies of the petroleum industry of Angola) initiated the demobilization of non-essential personnel to mitigate the effects of the COVID-19 pandemic; the adoption of the modality of remote work for certain functions and the establishment of quarantine measures, social isolation and systematic testing of all personnel prior to access of offshore and onshore oil and gas installations.

In collaboration with these associations and the Ministry of Health, further mitigation measures were adopted, such as the creation and equipping of medical-sanitary installations intended to serve the oil and gas industry and the formation and training of emergency teams to deal with suspected and positive Covid-19 cases. These actions aim to guarantee the health of personnel and the continuation of operations, principally of production, with the minimum possible number of cases.

How has COVID-19 affected the scale and schedule of the implementation of national economic reform?

H.E. Diamantino: The pandemic has affected all spheres of the national economy, especially the oil and gas sector, both through the decline in prices of commodities through the difficulties caused in the mobilization of resources for the renewal of activities.

Nevertheless, the process of reform of the oil and gas sector has continued, particularly through Sonangol-EP’s Renewal program, which includes the privatization program of its non-core activities. It is evident that the lack of market stability and the poor visibility of the immediate future has delayed the process of privatization of the assets linked to the services subsector of the oil and gas industry.

In what way can the development of the downstream sector reduce the dependency on fuel imports and compensate for losses in the exportation of crude?

H.E. Diamantino: The refinancing strategy designed by the Angolan government includes the improvement of the operational processes and the consequent increase in production of gasoline of the Luanda refinery and the construction of three new refineries in Cabinda, Soyo and Lobito. Angola currently imports around 80% of refined products to satisfy its internal needs, at the expense of enormous quantities of foreign currency.

In crisis situations like this one, characterized by the low price of crude, local refining compensates for part of these losses. Hence the projects listed above aim to advance internal self-sufficiency in terms of refined products and the exportation of surplus to neighbouring countries.

In what way can COVID-19 facilitate the transition to clean alternative energy sources, including natural gas?

H.E. Diamantino: Angola has policies and programs that aim for energy transition. Within these programs the executive is to convert thermal power plant to power generation from diesel to gas, as is the case with the combined cycle power plant in Soyo, with a capacity of 750 MW, or replacing them with new hydroelectric plants. There is also a project to construct a photovoltaic electric power plant in Namibe (50 MW) – a partnership between Sonangol-EP and ENI.

Additionally, Angola possesses an LNG power plant in Soyo which has been in operation since 2012, with an initial processing capacity of 1 million cubic feet of gas per day, which was founded because of the necessity of monetizing natural gas resources, eliminating their burning in oil and gas operations. Such a project has technical, economic and social advantages of great salience.

What is the Ministry’s perspective on the short, medium and long term for the hydrocarbon sector in Angola in the post-pandemic period?

H.E. Diamantino: Mitigating the natural decline of production represents one of the largest challenges of the sector and therefore is our top priority.

As a result, the Angolan Council of Ministries has recently approved a hydrocarbon exploration strategy that sets forth four pillars, namely: a) availability and accessibility of the areas that constitute the sedimentary basins of Angola for research and evaluation activity; b) the expansion of geological knowledge and access to oil and natural gas resources; c) ensuring the successful execution of the General Concession Award Strategy in Angola and; d) the intensification of research and evaluation of concessions and the Free Areas of Sedimentary Basins of Angola.

The Strategy indicates an intensification of exploratory activity for hydrocarbons in Angola, in a manner so as to guarantee the continual expansion of knowledge of oil and gas potential, including non-conventional reserves, for the substituting of reserves and the resulting mitigation of decline and the stabilization of oil and gas production.

Another objective will be the salvaging of exploration projects, on marginal fields or other fields, that have already been approved but were suspended because of the pandemic.

In the medium term, we foresee finishing the restructuring process for Sonangol-EP, with the dispersion of part of its stock exchange capital (until 2022). In this same period, the privatization program of the company’s non-core assets should be executed, as should the implementation of its plan for production and exploration, including the increase in its levels of production and the improvement of its percentage of gross national production, consolidating its position as the national operator. Another important project is the new consortium of gas to feed the LNG power plant and enable domestic projects such as fertilizer factories, steel mills, etc.

We also should begin shortly the construction of the Cabinda refinery and end the public tender for the construction of the Soyo refinery.