Statoil’s hopes for AngolaNovember 30, 2017
Marc Courtemanche, the country president of Statoil, talks to TOGY about curbing the decline of oil production in Angola, the legal framework surrounding the industry and the requirements for gas monetisation. Statoil is a partner in several Angolan blocks, producing 200,000 bopd in the country, and aims to become an operator.
• On developing the Congo Basin: “There are quite significant existing discoveries in the Congo Basin. The industry needs economic terms that make those resources viable to be developed because they are uneconomical at the moment. They may be very big, deep, small or complex reservoirs, but it is also about how you share the pie between the operators and the government.”
• On Sonangol: “Sonangol has had many processes that have been put in place but are not necessarily in the PSA or hydrocarbons regulations and that have increased a number of unnecessary administrative burdens. We need to find a way to streamline some processes with Sonangol.”
• On exploration: “We need the whole industry to generate activity in exploration. Rights in terms of gas would help. We need greenfield exploration, but also exploration within the existing licences. We need to close the gap.”
• On the gas master plan: “We need specific terms for gas and we need longer terms than oil PSCs, which are around 25 years. Gas requires 30-40 years to get the full value out of it. From this gas master plan, it is about understanding where the potential infrastructure in the country will be available for gas.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Marc Courtemanche below.
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How can the decline of oil production in Angola be managed to ensure that the slope is as gentle as possible?
We are present in maturing regions like the Norwegian and UK continental shelves. At the beginning of October 2017, we made an announcement about the discovery in the UK Continental Shelf of a maximum of 125 million barrels, showing that even in a mature area and even in places that have been explored, there are still possibilities because of new techniques and new processing of the seismic data and renewed teams looking at the data with different eyes.
The situation in Angola is specific. There are quite significant existing discoveries in the Congo Basin. The industry needs economic terms that make those resources viable to be developed because they are uneconomical at the moment. They may be very big, deep, small or complex reservoirs, but it is also about how you share the pie between the operators and the government. We have addressed that at conferences during the past couple of months to illustrate some examples about how you can change some terms and make things more effective, such as we have done in Norway, where the drilling of unsuccessful wells is 78% reimbursed by the state of Norway. That increases the willingness to take some risk. In the UK, they have reduced the tax down to 35% from 50%. Sometimes it does not require complex changes to increase the threshold and to make already discovered resources attractive.
What is the oil operators’ message to Angola’s new president?
As an industry we have to engage with the government. We have tried to illustrate some of the challenges that Angola is facing because of the maturity of the basins, showing also that are still good opportunities to mitigate the fall in production. The idea from the oil operators is to explain what a mature basin is, what the consequences of certain things were and the expected decline of production – Kaombo is the last project that has been sanctioned. It is important that we sit together and try to work to make Angola attractive again.
We wanted to make sure that we see Angolan oil and gas in the same way. After that, we offered our help to engage in a dialogue with the authorities to develop tools and regulations that might make the undeveloped resources commercial. They have to decide what they want to do, but at least we can exchange experiences and views as to how to do it. That is the main purpose and offer we have made, either to manage the decline as well as possible, or to continue to engage in Angola. That is the main message. By having an open dialogue and close collaboration with the Angolan state, we will be able to further develop Angola’s oil and gas industry. This meeting was a very good sign of the goodwill from the Angolan side.
As a major upstream player in Angola, what do you want to see from Sonangol as it continues its restructuring?
We need some simplification of the processes. Sonangol has had many processes that have been put in place but are not necessarily in the PSA or hydrocarbons regulations and that have increased a number of unnecessary administrative burdens. We need to find a way to streamline some processes with Sonangol. We want to work together with them, and as a company with high expertise we can help them and share experience as well.
The other work stream is around exploration. It is good to address existing reserves, but we need to the whole industry to generate activity in exploration. Rights in terms of gas would help. We need greenfield exploration, but also exploration within the existing licences. We need to close the gap. Some have portrayed this as the industry against Angola, but that is not the case. It is about addressing the issues, and when it comes to the way we work with the concessionaire, we believe that the processes could be streamlined. That is why it has been addressed as one of the key areas where we believe, as an industry, we can work together to look for improvements.
If it were decided that you had the rights to exploit the gas in your blocks, what would be the requirements to build the processing facilities, pipelines and transportation?
Gas is complex. Where and how you monetise it is key. Getting the rights on the gas is not a bad thing. In the presidential decree and task force that is looking at gas as we speak, they are addressing the value chain from the upstream to the midstream. We are told, but we are not seeing, that Sonangol has started work on a gas master plan, but you need a market for that. You need to export it and that is complex.
For us, as a major gas player, we need to make sure that we have the future regulation to make it easy to search for gas in the upstream and that we have some visibility about how to monetise it, either with the facilities in the country or on the international market. We need specific terms for gas and we need longer terms than oil PSCs, which are around 25 years. Gas requires 30-40 years to get the full value out of it. From this gas master plan, it is about understanding where the potential infrastructure in the country will be available for gas.
It is interesting because Angola has proven reserves. I have a gas expert with me working here now, so for the time being it is enough, but for Statoil in general, it is key that we know how to monetise. We also have expertise in the African continent, we are in Tanzania and we are engaging with the government to find the best solution to monetise. It will create some enthusiasm, but not necessarily a mobilisation of resources or investment in the short term.
Is your exploration team interested in looking into the Namibe Basin?
That is a frontier project. I can say we are looking at mature basins as well as frontier basins. We would be keen to look into this further in the Congo Basin. If the terms for mature fields are put in place and if the exploration work available creates the right incentive, we are getting prepared for going into the exploration.
What is your assessment of the business environment in Angola overall?
I am quite impressed at how Angola has been pragmatic over the past three years. It started with this Kwanza excitement when the results were coming. It started well in terms of data sharing; everyone was in the same boat, and we need to share the data among the national concessionaires to get better days for the industry. Then, after continuing on the Congo Basin, even if results were not as we wanted, we still have to have this mature field decree and this flexibility. They may not get the result they expected, but they have been trying to put forward some solutions.
They knew that the tax dispute was a big burden for future investment. They got everyone together and had discussions for four or five months to find solutions. Now, all those work streams are underway and everyone is fully involved. Something good will come from that. That is a good signal for Angola and for our corporation. I am very keen to go over this process. It is exciting to see that we can be a part of shaping the oil and gas future of Angola. Shaping the future of the industry in the region is something that is in the vision of Statoil. We are in the place to do that in Angola, so it is a very exciting time. I am very enthusiastic.
For more information on the Angolan market, including the recent reshuffle at Sonangol, exploration efforts and changes implemented by the newly inaugurated president, see our business intelligence platform, TOGYiN.
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