Angola’s production functionApril 4, 2018
Laurent Maurel, the general manager of Total E&P Angola, talks to TOGY about the Kaombo project, the maturation of Block 17 and the business framework in Angola. Total currently operates seven licences in the country, including deepwater Block 17 with a 40% interest and ultra-deepwater Block 32 with a 30% interest.
On the gas market: “In gas there was a need to create the legal and contractual framework. It is a complex matter and discussions have been difficult. The result will not solve everything, but it is a very positive step in the right direction for the country.”
On Kaombo: “Kaombo is a complicated and expensive project. It is the last large-scale project that has been decided in Angola, so it’s very important to maintain production in the country, which we will do for the next couple of years.”
On co-operation: “The first subject was really about improving the efficiency of the relationship between operators and Sonangol and making sure we were putting the efforts on the right matters, so that Sonangol could deliver according to contractual requirements.”
On talks between IOCs and the government: “The industry was consulted to ensure proper detailed feasibility, we had a negotiation of the terms and the economic incentive, with the objective of restoring the competitiveness but also maintaining a proper balance for the country.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Laurent Maurel below.
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What are Total’s main achievements in 2017 and the early part of 2018?
The offshore side of the Kaombo project is going well. Every single offshore part has been on time and well done. We had one delay on Kaombo, but we are still targeting first production in the summer. The first FPSO, Kaombo Norte, left the yard on Tuesday, March 6, 2018 for its seaworthiness trials. It is a converted tanker that has been changed quite a bit. We had to work with Changi Airport in order to find the right time because the flare on the FPSO is so high it could affect planes flying into the airport. The FPSO is scheduled to arrive on site in mid-April, and then we’ll start the hook-up phase.
Our CEO, Patrick Pouyanné, came in December to meet with the President Lourenço and we also announced that we would enter Block 48. It is a new deep offshore exploration block, with 3,600 metres depth, so it’s going to be a challenging well to drill. There are only a handful of rigs that can do this. Outside of E&P, we also announced that we agreed with Sonangol to set up a JV with to develop a retail network and also some other forms of co-operation with the NOC, including what we can do in terms of renewables.
What sort of milestone will it represent for Total to bring Kaombo on line in summer 2018?
When you start a new project, starting production is a milestone. Kaombo is a complicated and expensive project. It is the last large-scale project that has been decided in Angola, so it’s very important to maintain production in the country, which we will do for the next couple of years.
The production we do in this country is very important. For us, it will mean that we maintain our position as number-one operator. We can also maintain our production and still represent 35-40% of the oil production of the country. Kaombo will compensate the decline of Block 17 production.
Block 17 was the most important block for Angola. Is it in decline?
It peaked in 2015 at a level of 700,000 bopd. Now it is a story of fighting the decline.
However, starting last October, for the first time in about 20 years, we have no rig operating in Block 17. We intend to have a rig again in 2019, but 2018 will be a blank year without drilling in Block 17.
This year we have the Zinia Phase 2 project, which we intend to sanction very quickly, and then we have a couple of others projects on CLOV and Dalia that we also target to sanction.
What were the main themes or perspectives Total delivered during the taskforce for the new president?
We were not really different than other majors. The main topic was Angola losing competitiveness compared with other places.
The first subject was really about improving the efficiency of the relationship between operators and Sonangol and making sure we were putting the efforts on the right matters, so that Sonangol could deliver according to contractual requirements. For instance, there have long been discussions about the threshold value of contract approvals. For some companies here, a USD 5 million threshold means 65% of the number of contracts are below the threshold and represent only 5% of the value. It was clear from our standpoint that improving efficiency meant increasing the threshold to such value so that we could reduce the workload for all parties while ensuring Sonangol keeps control and deliver according to industry standards. The discussion on marginal fields was really needed because the previous decree was difficult to implement and open for some rather different interpretations. There was a need to do something, and they did it the right way. The industry was consulted to ensure proper detailed feasibility, we had a negotiation of the terms and the economic incentive, with the objective of restoring the competitiveness but also maintaining a proper balance for the country.
In gas there was a need to create the legal and contractual framework. It is a complex matter and discussions have been difficult. The result will not solve everything, but it is a very positive step in the right direction for the country.
Another area where a proper framework was needed was the future abandonment part of our activity. It involves up to billions of dollars of potential liability and funds that you need to secure to cover future abandonment requirements. This an area where some operators had seen very significant progress in the second half of 2016 with Sonangol supporting internationally recognised best practices. Beyond such specific cases, there was a need to expand solutions globally to the industry. Like any negotiation, there are some areas where the industry supported some views that were not accepted by the authorities, but the result is globally positive and really means a reduction of the uncertainty and the risk profile of our activity in the country.
All in all, the results achieved over very different and important issues represent a good package. It has required a lot of work in four months and I am sure it will help the industry to deliver and sanction new projects, as I previously indicated for our activities.
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