By Neanda Salvaterra
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 9, 2017).
LUANDA -- Angola was once a magnet for the world's biggest oil
companies, drawing billions of dollars in investment from BP PLC,
Exxon Mobil Corp. and others back when crude prices were rising to
$100 a barrel. Now, foreign companies have all but given up on new
ventures there.
BP PLC partially pulled out of an offshore block, taking a $750
million write-down this year. Halliburton Co. and other oil-service
companies blamed falling revenue on declining activity in regions
including Angola. Total SA of France is reshuffling personnel to
cut costs while Italy's Eni SpA is renegotiating service
contracts.
Energy companies have reduced capital spending in Angola more
than in any other sub-Saharan African country, with an estimated
$67 billion in spending cuts from 2015 to 2020, according to the
consulting firm Wood Mackenzie. Angola's oil-drilling rig count has
fallen from a peak of 19 in February of 2014 to three rigs in
October.
In an era of $60-a-barrel crude, Angola has become a challenging
place for big-oil companies. Because of the high costs of pumping
from the country's deepwater reserves, oil companies need an
average oil price of almost $73 a barrel for projects to break
even.
"Today we are looking for the profitable barrel, the good
barrel," said Guido Brusco, managing director for Eni Angola and a
member of the board of the Angolan Exploration and Production
Companies Association.
Mr. Brusco said oil companies could still invest in Angola, but
only if its leaders "make the right decision at the right time" on
a series of reforms.
Oil companies have complained privately to the government about
money-losing contracts, a turgid bureaucracy and slow
decision-making from the state oil company, Sonangol.
Angola's leaders say they are trying to address the oil
companies' concerns this year.
In November Angola's new president, Joao Lourenco, dismissed his
predecessor's daughter, Isabel dos Santos, as chairwoman of
Sonangol. She is Africa's richest woman, according to Forbes.
Executives had complained that Sonangol became less responsive to
industry concerns during her tenure.
"Sonangol has lost its focus," said Lago de Carvalho, a former
Sonangol executive.
Ms. dos Santos said in October that she was working to solve the
oil industry's problems. She couldn't be reached for comment.
Angolan officials also have pledged to provide more flexible
contracts and reduce bureaucratic hurdles.
The goal is to achieve "economic balance and satisfy investors
as well as the government," said José Maria Botelho de Vasconcelos,
the country's petroleum minister until September. The country's
current oil minister, Diamantino Pedro Azevedo, didn't respond to
requests for comment. Sonangol declined to comment.
Firms such as Chevron, BP and Angola's biggest foreign oil
investor, Total, helped build Angola's oil industry into a global
powerhouse, driving its production up to 1.7 million barrels a day
in 2016 from 718,000 barrels a day in 2000.
The boom in oil money helped crown Angola's seaside capital,
Luanda, as the world's most expensive city, as high oil prices
fueled a construction boom and droves of skyscrapers. Angola joined
the Organization of the Petroleum Exporting Countries and paid off
billions of dollars owed to foreign creditors.
Now, some construction projects have ground to a halt,
symbolized by the unfinished concrete shell of a
300,000-square-meter shopping mall in central Luanda. Angola's oil
projects also nose-dived, prompting Halliburton to report that
revenue for regions including Africa was down 28% last year.
Last June, BP took the $750 million write-down and stepped away
from part of a block after it found more gas than oil. Mr.
Vasconcelas said Angola is working on a revamp of natural-gas
ownership laws that should be ready by the end of this year.
A handful of new projects are trickling in as oil prices
recover. Next year Total is expected to start producing from a big
offshore oil field and in December the company agreed to start one
new deepwater project with Sonangol.
But oil companies privately complain that requirements that they
buy certain supplies from select domestic firms drive up costs.
They want to retain more of the petroleum they produce to cover
their expenses and to make money from discoveries of natural gas,
which under current Angolan law belongs to the government.
Output is "going to start to fall off because there haven't been
any of these big projects sanctioned in a few years," said Adam
Pollard, a Wood Mackenzie analyst.
(END) Dow Jones Newswires
December 09, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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