Great expectations in AngolaJanuary 18, 2021
Nina Birgitte Koch, managing director of Equinor Angola, talks to The Energy Year about how Angola’s energy players have navigated Covid-19, the latest on the company’s projects in the country and its key objectives for 2021. Global energy company Equinor is a partner in eight of Angola’s offshore producing fields.
How do you view the way Angola’s domestic oil and gas community navigated the Covid-19 crisis?
I’ve been very impressed by how the government, the operators and the local industry have dealt with this extremely challenging period. The safety performance and production figures this year [in 2020] have been pretty solid amid the ongoing difficulties for business continuity. We haven’t, for instance, experienced lower production efficiency in 2020. We have handled some OPEC quota limitations, but overall operations at facilities have been ongoing with relatively high efficiency.
Of course, several activities have been postponed and projects deferred. All operators have decreased their number of offshore personnel and drilling activity has basically stopped. The risk of whole crews becoming infected – and the loss of value that would have caused for operations – is substantial. Stopping certain activities such as offshore drilling proved to be a wise decision at that point in time.
Despite all these delays, this period has also allowed us to focus more on business continuity planning. We think that drilling is the key to fighting the production decline and maximising the value of the country’s assets. We very much support taking on activity and drilling as soon as it’s considered safe for people.
It’s great to see the government and the operators working hand in hand to deal with the current challenges. We’ve had a very strong collaboration in the oil and gas industry in Angola and I’ve never experienced anything like it anywhere else. It’s taken a tremendous effort to make everything work – with all the changes to logistics, there were many things to pay attention to.
We know it’s not over yet; it’s an ongoing exercise that will have to be part of our daily routines as we mitigate risks and come up with action plans to deal with challenges as they occur. Angola has, once more, proven to be very resilient in withstanding different types of scenarios.
How important is Angola today in Equinor’s global portfolio?
We’ve been in Angola for 30 years now and the country has almost always been regarded as a high priority for Equinor. The main reason for this lies in the fact that Angola offers a lot of high-value assets and, therefore, it has made an important contribution to our portfolio development. At our peak level, we had 250,000 bopd of equity oil from Angola. Now we have about half of that, which is still a substantial volume.
We currently have purely partner-operated licences in the country, since the exploration licences that we took on as an operator a few years back turned out to have dry wells and were therefore relinquished.
Equinor is the biggest offshore operator globally. We have a lot of operated assets around the world and we utilise that experience in Angola. We are happy to work with a distinguished crowd of international operators on several producing fields in the country. Going forward, we would also like to work with operators on exploration acreage.
What are your expectations going forward from the deepwater Block 17, which has historically been one of the company’s most important assets in terms of daily equity production?
Block 17 has been special to us, not just in Angola, but also at a global level. It is no wonder the terminology “golden block” has been used in reference to its potential. Although we’ve produced a lot in the past from the block, there’s still so much left. One of the biggest achievements last year was reaching an agreement with the government to extend the block’s licence until 2045. This gives us a lot of predictability.
There are excellent projects being put forward within Block 17 and we still have very high expectations. The Dalia oilfield, one of the block’s major hubs, in itself reached 1 billion barrels of production in July 2020, which was done without lost-time injuries. It’s an excellent achievement that helps us maximise the asset’s value going forward.
What is the status of the risk service contract Equinor signed with Eni and Sonangol for Block 1/14 in 2019?
Our first priority is to see the agreements signed and finalised, and we are in that phase now. Block 1/14 represents one of the exciting exploration opportunities that we would like to be part of, together with Eni (as the operator) and Sonangol. Despite some delays, we have been able to push forward some of the processes through almost purely digital meetings.
How do you view Angola’s receptiveness to new production and cost optimisation technologies?
Going forward, it’s crucial for Angola to remain competitive globally and technology will play an important part in that. The global business climate is changing and the oil and gas industry is facing high expectations to find new solutions, reduce cost and deal with capital restrictions. I don’t think anybody is expecting everything to be how it used to be, with extremely high prices per barrel. We have to be realistic and find new ways of doing business with other thresholds.
That means working with lower breakeven costs and lower CO2 emissions. How do we achieve that? There’s not an easy answer, but there are definitely things we can do to develop fields better. There are always new ways of putting together projects to decrease costs and emissions.
In the past, when big discoveries were made, cost was not so important because the value was so tremendous that it was more about getting production up and running fast. That’s not what we are going to face in the future; it’s going to be quite hard to get capital from the different companies to invest.
Equinor has worked with many new digital solutions to connect fields and utilise existing infrastructure. It’s about making drilling more efficient and enhancing oil recovery. There are many things we can do to maximise value and find the optimal solutions. We have proven that we can develop new concepts and more digital solutions that will ultimately lead to lower costs. We’ve done this in other parts of the world and I am sure it can be replicated in Angola.
One good thing in Angola is that there are many parties with a lot of competencies and experience from other parts of the world. Exchanging that experience will be crucial going forward.
Sonangol plans to start the construction of its new centre for scientific research and innovation in 2021. What does this project mean for Angola’s local skill development efforts?
We are pleased to see this project being put together. I like the vision and how the government thought about developing the centre within a short distance of two universities and other companies present in that area, like an industrial technology park. It’s about getting the right content – it’s not about fancy buildings and a lot of infrastructure. The main part is to build a good knowledge base that can be valuable for Angola and help the growth of its oil and gas and renewables sector going forward.
We keep in contact with Sonangol about the centre and I think it’s a competent team that they’ve put together to develop this project going forward. More than ever, we need to develop local competencies and work together in the industry.
How appealing are opportunities in the renewables sphere in Angola for a company like Equinor?
Equinor is going through a tremendous transition period, as we have committed to net zero carbon emissions by 2050. It’s a very broad picture with the huge CO2 value change that we’ll work with. For instance, in the UK offshore wind farms are massive projects. It all used to be a small thing and, as a company, we were accused of investing in renewables simply to look good. However, that has never been the case. The energy transition is real and it’s at our doorstep.
For us, it’s a matter of how we do oil and gas in parallel with renewables. We have a lot of gas in the portfolio but we also want to see the potential for hydrogen and other major contributors to the energy transition. There’s been a big change in the last year in the licences we’ve been part of, with an enhanced focus and planning regarding CO2 emissions. There are many things we can do for producing fields and this is all part of ensuring long-term sustainability. We have substantial experience from the Norwegian continental shelf in how we can optimise some of our facilities.
When it comes to renewables, we assess the potential of many countries in our global portfolio and pursuing opportunities depends on many different factors, such as geographical location, existing renewable energy systems, concession agreements in place, the competitiveness and of course the market as a whole.
We have developed solar projects in Brazil and we are exploring more solar opportunities. However, our key tool to grow within renewables has been offshore wind. That’s why we are working with big wind farms outside the US and the UK. We see our competitiveness in offshore wind as based on the fact that we can utilise our competences within product management, logistics, maintenance and technology. We have developed wind turbines and worked with advanced technology over the years to make floating offshore wind farms competitive.
Whether Angola is going to be part of our renewables portfolio depends on the available concessions. Angola has a lot of resources, including water and hydropower. Whether there is another market for wind, solar and so on we have yet to see. If the government is putting forward concessions for offshore wind farms, for instance, we would definitely be interested in looking into that. For the time being, we don’t have any concrete plans for renewables in Angola. However, our global strategy is very clear on this and we are going to do a lot of new renewables investments going forward.
What must Angola keep in mind when it comes to enhancing local skillset development?
Every country that has an emerging oil and gas industry will have to have local content policies. After all, it’s a matter of how those policies are being implemented and put in practice.
There were major companies getting into Norway that trained the Norwegians to take on operatorships later. That’s how it’s been done in many countries and it was hugely successful in Norway.
Equinor has been around for more than 40 years but it’s still pretty young and tremendous value has been generated by the company’s efforts to enhance local content.
I think the new local content regime is very important. It may be too early to see how it’s going to play out. First, we need to see its short-term effects on the domestic industry.
What are some of the key objectives set out by Equinor Angola for 2021?
I’d like to see us close the exploration agreements that we are working on at the moment. I hope that we will be able to get more exploration acreage and work on the planning for that throughout 2021. New licensing rounds will also be important for us. I would also like to see more projects – brownfields or tiebacks – being realised on our existing blocks. I was hoping that we would be able to drill lots of wells this year to stop the production decline and I hope we can pick up with drilling in 2021.
We want to aggressively move forward into CO2 reductions and flaring policies, and we plan on investing in some modifications offshore to make sure that we continue to decrease emissions. We are of course depending on the operators to do this.
Covid-19 is a real struggle for the world as a whole and it’s been a very tough period for Angola with many financial problems. We are very pleased with the new changes and institutions established to oversee the development of the domestic energy industry. We look forward to continuing our collaboration with the ANPG [National Oil, Gas and Biofuels Agency], as they have a very important role to play in resource management going forward.