Angolan oil sector on brink of major restructuring after creation of Oil Agency

19 November 2007

Luanda, Angola, 18 Nov – The Angolan oil sector may undergo major restructuring over the next few years following the creation of the National Oil Agency, which will take on responsibilities now in the hands of Sonangol, namely regulation and concessions.

The creation of the agency, which has been called for by international organisations and suggested at a government level, would have the aim of increasing efficiency and transparency in the sector, which is currently synonymous with state oil company Sonangol, which is an important source of revenues for Angola.

“When we feel that these two entities [the ministries of oil and finance] have sufficient capacity, it will be time for Sonangol to be completely removed from regulatory activities,” deputy minister, Aguinaldo Jaime recently told the Financial Times of London. He is considered to be the main mentor behind” the economic policies of the government of Fernando Piedade dos Santos.

Asked about timings for this restructuring, Jaime said that five years would likely be enough.

According to the Africa Monitor newsletter, the Agency will have a status similar to am autonomous public institute and will have the responsibility for sector regulation and, possibly, exclusive concession rights.

At the same time, Sonangol will be restructures, but, Jaime said, this restructuring would be unlikely to represent a loss of its current power, particularly in terms of management of oil revenues.

The restructuring will split Sonangol off from the business areas not related to its core business, by selling off the subsidiaries it created to manage them.

The state oil company, headed by Manuel Vicente, currently has interests and assets in areas such as transport, communications, banking and insurance, as well as a significant portfolio of external stock-holdings, including a strategic share in Portuguese oil company Galp Energia and Millenium BCP, Portugal’s largest private bank.

With this process, Africa Monitor reported, Luanda hopes to boost Sonangol’s prestige, with the aim of affirming its place in the international market and its already announced listing on the world’s main stock exchanges, namely New York.

The reconfiguration of the Angolan oil sector would also be a show of “goodwill” and “cooperative spirit” towards the International Monetary Fund and other organizations that have called for a separation of different roles in order to achieve greater transparency.

However, Africa Monitor noted, Luanda continued to oppose a new cooperation agreement with the IMF, even if does not require monitoring.

Ricardo Soares de Oliveira, a researcher from Oxford University and author of a recent study on Sonangol, told the Financial Times that the oil company is “an extremely cosmopolitan and efficient company,” but whose skills “have never been effectively put at the service of Angolan development.”

In the last two years, Sonangol has posted profit of over US$1 billion, according to official figures.

Crude oil production in Angola reached a daily average of 1.4 million barrels, 40 percent of which Sonangol’s share, and Angola is expected to reach the mark of 2 million barrels per day at the end of this year, thus equalling Nigeria’s production, which is currently sub-Saharan Africa’s largest oil producer.

Sonangol is still extending its activities to natural gas, via the Angola LNG project, which involves some of the main multinational companies in the sector, as well as to refining, with the aim of increasing the added value of exported oil products. (macauhub)