Angola’s next move

Is Angola moving to a more mature stage in the lifecycle?
The basin here in Angola would be characterised as relatively mature. That doesn’t mean there can’t be exploration, and it doesn’t mean there can’t be even significant exploration discoveries. Looking around the world, this industry has been very resourceful and able to find new and large discoveries even in mature basins, and I expect Angola will be no exception. What’s important for Angola is having three conditions in place, especially in a mature basin: You have to have the geology, you have to have hydrocarbons in the geology and you have to have the right commercial terms to really make it work. Angola is blessed with good geology and a fairly abundant amount of hydrocarbons. The area we are working on now is the commercial terms.
As the industry involved in a basin, we have to evolve with it. We have been working closely with our partners in the government to progress that evolution, and I think there will be an opportunity to do that. At the same time, we have a very large base of installed infrastructure and a large number of discovered resources we are currently producing. We also want to make sure we are able to produce that very safely, efficiently and reliably. We are concentrating on our base because that underpins everything going on here in Angola.

Chevron has been particularly vocal about the commercial terms of operating in Angola, do you think the new government is receptive to modifications to the existing terms for operators?
When I think about some of the opportunities in 2017 and 2018, the sector needs a stronger investment climate and there need to be some changes to help address that. Chevron were really honoured to be part of a group that had an opportunity to meet with the president and some of the key members of his administration. We helped explain some challenges the industry was facing in this maturing basin. The president was very open and receptive to the information we provided; he was very inquisitive, very intuitive and well informed. We had a very positive dialogue. Coming out of that, I was very impressed that he immediately appointed a task force under the ministers of finance and mineral resources and petroleum to actually work with the industry to see what could be done to unlock some of the potential that still remains in the country.
Though there are five task forces, they mainly fall into three areas. One has to do with improving efficiency in the way we work with key government agencies and particularly the concessionaire, trying to make sure we can be more efficient and work together, helping lower our overall cost structure. We also touched on developing stranded resources, whether that be marginal oil or gas, which has not had a strong framework that allows its development to proceed. A third area is providing some real clarity around how assets will be treated at the end of their life. All assets go through an exploration, development and then a retirement phase. Having good clarity about how that retirement phase is going to work was also important to the industry.
I was really impressed that the president and his administration stood those task forces up and gave us some aggressive deadlines. We have been working in a very collaborative way ever since. He has really set a strong tone that says we are interested in working with the industry and changing the investment climate in Angola, and I think that is very important for us in 2018 and beyond.

Do you think 2018 is going to see the operators breathing a little easier now that oil price is between USD 60 and 70 per barrel?
My short answer is no. I have been through a number of these downturns over 38 years in the industry. Conditions can change. Right now we are really blessed with a nice confluence of events. We have worldwide demand growing, and it is growing because economies around the globe are strong right now. It is quite unusual to have so many economies all hitting on most of their cylinders at one time. We have countries that have made decisions to withhold production, which has helped support higher price levels and we will see how long those last. Those two factors coming together have really helped support the oil price.
In Chevron, we try to make sure we have a business that can thrive in any market conditions. We recognise that just as prices have run up to the USD 60-70s, prices can also retreat. We have to have a business that is sustainable in all price environments. I do not think you are going to see us resting and celebrating too much. We appreciate and enjoy the extra profit we are receiving right now. We have to make sure we build a strong, sustainable business no matter the price regime.

How do you work to ensure the Angola LNG plant is sufficiently supplied and that generally gas can be exploited in Angola?
One of the things we have been working on with the presidential task forces is some potential gas legislation. I am optimistic we will be able to reach some agreements on that. If we are able to, that is going to unlock additional gas potential in the country. That is going to be good for Angola. It will be good for Angola LNG and could be good for other sources of demand for natural gas. The government and the industry have been working very closely together on this. This is something that will help all key sources of demand.

Do you have any plans to expand into the rest of Angola, for example the Namibe Basin?
We are interested in any opportunity to invest in Angola. We will absolutely take a look at potential bid rounds that come up. When we evaluate, we have to make sure what we talked about earlier is in place. There has to be a reasonable chance of hydrocarbons there, and we have to make some money. We have a 65-year history in this country. We know how to do business in this country. With that history and our expertise, we would be interested in other opportunities. Each company needs to do its research for any bid round, and we are no different.

Are you confident in the reorganisation of <a href='https://staging.theenergyyear.com/companies-institutions/sonangol/’>Sonangol?
We have worked well and effectively with a number of administrations in Sonangol over the years. We do have a new administration and we are working with them. We need to work together to move some of these investment opportunities forward. Sonangol has been part of these presidential task forces, and it has been helpful to have them there, providing their perspective. Ultimately it comes down to specific investment opportunities and what we can do to move those forward. That is what we are going to be working on with the new Sonangol board.

Is it a good time to invest in this market?
There will be good investment opportunities in this market, but companies can be selective. Over the last three-plus years, companies in the industry have significantly pulled back on their investment plans and I do not see that changing any time soon. That means competition for capital is going to be extremely intense. It is a worldwide competition. Companies like Chevron and our peer companies have opportunities throughout the globe. We take a global view. That is where Angola has recognised they have got to be competitive for that capital. That is why I am so excited about what the president is trying to do in terms of rebuilding and re-strengthening the investment climate here. If he is successful, that will attract capital back in and this will be a good place to invest. I think that is possible too.

What have been Chevron’s highlights in the past year?
We brought our Mafumeira Sul project on line in Block 0, which was a big milestone for us. It is currently contributing important and needed production for Angola, and that is continuing into 2018. We have just commissioned the LPG plant as part of Mafumeira Sul, and it is now in production as well.
When I think about 2018, I think about the opportunities we have. We have opportunities to invest in 2018 in blocks 0 and 14. We are working closely with our partners as well as the concessionaire to bring those investment opportunities into reality. We are looking forward to restarting our drilling in Block 14. I think we will be able to do that this year; I am very excited about those prospects. 2018 is going to be a bit of a turning point for us compared to the last few years. The opportunities we are looking at are in 0 and 14.

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