INTERVIEW: New BP, Eni venture eyes long-term oil and gas revival for Angola

Azule Energy, the new Angolan joint venture of BP and Italy's Eni, plans to step up exploration following recent license issuances, seeing ample opportunity in spite of recent production decline in the West African country, CEO Adriano Mongini said in an interview.

Reflecting on the 18 months since the formation of Azule from BP and Eni's Angolan assets, Mongini emphasized the "fantastic" quality of the country's oil reservoirs and outlined "very intense and aggressive" exploration plans.

He said he had no knowledge of the thinking behind Angola's shock December 2023 exit from OPEC, but pointed to possible differences on the production outlook. Sources told S&P Global Commodity Insights that Angola had left following a row about its production quota, which was set to be reduced from 1.46 million b/d to 1.11 million b/d after years of under-production.

Azule has its sights on near-term production increases: from 209,000 b/d of oil equivalent in 2023 to 218,000 boe/d in 2024, and then 245,000-250,000 boe/d in 2027, Mongini said. The bulk of this is expected to be crude, much of which currently goes to Asia; Angola was China's eighth-largest crude supplier in 2023, according to customs data. In December almost half of Angolan crude exports went to the Asian nation, according to S&P Global Commodities at Sea.

Azule's near-term increases will come from two projects for which it has earmarked $7 billion in investment up to 2027. The Agogo Integrated West Hub project will bring on stream an additional 120,000 b/d floating production, storage and offloading vessel in 2026 to handle output from both Agogo and the Ndungu fields. And the New Gas Consortium, also due on stream in 2026, is Angola's first project primarily targeting gas rather than oil. It takes advantage of reforms enabling companies to monetize gas rather than, as previously, gas being supplied free to the Angola LNG export facility as a byproduct of oil production.

Alongside those projects, Azule has been boosted by several new license awards in recent months. It anticipates drilling 16 exploration wells in the next four years, some in the role of operator and others as non-operator, Mongini said. "We have a very intense and aggressive portfolio for exploration, some generated in these new licenses," he said in a Jan. 30 interview on the sidelines of the Baker Hughes Annual Meeting.

The recent awards comprise four deepwater licenses for which Azule will be operator, of which two are close to existing hubs -- Greater Plutonio and PSVM (Plutao, Saturno, Venus and Marte). The other two cover previously unexplored "frontier" blocks 46 and 47, both considered "ultra-deepwater."

A fifth license, operated by Chevron, lies on the northern border with the Democratic Republic of Congo and has been assigned following the resolution of a decades-long dispute between the countries last July -- a "strategically" important moment, Mongini said. As regards the latter license and what it may yield, "there are two finds already defined, and it's an area that is a very prolific basin so the expectation is that maybe other exploration will find even more," he said.

Beyond the new licenses, Mongini highlighted a non-operated exploration well Azule expects will be drilled by ExxonMobil in the Namibe basin near the Namibian border, possibly this year, and its own plans to broaden exploration to include gas.

"With zero value there was no exploration for gas -- now with all the reforms that have been done in the sector, also gas has a value. We will drill the first gas exploration well in Angola next year in Block 114," he said.

OPEC+ split

Mongini played down Angola's recent production decline, challenging the idea that output levels had been disappointing. National oil output has fallen by more than a third in the last eight years, to around 1.2 million b/d. However, Mongini said this did not reflect the underlying reserves, and renewed investment would be key. He highlighted the high productivity of newly developed fields, which are often associated with subsequent rapid decline, and noted a target by the petroleum ministry to maintain production above 1 million b/d. In the days before it quit OPEC, Angolan oil minister Diamantino Azevedo was demanding a 1.18 million b/d 2024 production quota in letters sent to secretary general Haitham al-Ghais.

The 1 million b/d baseline "can be achievable, not just in the short term... because Angola still has very high potential" particularly in the ultra-deepwater, he said, noting also TotalEnergies' involvement. "Everything starts from the fantastic quality of the reservoirs of Angola. That means new wells are very productive -- production is very high for each well," he said. "Higher production means faster decline," he said, estimating decline rates for Angola in general at 25%/year.

Upstream analysts at S&P Global Commodity Insights concur on Angola's productive potential. "There are deepwater exploration possibilities outboard of the currently developed areas," Ian Conway, executive director of upstream research, said, pointing particularly to the northern border area and southern waters close to Namibia. "The Azule joint venture arrangement between BP and Eni sets up a domestic vehicle that can be light-footed in dealing with the challenges that mature offshore African basins can bring," Conway said, noting gas infrastructure development as one such challenge.

Mongini highlighted Azule's plans to cut routine flaring to zero this year through efficiency gains and improvements to facilities. In September the venture signed a memorandum of understanding on decarbonization projects with state company Sonangol. The two are already developing the first phase of the 25 MW Caraculo solar pholtovoltaic plant and are discussing a second phase to double capacity.