Following the worst fuel crisis to hit Africa’s second-largest crude producer recently, President, Joao Lourenco, bit the bullet by sacking Carlos Saturnino, chairman of Angola’s state-oil company, Sonagol. Lourenco did not stop at that. Other board members were fired and few directors were reinstated to the board.
The fuel crisis was attributed to “difficulties in accessing currencies to cover the costs of importing refined products,” according to Sonagol. Unpaid debts owed to the energy company by industrial clients was also blamed.
Angola is Africa’s second-largest oil producer behind Nigeria. Despite producing around 1.5 million barrels of oil per day, the country relies on imports for 80 percent of its demand for refined products such as petrol and diesel due to insufficient in-country refining capacity.
There are lessons for Nigeria from the Angola action. Despite its vast crude oil resources, Nigeria still witness persistent fuel shortages yet nobody or group has been held responsible by government even when it is obvious that Nigeria’s state-oil company, Nigerian National Petroleum Corporation (NNPC) and the Petroleum Ministry lacked initiative and were bereft of ideas.
Lessons from Angola are not limited to whipping the state-oil company into line. It also includes industry reforms.
Angola’s recent energy reforms span from deep changes in tax law to changes in concession contracts and the opening of marginal fields to African independents. Its Ministry of Mineral Resources and Petroleum quickly put together a task force comprised of both international and domestic stakeholders, including the Ministry of Finance, the Office of the President, Sonangol, BP, Chevron, ENI, Esso, Equinor, and Total. The task force proposed improvements in several areas, including: simplifying the oil concessions management process; implementing incentives for investment in marginal fields; and creating a natural gas regulatory framework.
The reforms were aimed at benefitting all Angolans and increase the ability of employers to generate more opportunities for Angolan citizens, investors and the region.
The measures appear to be working and there are results to show. Angola has seen a slight rise in investor confidence lately as more attractive terms are being offered in the country’s oil and gas developments.
Mega oil and gas projects have achieved final investment decision since 2018, and several more are headed for FID in 2019 and 2020. A new licensing round is expected to attract new international explorers to the country, as well as promote the participation of Angola’s domestic sector by offering incentives for marginal fields.
The World Bank’s economic outlook for Angola released in December 2018 predicts GDP will grow by 2.2 percent in 2019, the first time the country will have seen positive growth since 2014. An improved investor environment is listed as a cause for the improvement.
FRANK UZUEGBUNAM
