Sonangol to spruce up for investors

Angola’s state oil company, Sonangol, aims to slash breakeven costs on new oil production to as low as $20-$30 per barrel and make its contracts more attractive to investors and oil and gas companies, CEO Isabel dos Santos said.

On the sidelines of the Financial Times Africa Summit in London, Dos Santos said changes to the board announced last week would help Sonangol to revamp new exploration and production agreements and significantly cut costs.

“We are rethinking all our strategy, with a view of being able to produce barrels within $40-$50 per barrel,” said Dos Santos, the billionaire daughter of Angola’s former president Jose Eduardo dos Santos.

She said some projects were targeting a breakeven as low as $20-$30 per barrel, adding the changes were essential so that new concession agreements could begin “delivering dollars per barrel, rather than just cost”.

“In the past, we had investments that were … quite capexheavy. That leaves us with a portfolio with barrels over $70, over $80, so we have some issues with some fields.”

Sonangol has been trying since the recent slump in oil prices to reduce costs and attract investment, but Dos Santos said bringing in new talent, particularly with experience at multinational firms and oil majors, could bring further results.

IN THE PAST, WE HAD INVESTMENTS THAT WERE CAPEX HEAVY. THAT LEAVES US WITH BARRELS OVER $70, OVER $80

Sonangol said on Friday it had saved $1.7bn, thanks to spending cuts since 2014. But it had replaced the chairman of its executive committee, Paulino Jeronimo, who had managed new concessions and relationships with operators. The functions would now be carried out by two managers who could enable “the faster treatment of the challenges of the sector”.

Earlier in the week, it appointed three new board members to help restructure the firm, including former ExxonMobil executive Ivan Sá de Almeida.

“We are redrawing our terms and conditions to make them more attractive,” Dos Santos said, adding that under the previously designed contracts, “the level of commitment [for companies] was not attractive”.

Sonangol cancelled an auction of oil exploration licences for eight blocks in May, saying the drop in oil prices since the bidding opened had made the terms uneconomical.

Dos Santos said Sonangol had recruited new talent at other levels too, and had so far brought in about 26 people from oil companies such as Chevron and Total, and it was still “looking at different multinationals that had Angolan talent.”