Tokyo — Angola is in the final stages of preparing its first licensing round in about eight years, as the West African country aims to capitalize on renewed investor interest in its oil sector, the depleting reservoirs of which it hopes to replace.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
"The new strategy for the [licensing] of onshore and offshore blocks will be approved soon, and it will not just be a strategy for [this] year but for the period 2019-25," Minister of Mineral Resources and Petroleum Diamantino Pedro Azevedo told S&P Global Platts in an interview during a visit in Tokyo.
"It will be including onshore and offshore blocks for Congo, Kwanza, Namibe," Azevedo said of the strategy.
Asked about the exact timing of the licensing round in 2019, Azevedo said: "That depends [on] approval by the government but what we are saying is that [this is] the strategy for the [licensing] of blocks from 2019 until 2025."
Speaking separately at an Angolan investment seminar Friday, Azevedo called on Japanese companies to participate its planned licensing round.
Currently Japan's Inpex, Mitsubishi, Japan Petroleum Exploration, and Taiyo Oil are involved in Angola's E&P sector. Inpex holds a 9.99% stake in Angola's offshore Block 14, which in September 2018 pumped an average of around 65,000 b/d of Nemba crude -- with an API gravity of 37-38 degrees with a sulfur content of around 0.2%.
Angola's imminent licensing round comes at a time when its crude production has been declining due to technical and operational problems at some of its fields, exacerbated by a lack of fresh upstream investment and incentives.
But enthusiasm for new projects has increased, partly due to fiscal changes and the launch of production at the Kaombo field last year boosting sentiment.
State-owned Sonangol expects output to be around 1.65 million b/d in 2019 after production slumped to an over 10-year low of 1.42 million b/d last year.
Output, however, had a much-needed boost in the second half of last year due to the startup of the 230,000 b/d Kaombo project, with phase two of this development expected to add 115,000 b/d sometime this year.
Angola produced 1.48 million b/d in December, according to the latest S&P Global Platts survey of OPEC output.
"You know we are launching some new projects with intention to replace some reservoirs that are declining," Azevedo said. "We launched the Kaombo 1, and [this] year we launch the Kaombo 2 -- the second phase of the project.'
CRUDE OIL EXPORTS TO ASIA
Angola, however, faces rising competition from US crude in the vital Asian market, where much of the world's demand growth is expected.
Armed with competitive price tags, rising production volumes and improved oil export infrastructure, US crude oil has rapidly gained popularity in Asia over the past couple of years.
That does not bode well for various West African crude suppliers as many of the light sweet Angolan, Nigerian, Algerian and Congolese grades often compete directly with the US Eagle Ford, Bakken, WTI Midland crudes in East Asia.
Asked whether Angola sees the US as a major competitor in the oil markets, Azevedo said: "Angola has been in the [international] oil market for some time. During that time we always have our markets for our product, and we think we still we remain with the markets for our product. We are not afraid of marketing our product."
Angola was ranked the third biggest crude supplier to China over January-November 2018, according to the latest General Administration of Customs data.
However, the flurry of US crude flows to Asia last year took its toll on Angola's market share there. China imported 43.042 million mt of Angolan crude in January-November 2018, down 8.9% on the year, the customs data showed.
At the same time, China imported 12.281 million mt of crude from the US over January-November 2018, almost double the 6.819 million mt a year earlier.
It wasn't all doom and gloom however, as some Southeast Asian buyers maintained their appetite for light sweet Angolan grades.
Thailand for one, imported 31,657 b/d of crude from Angola over January-November 2018, more than double the 13,147 b/d it imported over the same period of 2017, according to the latest data from the Thai Customs Department, Energy Policy and Planning Office.
Thailand's appetite for US crude was also strong. It took 36,662 b/d in January-November, also more than double the 16,364 b/d imported a year earlier.
COMPLYING WITH OPEC CUTS
Angola, meanwhile, is currently producing crude oil at a level agreed in the OPEC/non-OPEC production cut accord effective from January, Azevedo said.
Under the deal, in which OPEC and 10 non-OPEC allies committed to cutting a combined 1.2 million b/d from October levels for the first half of 2019, Angola pledged to hold its production at 1.481 million b/d.
"We accepted the decision taken by OPEC, and we are acting accordingly," he said.
Asked whether the recent deal had been effective so far in bringing the market back into balance, Azevedo said: "Yes we see that; and that is why we took the decision, and we expect that our decision will contribute to stabilizing the oil market."
--Takeo Kumagai, email@example.com
--Gawoon Philip Vahn, firstname.lastname@example.org
--Herman Wang, email@example.com
--Edited by Jonathan Dart, firstname.lastname@example.org