A new dynamism in AngolaSeptember 7, 2021
Angolan Minister of Mineral Resources, Petroleum and Gas Diamantino Pedro Azevedo talks to The Energy Year about initiatives to strengthen the resilience of Angola’s oil industry, the importance of the country’s new local content decree and progress in its refining sector. The ministry is responsible for the national policy, supervision and control of oil and gas activities in Angola.
This interview is featured in The Energy Angola 2021.
What were the ministry’s main initiatives to strengthen the resilience of the oil industry and maintain business continuity during 2020 and 2021?
The reforms that the Ministry of Mineral Resources, Petroleum and Gas is undertaking result from the fulfilment of the guidelines shaped in the government programme and from the goals established in the National Development Plan 2018-2022 (NPD).
The new model of the oil sector was created with the establishment of the National Oil, Gas and Biofuels Agency (ANPG), which takes up the functions of national concessionaire, regulator and inspector; the restructuring (regeneration) of Sonangol EP, refocusing it on its core business around the value chain of crude oil and natural gas; the reinforcement of the role of the Ministry of Mineral Resources, Petroleum and Gas; and the establishment of the Regulatory Institute for Oil Derivatives (IRDP) for the complete liberalisation of the sector of trading and distribution of products derived from oil.
The key functions of the national concessionaire that were previously under Sonangol migrated to ANPG, keeping the same organisation, processes and collaborators, thus not creating any interference with their daily work on managing concession contracts with oil operators. At Sonangol EP’s level, the restructuring plan also known as the “Sonangol Regeneration Program” was prepared and approved with the goal of focusing the company on its core business, making it more agile in order to face challenges, making it more robust and competitive, and making it a reference company in the oil sector in the African continent, committed to sustainability.
What specific targets has the ministry tried to achieve with these measures?
To increase efficiency and strengthen the oil activity, we are implementing several measures in such a way as to create conditions and an environment able to capture new investment that seeks to contribute to the increase of reserves and the production of oil and gas, and consequently bring more value to the Angolan State and to involved partners.
Among these actions, the main highlights are efforts to reduce unplanned downtime, monitoring the maintenance programmes of the operator in the field and holding technical meetings with the goal of guaranteeing production according to the established objectives.
There is also the fulfilment of maintenance programmes, inspection and technical audits to guarantee efficiency and operational integrity of the plants and – if possible within the established deadlines – to monitor the fulfilment of the maintenance programme for all blocks in operation in such a way as to establish a co-ordination strategy in the intervention programmes and planned maintenance with the goal of guaranteeing the optimisation of operations and the reduction of unplanned downtime, and consequently to decrease their impact on production and on cost.
Other goals involve the development of additional resources in mature fields; fostering the development of marginal fields and new opportunities through Decree No. 6/18 and fostering the exploration within development areas through Decree No. 5/18.
In addition, another goal was the establishment of the New Gas Consortium (NCG), aimed at the intensification of the exploration and production of gas and also the implementation of the bidding process inserted in the Strategic Plan of the ANPG and in the bidding strategy for more than 50 blocks between 2019 and 2025, with opportunities distributed through several segments of the upstream chain – namely exploration, development and production.
To increase efficiency and strengthen the resilience of the domestic sector during the pandemic the ministry, while taking part in the Multisector Commission for the prevention of and fight against Covid-19, has created conditions to ensure the functioning of the sector. For the continuity of oil operations, for example, companies defined an entry visa solicitation programme for employees, submitted to the ministry for validation as well as to the Covid-19 Co-ordination Commission.
As a result of these measures, within the reference period of 2019 and 2020, crude oil and gas production has not stopped, although it was affected in its overall performance, with a sharp reduction in the exploration activity.
What are the main results of the consolidation of the role of the ANPG as national concessionaire and of Sonangol-EP’s regeneration programme?
In relation to the main results of the consolidation of the ANPG, we must firstly highlight the focus, as this entity is dedicated only to the functions of regulator, inspector and national concessionaire.
Since its establishment it was possible to approve several agreements with different contractor groups for the redevelopment of fields at different concessions. An example is the redevelopment of the Kuito, Tombua-Landana and Benguela-Belize-Tomboco-Lobito fields in Block 14, operated by CABGOC, where some contractual terms have been altered and the period of production has been adjusted in order to incentivise the drilling of several development and exploration wells.
Another agreement reached was for the redevelopment of Block 15, operated by Esso, where the period of production has been adjusted, some contractual terms have been altered and the development areas have been merged in such a way as to guarantee the implementation of a drilling plan for several exploration and development wells. In the last case, the agreement on the extension of the production period of the development areas of Block 17 was associated with a work programme with the objective of identifying additional resources to possibly replace the reserves.
How will these new developments affect present and future concession dynamics?
The General Strategy for Attribution of Petroleum Concessions for the period 2019-2025 was approved, under which the awarding of 50 blocks is expected through direct negotiation, public competition and limited public competition.
In the scope of the implementation of the General Strategy, risk-service contracts were signed with Eni Angola for Block 1/14 and the onshore Cabinda Centro block located in the Congo Basin. Also signed were risk-service contracts with Esso Angola for blocks 30, 44 and 45, located in the Namibe Basin.
Additionally, still in the scope of this strategy, three production-sharing contracts have been signed, for blocks 27, 28 and 29, located in the Namibe Basin, as a result of the first bidding rounds that the ANPG held in 2019.
The strategy for exploration of hydrocarbons of Angola was approved, which foresees the evaluation of the oil potential in all of the country’s sedimentary basins. This new dynamism is the result of the restructuring of the Angolan oil sector.
Naturally with the redevelopment of the aforementioned blocks and the beginning of the activities at the recently awarded blocks, Angola will create more business opportunities for the sector as well as for society in general, without forgetting the creation of direct and indirect jobs.
What are the 2019-2025 Concession Award Strategy’s specific goals to mitigate the decline of oil production, reduce production costs and promote the development of marginal fields?
The goals of this strategy are to promote the expansion of geological knowledge of the country and its oil potential; to secure the continued growth of discovered oil resources; to foster competition in the oil industry and investment, ensuring fair remuneration and the return of the same; to promote foreign direct investment in the national oil industry, spreading knowledge, technological innovation and universally accepted governance practices; and to promote gas exploration.
In parallel, to mitigate the production decline, reduce costs and foster the development of marginal fields, the ANPG will change contractual terms and extend the production period to promote investment by the current contractor groups, and at the same time increase production. It will also approve marginal projects, within the terms of Decree No. 6/18, which provides fiscal incentives to investors in order to create a favourable investment environment.
The adopted frontlines for the stabilisation and increase of oil production in Angola aim to improve operational efficiency; to increase the recovery factor of mature fields; to stimulate the development of marginal fields and new and already identified opportunities; to stimulate the development of non-associated gas and optimise the rational usage of associated gas; and to intensify actions that tend to reduce production costs (capex, opex, and administration and services).
What policies are in place to make Angola’s marginal fields more attractive for small indigenous and regional companies?
In relation to marginal fields, contractual and fiscal incentives were given so they can be developed in the concessions in which they are located, and only in the case of no interest being shown by the blocks’ contractor groups will they be made available to other interested parties.
As of today [July 2021], seven marginal discoveries have been approved in the blocks and we await more declarations.
What can we expect from the New Gas Consortium and its role in the expansion of gasfields at blocks 1, 2 and 3 for feeding Angola LNG and for other domestic projects?
Angola is essentially a producer of crude oil and it also produces associated gas. Part of this gas is used by Angola LNG for the production of LNG. Considering the future prospects of a deficit in the supply of associated gas to Angola LNG, a decision was taken to establish the New Gas Consortium, which will develop resources of discovered non-associated gas at blocks 2/15, 3/15 and 15/14 and supply it to Angola LNG.
The consortium will also make natural gas available to the Soyo combined-cycle power plant (for electricity generation), for fertilising projects – with two expressions of interest already received – and others that also use natural gas as raw material. The operator (Eni) is working hard with the consortium partners to achieve the final investment decision.
What is the importance of the new local content decree?
Local content is a tool used by many oil and gas producing countries, aimed at the effective participation of local companies and workers in the national oil and gas industry.
Angola, in this case, cannot steer away from the rule nor place itself at the margins of a trend that can be beneficial for the country. Moreover, the process of local content in Angola dates back to the 2000s, when many legal instruments were produced adaptable to the operational dynamism of the sector, which was sheltered by the Oil Activities Law, such as Order No. 127/03 of 25 November.
However, it is not a completely new legal regime for local content, because relevant issues were addressed in several directives on the oil sector value chain. To avoid confusion, the creation of a legal decree on local content became necessary, allowing institutions related to the Angolan State to follow the economic and technological evolution of Angolan companies that are engaged in oil activity.
The recently published Legal Regime of Local Content of the Oil Sector has a great significance for the economic life of the country, once its premises are implemented with legal and operational wisdom.
To this effect, the fundamentals of Presidential Decree No. 271/20 of 20 October, the Legal Regime of Local Content of the Oil Sector, are in the preservation of national interest, the integration of the Angolan business community in the oil sector, the promotion of free competition, the hiring of Angolan workforces, the promotion of technology in Angola and the promotion of Angolan trading and law societies. This will provide conditions for the installation of industries, the usage of local raw material for the manufacturing of equipment for oil operations, the reduction of imports, the increase of internal production of goods and services, technological transfer and the increase of jobs in the country.
How do you view the progress achieved in the country’s refining sector?
NDP 2018-2022 establishes that one of the objectives for the oil sector is to guarantee self-sufficiency in refined products through the construction of new refineries and the expansion of the Luanda Refinery, and has as a goal to start the construction of at least one refinery. The production of refined products in Angola is clearly insufficient, representing only 20% of the internal consumption, which makes the country excessively dependent on the import of oil derivatives.
The expansion and modernisation of the Luanda Refinery aims to fundamentally increase the current production of petrol from 300 tonnes per day to around 1,300 tonnes per day, improve the reliability of the refinery and reduce operational costs.
The Cabinda Refinery is to be built on the Malembo Plain, around 30 kilometres north of the city of Cabinda, and will have the capacity to process 60,000 bpd. It will be developed in three phases. The conclusion of Phase I is expected in 2022, with a capacity to refine 30,000 bpd and production of gas oil, Jet A-1, naphtha and fuel oil. Phase II will be concluded in 2023, with a capacity of 60,000 bpd and the production of gas oil, petrol, Jet A-1, naphtha, fuel oil and LPG. Phase III will be concluded in 2025.
In the scope of re-evaluating the initial strategy for the implementation of the Lobito Refinery, which advocated its construction in two phases, studies have been conducted for the definition and selection of an optimum design for the refinery, and these recommend the construction of a single-train refinery with 200,000 bpd of capacity. A single-phase construction is expected to begin in 2022 for the refinery to start production in 2025.
The Covid-19 pandemic at a global level has negatively impacted the execution of these projects due to the closure of some manufacturers of equipment and materials and the difficulty in mobilising expatriate workers. However, these constraints should not substantially impact the timeline of the programme, which expects the launch of the platforming unit by 2022.
With these projects, we expect to achieve self-sufficiency in the production of refined products and hopefully export the surplus.
How is the country developing renewable energy generation?
The efforts of the Executive in terms of the energy transition began prior to the pandemic crisis, but due to the crisis the moment has been leveraged in order to resize policies, encouraging foreign investment in clean energies such as that between Sonangol EP and Eni Angola for photovoltaic power generation in the province of Namibe. Sonangol also expects to invest in renewable energies and is already developing solar projects with Eni and TotalEnergies, as well as studying proposals for biofuels and green hydrogen.
What additional steps can be taken by the government and by the actors of the national industry to reduce carbon emissions and gas flaring?
The Law of Oil Activities prohibits the flaring of gas, allowing only its flaring in the case of testing wells or for operational reasons.
For many years, a great part of produced associated gas was flared in oil operations. The first main measure to address the situation and allow the development of oil discoveries in deep waters and ultra-deep waters without flaring gas and the monetisation of this resource was the construction of the LNG plant at Soyo.
Carbon emissions in the oil industry are controlled by the sector and the operators must have a strong commitment to environmental issues. Beyond the preoccupation with gas flaring, the control of fugitive emissions is also part of the operators’ agenda. Some associated gas has been stored in subterranean reservoirs for further use. The elimination of gas flaring will also happen through a broadened exploitation of this resource, which presumes the existence of a domestic market.
What are the main goals defined by the ministry for 2021-2022?
As for the objectives defined by the ministry for this period, they are in the National Development Plan NDP-2018-2022 and in the Sector Development Plans (Mining and Oil).
The focus of the oil sector programme is to reduce the decline of crude oil and gas production, maintaining higher operational efficiency, minimising unplanned losses and optimising and fostering the production of refined oil products, as a way to guarantee self-sufficiency in the country for these products and increase fuel and lubricant storage capacity, thus ensuring coverage throughout the national territory.
In this way, three objectives were met for the period, which are to boost and intensify the substitution of reserves, aiming at reducing the sharp decline in the production of hydrocarbons; to guarantee self-sufficiency in refined products through the construction of new refineries and the expansion of the existing refinery; and finally to improve the distribution network of fuels and lubricants throughout the country through the increase of storage capacity.
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