Angola reforms set to survive Sonangol sackings
The new boss of Angola’s state oil firm is seen as another safe pair of hands
Last week's sacking of Sonangol chairman Carlos Saturnino and most of the company's board was ostensibly due to President Jao Lourenço's dissatisfaction with the way the company handled a fuel import crisis. But other factors may be been at play too.
The country has been suffering fuel shortages, as it failed to import enough refined products to meet demand. Although Angola is Africa's second largest oil exporter, it can only meet less than a fifth of its own fuel needs from domestic refineries and must import the rest
Lourenço blamed a lack of communication between Sonangol and the relevant government departments for the fuel shortage. Meanwhile, Sonangol, which oversees fuel imports, had previously blamed difficulties in accessing hard currency to pay for imports and a cashflow shortage due to unpaid debts.
Whether the decision to fire Saturnino was solely motivated by the fuel crisis is hard to tell, given the opacity of Angolan politics. However, it is a step that is unlikely to have been taken lightly, given Saturnino was in the middle of overseeing a major restructuring of Sonangol, designed to simplify the organisation and attract more investment to the upstream sector.
"One would have to question whether other factors played a role in the decision to dismiss Saturnino, such as tensions between him and Lourenço over the restructuring of Sonangol and reforms to the industry, including the creation of the new regulatory body," said Maja Bovcon, an Africa analyst at consultancy Verisk Maplecroft.
The restructuring, intended to be completed by the end of 2020, is intended to reduce the influence of Sonangol over the industry and the entire Angolan economy, which it amassed during the 38-year presidency of José Eduardo Dos Santos, who stepped down in 2017. The former president's daughter, Isabel Dos Santos, was then fired by Lourenço as Sonangol head, to be replaced by Saturnino, in November of that year.
As part of the reform process, lower marginal field tax rates were announced in May 2018, while a new national oil and gas agency is being created to handle exploration and production agreements, removing that responsibility from Sonangol. Although Saturnino has been replaced by another Sonangol veteran — and board member — Sebastiao Gaspar Martins.
Steady as it goes?
As a respected industry veteran, Saturnino was generally regarded as a firm hand on the tiller to guide Sonangol through the reforms. But, whatever the reason for the sacking, the appointment of Martins to succeed him would suggest the president wants to ensure a continuity at a delicate moment in the restructuring process.
Martins has nearly 40 years of expertise in oil and gas and knows Sonangol inside out, having previously led the board of directors and the executive committee of the exploration and production unit, Sonangol P&P. The government will be hoping that his profile within the oil and gas sector will help reassure investors that the reform process remains on track.
Maplecroft's Bovcon says the outlook still looks broadly positive.
"We remain cautiously optimistic about Lourenço's administration. The speed and determination with which the government is enacting reforms in the oil and gas sector has been impressive, especially by regional standards," she said. "The recent setbacks and the change in Sonangol's leadership primarily highlight the magnitude of challenges the authorities face while trying to revive hydrocarbons production and the broader economy."
The country is desperate to revitalise exploration in order to replace dwindling reserves from its maturing major oilfields. Angola is no longer challenging Nigeria to become Africa's top exporter, with production falling from over 1.7mn bl/d in 2016 to less than 1.5mn bl/d in early 2019.
Production received a boost with the start of operations from Total's Kaombo Sul floating production storage and offloading (FPSO) unit in April 2019. This phase of the Kaombo project on Block 32. Kaombo Sul will add a further 115,000 bl/d of oil to the 115,000 bl/d from the first FPSO, Kaombo Norte, which came on stream in 2018.
However, it is an uptick in exploration, with the potential for new discoveries, that is needed to give the Angolan oil sector a stronger longer-term future. To that end, a fresh licensing round has been scheduled for later in 2019, in the hope that explorers will be enticed by the reforms that have already been made to the fiscal regime.