Sonangol takes up financing challenges with alternative solutions

Ricardo Van-Deste, CEO of the Exploration and Production Business Unit, Sonangol

The third day of debates, round tables and presentations of African Energy Week began with a session devoted to the Angolan national oil company. The lively session covered the company’s oil production ambitions, focusing on increasing its percentage of Angola’s exploited oil production from 2% to 10% in the coming years; its plans to reduce its carbon footprint, from planting mangroves to investing in renewable energy solutions; and finally, on the very fundamental issue for oil and gas in Africa in today’s world, which is financing.

“A lot of people say we’re going to run out of oil. I think we’re probably going to run out of cash long before we run out of oil, ”said Ricardo Van-Deste, CEO of Sonangol’s exploration and production unit.

While the struggle to attract foreign investment into the oil industry has always been a reality in Africa, with many oil producers relying almost exclusively on foreign expertise and foreign companies to exploit their resources, the struggle has become much more tough in recent years, as a number of countries and financial institutions have started to ban investments in hydrocarbon-related projects due to their environmental implications.

As the energy transition narrative continues to unfold at varying speeds, the situation is likely to worsen for the continent’s oil and gas producers, and especially for Sonangol. As Mr. Van-Deste himself suggested, “the day may come when the banks just won’t give us any more money.”

To respond to this imminent threat and as part of its regeneration program, Sonangol is looking for alternative solutions to find capital to expand its operations. While it started out by disposing of its various secondary properties, which at one point included travel agencies, hotels and food services among many other assets, it is now focusing on other types of assets.

“We have identified 8 blocks to be included in our divestment strategy for investing, where we have exploration blocks as well as production assets. This gives the possibility to interested companies with various profiles to enter the market without having to go through a national tender, ”added Van-Deste.

These 8 blocks were selected because they either have lower profitability margins or higher development costs and its sale will provide liquidity to Sonangol to be able to finance new investments on its most profitable assets.

This act of balancing the portfolio is central to giving the company leeway for its financial obligations.

“We need to diversify the way we get money. We have to wait until the end of the year to assess what we can get from our divestment program and assess what other funding we can find, ”he added.

These other means of funding are likely to result in the long-announced NOC IPO. It is no secret that the Angolan political leadership and the board of directors of Sonangol have been in favor of the listing of at least part of the company on the stock exchange, be it in Luanda, London or New York, but the date for that remains elusive. Sebastião Gaspar Martins, chairman of the board of directors of Sonangol, announced in September in Luanda that the company was considering “accelerating” the launch of its IPO, but it is not clear what that means.

One thing seems certain, financing oil and gas projects in Africa will only get more complicated as the energy transition progresses, and companies like Sonangol will need to get creative to stay solvent and continue to explore for oil, as much as the world. might heat up, it’s still hungry for 100 million barrels of crude oil, every day.

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