London — Angola's battle to stem its steep production decline is proving to be a long one, with hopes rest on the country's new licensing round -- the first since 2011 -- along with the outcome of reforms by President Joao Lourenco.

The country's oil bounty is depleting, as a bulk of key producing fields all mature and decline at the same time. A fall in upstream activity since the oil price crash of 2014 has also stymied foreign investment, which was already low due to tough fiscal terms.

Africa's largest oil producer will have to remain patient, analysts say, as the first steps of the recovery path are only now being laid out.

Lourenco, who took over from his predecessor Jose Dos Santos in 2017, has made a number of oil policy changes from the former regime. His government decided to alter the fiscal terms for some oil contracts, giving international oil companies higher returns and opening up offshore and onshore basins.

Bids for the country's new licensing round, which includes around 10 oil blocks in the Namibe and Benguela basins, close mid-November.

MUCH-NEEDED REFORMS

Verisk Maplecroft senior Africa analyst Nick Branson expects President Lourenco's "proactive response to mitigate the severity" of the decline.

"President Joao Lourenco has been working hard to turn the ship around, but after years of neglect, results will take time to materialize," he said. "These long-overdue reforms will encourage oil majors already in-country to pick up acreage in the Namibe and Benguela basins under Angola's current licensing round."

One of the reforms has been the restructuring of the state-owned Sonangol. In February, the government created the National Agency of Oil, Gas and Biofuels (AMGP) which now assumes the role of national concessionaire for hydrocarbon licenses.

2020 PRODUCTION GROWTH

Oil output will rise to 1.44 million b/d in 2020, from 1.40 million b/d currently, President Lourenco said in a state of nation address last week. The 35,000 b/d increase will be slight but welcome compared with the recent slump in production.

Lourenco also said the country's economy would return to growth next year as his government picks up efforts to diversify its economy. The country has been dealing with a severe drought in the past few months, further ailing its already fragile economy.

The country's production has been languishing at multi-decade lows, despite the startup of the 230,000 b/d Kaombo deepwater project more than a year ago.

Oil output -- which accounts for 95% of exports -- has fallen by more than 300,000 b/d in the past two years due to technical and operational problems at its key fields -- Pazflor, Girassol, Hungo, Kissanje and Plutonio.

Production has averaged around 1.38 million b/d this month, according to S&P Global Platts estimates, compared with 1.71 million b/d in October 2017. A decade ago, output was as high as 1.90 million b/d.

There have been some bright spots. Eni made five oil discoveries in Angola's prolific Block 15 in the past 15 months, which are estimated to contain up to 1.8 billion barrels of light oil in place.

The country's beleaguered upstream sector is poised for an increase in activity, boosted by fiscal changes and greater interest from the likes of Total, Eni and ExxonMobil.

-- Eklavya Gupte, eklavya.gupte@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com