Angola banks on largest-ever offshore oil investment
London, November 13, 2018 (AltAfrica)-For three months now the Kaombo Norte has been anchored off the northern coast of Angola and has recently begun to pump up crude oil secreted in the depths below.
The arrival of the platform ship, which belongs to French oil giant Total, has been a timely lifeline for the Angolan government.
Angola was badly hit by the oil-price plunge in 2014. But sub-Saharan Africa’s second-largest oil producer is hoping the project will mark a return to viability for the industry that has dictated Angola’s fortunes for the past decade.
More than 300 metres (330 yards) long, the floating production storage vessel is a converted tanker refitted with a maze of pipes and crude processing tanks.
Two million barrels can be stored onboard and a tanker calls roughly once a week to collect the precious cargo before delivering it around the world.
Nearby sits a tower marking the top of the 2,000-metre pipe that draws the crude deposits below into the heart of the ship.
“It’s fixed to the bottom and is positioned on a very particular bearing that allows the ship to move 360 degrees depending on the wind and the current,” said Total’s project manager Cyril de Coatpont.
A 300 kilometre-long (190 mile) network of pipes, a world record, was built below the water’s surface to link together the six oil reservoirs.
‘An economic miracle’?
It spreads out over 800 square kilometres — the same surface area as Paris.
Kaombo Norte will be joined in mid-2019 by its sister ship, Kaombo Sul.
Together they will pump 230,000 barrels a day — 15 percent of Angola’s current production level from estimated reserves of 660 million barrels.
The cost of the project, Angola’s largest ever investment in offshore, is $16 billion.
For Total, the largest foreign oil company active in Angola where it is responsible for 40 percent of output with 600,000 barrels a day, this is the price of maintaining production levels.
“There is a positive dynamic with the heightened petrol price and the desire of the Angolan government to back the industry, which is welcome,” Total chief executive Patrick Pouyanne told journalists.
The arrival of the Total investment has proved timely for Angolan President Joao Lourenco.
Since succeeding former president Jose Eduardo dos Santos a year ago he has promised an “economic miracle” to revive Angola’s fortunes.
But in 2014 a global slump in the price of black gold, which accounts for 90 percent of Angola’s exports and 70 percent of government revenues, plunged the country into deep recession and weighed down the local currency.
Volume into value
The crisis showed policymakers they could not count on oil and would have to diversify the economy.
“Production fell considerably in recent years as our zones have reached their peak output levels,” said the head of Angola’s state oil company Sonangol, Carlos Saturnino. “To stop the rot, we had to find new reserves and then exploit them.”
The government adopted a raft of measures to encourage the global oil majors to resume exploration activities which had largely been frozen since 2014.
Angola’s golden age of oil may be over but the government is committed to its goal of maintaining production at 1.5 million barrels a day.
“We are ready to invite bids for new production blocks next year,” said Oil Minister Diamantino Azevedo.
Total is contributing to the government’s drive to revive the sector having announced three new projects.
The recent rebound in oil prices has revived exploration activity across the continent, though analysts remain wary of the value of such projects.
Last month oil prices reached their highest point in four years but have since softened slightly.
“Converting volume into value is undoubtedly sub-Saharan Africa’s Achilles heel,” said Adam Pollard, a researcher at the Wood Mackenzie consultancy.
The challenge poses problems for the industry as well as oil-producing nations.
The Kaombo Norte, located 250 kilometres northwest of the capital Luanda, has begun to draw the precious reserves of block 32 — an achievement 20 years in the making.
Despite the engineering breakthrough represented by the project, Angola’s oil bonanza will continue to wind down, say experts.
“Rising crude oil prices are good for Angola,” said Carlos Rosado de Carvalho, head of Angolan economic magazine Expansao.
“But it is estimated that 60 to 70 percent of revenues are already earmarked for debt repayment, and its effects will be limited.”