Sonangol takes Cabinda refinery FID
Angolan NOC is moving forward with most promising project, but other downstream expansion plans remain in limbo
Angolan state oil firm Sonangol has long espoused ambitions to create a downstream sector to match the upstream, upon which the former Portuguese colony is highly reliant.
Imports account for around 80pc of the country’s refined product demand, with the rest being processed at the only functioning refinery at Luanda. The facility has a throughput capacity of c.57,000bl/d, although an ongoing upgrade project will increase this to 65,000bl/d, with a completion date pencilled in for next year.
Key to the government’s plans to develop the sector are the addition of greenfield facilities at Lobito in the south, Soyo in the north and Cabinda even further north in the exclave of the same name. Partners have been brought in for each of these initiatives only for contracts to later be cancelled.
Plans for the refineries at Soyo and Lobito have been discussed repeatedly over the past decade, though progress has not been forthcoming
However, in October Sonangol and UK-based investment management firm Gemcorp Capital announced they had taken FID for the construction of the Cabinda facility on the Malembo plain, around 30km north of the provincial capital.
The $920mn project is to be undertaken in three phases, the first of which consists of a 30,000bl/d crude distillation unit and 1.2mn bl of storage capacity. The later two phases involve the construction of a full-conversion refinery with total nameplate throughput capacity of 60,000bl/d, producing gasoline, diesel, fuel oil and jet A-1. The facility is expected to come into operation in 2022.
Gemcorp was brought in last October following the award of a contract to the little-known Hong Kong-based United Shine consortium in 2019 and Sonangol’s subsequent cancellation of that deal. Gemcorp claims to have $1.2bn in assets under management; however, considering Sonangol’s previous difficulties in bringing its refining projects to fruition, the addition of a technical rather than financial partner may have been prudent.
In the background, though, Luanda has a wide-ranging agreement in place with Italian major Eni. The deal, which has flown largely under the radar since it was announced in June 2019, will see Eni provide technical assistance to improve efficiency at the Luanda refinery, as well as supporting the development of the Lobito and Cabinda facilities.
Italian support is already playing an important role in the upgrade of the Luanda refinery, with Maire Tecnimont subsidiary KT – Kinetics Technology carrying out a $200mn EPC relating to the naphtha hydrotreater, which includes naphtha splitting, and the catalytic reformer. The scope also includes some utilities and offsites, as well as integration with the existing facility.
The Eni announcement was one of a string of positive moves by Luanda since Joao Lourenco took over as president in 2017, ending the 38-year reign of Jose Eduardo dos Santos, but the country’s momentum appears to have been halted by the pandemic.
Next on the horizon was to be Soyo, while the Lobito project has been troubled by feasibility concerns since it was first announced in 2007. But the northern Soyo plant has also had its fair share of complications and delays since Sonangol announced the breaking of ground for a 26-month construction period in June 2015.
x2 – Impact of Cabinda refinery on Angolan capacity
A tender was launched in mid-2019 for companies to bid to construct a 110,000bl/d refinery. A winner has yet to be named and an announcement will now not to be made until after the Covid-19 pandemic subsides. Of the 31 companies that expressed an interest, 15 submitted bids and just nine of these were validated by Sonangol.
While the company’s 2023 completion date for the project was somewhat more conservative than timeframes given for other developments, Soyo now appears likely to overshoot. As for Lobito, any short-term expectations should be viewed as highly ambitious.
With Cabinda progressed beyond the FID stage, further progress will provide an indication of what can be anticipated from the other, larger plants. Given Sonangol’s downstream track record, one project at a time may be more than enough.