Angola kicks off oil reforms as Nigeria dithers

Unlike Nigeria’s Muhammadu Buhari, Angola’s President João Lourenço have commenced oil reforms in its state-owned Sonangol with the aim of boosting production in Africa’s second biggest oil producing country.

Since João Lourenço became president of Africa second largest producing oil country  Angola in September last year, he has moved to overhaul  state owned oil company, Sonangol, which has been criticised in time past by transparency and rights groups for a lack of transparency as both producer and regulator.

In place of state-owned Sonangol, the Angolan government will create a National Oil and Gas Agency which will take on the role of the national concessionaire which will allow the agency to manage oil blocks, sell oil blocks and reduce the near total grip state energy firm Sonangol has over the sector.

“A government that is new in Angola is already championing reforms in its oil sector while we have a government in Nigeria who has a Petroleum Industry Governance Bill (PIGB) right in his front but cannot sign it into law,” Ademola Henry, Team Leader at Facility for Oil Sector Transformation (FOSTER) said.

On what it will mean for investment, “certainly investors will want to move more to Angola’s oil and gas industry where there are more regulatory efficiency than a place like Nigeria were there are still corruption lapses,” Henry told BusinessDay by Phone.

Diamantino Azevedo Angola’s Oil Minister said Sonangol’s role as national concessionaire will be transferred to the National Agency of Petroleum and Gas in the first half of next year in a re-organisation scheduled for completion in 2020.

“The agency will be tasked with conducting bids for new oil concessions, managing production-sharing agreements as well as representing the state in the sharing of profits from oil concessions,” Azevedo said in Luanda, Angola.

Sonangol, which partners with companies including Total and BP to pump oil in the southwest African nation, will focus on the exploration, production as well as refining and distribution of oil and gas.

The oil minister cited irregularities and excessive bureaucracy at oil-bloc tenders as some of the reasons for the decline. Sonangol will focus on its core business, making it more efficient and agile.

According to the statement from the ministry, the restructuring of Sonangol will also involve the shedding of under-performing assets outside the oil sector in which the company invested during the oil boom as the new model is part of series of measures taken by Lourenço aimed at revamping the sector, including tax breaks for the development of marginal fields and new legislation for gas rights.

Based on the new model, Sonangol’s will focus on the exploration and production of crude oil and natural gas, refining and liquefaction of gas, export and logistics and distribution of refined products and petrochemicals.

“Angola and other African countries such as Ghana, Uganda, Tanzania and Mozambiq are borrowing from Nigeria’s PIB; so they are learning from us and putting it into actions while Nigeria continues to allow sentiment and patronage obstruct its own development,” Wumi Iledare, a Professor of Petroleum Economics and oil and gas expert said.

The implementation of the new model was split into three stages, the first one, (until December 2018) involves preparation for the transition, the second (January-June 2019) the transition itself and the third (July 2019 to December 2020) focusing on optimisation and completion of the new model.

“If these small African countries are efficiently utilizing what we rejected then it is very sad. That is why our NNPC is struggling and cannot compete with its peer that started at the same time,” Iledare said.

The process of restructuring Sonangol, called the “Regeneration Programme” will be made public soon as Angola hopes the shift will help reverse a decline in oil output in the OPEC member by reducing bureaucracy and speeding up the pace at which company investments can be approved.

“By this act alone, Angola will soon start attracting investment to its deep water assets which are not as prolific as that of Nigeria,” Iledare told BusinessDay.

Stakeholders in Nigeria oil and gas sector have expressed fear that the fate that befell the PIB that was sent to ex-President Jonathan would not befall this PIGB awaiting president Buhari assent as the two were sent for assent on the year that precedes general elections.

“We had a PIGB that was thoroughly debated, thoroughly analysed, and thoroughly scrutinised; right now nobody knows the fate of the bill,” Iledare lamented.

In 2014, a harmonised Petroleum Industry Bill (PIB) consisting of all the four areas of governance, administration, fiscals and host community, was passed and sent to former President Goodluck Jonathan for assent a few months before the general elections. The bill went with the election while the country keeps licking the wounds that its non-approval inflicted on the entire economy of the Africa’s biggest crude exporter.

“If we do not reform our oil and gas sector quickly, we would end up like Venezuela,” Iledare warned.

DIPO OLADEHINDE