Soyo Refinery: All Bets Are In

Image: Angop

The Angolan Ministry of Mineral Resources and Petroleum (Ministério dos Recursos Naturais e Petróleos – MIREMPET) has closed the call for applications for the construction of the Soyo Refinery. Ministry officials will hold an opening ceremony on Friday, when the proposals submitted for the tender will be publicly opened. The different offers will then be analysed by the ministry and the winner will be announced on 31 March, 2020.

The new refinery will be able to process 100 thousand barrels of crude oil per day and greatly contribute to expand Angola’s downstream sector. The only refining facility operating in the country currently is the Luanda Refinery, processing around 60 000 barrels per day, corresponding to just 20% of the country’s fuel needs.

The Soyo venture, along with the new Lobito and Cabinda refinery projects and the refurbishment of the Luanda refinery, is part of the government’s plan to make Angola self-sufficient in fuel production and to develop an economy-boosting the downstream sector. T

The government has designed a number of fiscal incentives to lure investors to bid for the Soyo project. In particular, the Private Investment Law reduced the Industrial Tax by 80% for an eight-year period, cut the Urban Building Tax by 75% for office and investment buildings and reduced taxes on capital and dividends by 80% for the same time period.

The conclusion of the tender period comes just 12 days after Sonangol announced the signing of an agreement with Gemcorp Capital LLP for the construction of the Cabinda Refinery. Works to prepare the terrain for construction are expected to start in February 2020. Located in the Malembo plane, some 30 kilometres North of the city of Cabinda, the refinery’s first phase of development, scheduled for conclusion by the end of 2021, will be able to process 30 thousand barrels per day. The second phase will double that capacity by the end of 2023. Sonangol expects the first phase will create 2,000 direct and indirect jobs while the second phase could add another 1,800 positions.

Sonangol first announced the commissioning of the Cabinda refinery to United Shine Ltd in June 2019, a consortium that was responsible for financing 90% of the development, with the rest being assured by Sonangol. In early December 2019, Sonangol announced it had revoked the contract as United Shine had not complied with its obligations and had failed to demonstrate it had the financial capability to complete the project. Gemcorp, a capital investment fund based out of London and focused on emerging markets, has an established history of financing projects in Angola.

The Lobito refinery is the largest of the three new downstream facilities, at 200 thousand barrels per day. The project kicked off in 2012 with an estimated budget of $10 billion, but it was suspended by Sonangol in 2016 following the oil price crash. Reportedly, 75% of the budget had already been spent on developing infrastructure at the site. The project only restarted in late 2017.

In 2018, Sonangol announced it had shortlisted seven companies to conclude the project, but never publicly revealed the winner. In a rare interview to a local Angolan newspaper in December 2019, Sebastião Gaspar Martins, Member of the Board of Directors at Sonangol indicated that due to its considerable dimension, the Lobito refinery would not be operational until 2025. It is expected to create up to 10, 000 direct and indirect jobs.

Finally, President João Lourenço indicated in his October 2019 state-of-the-nation address that the expansion and refurbishment project of the 60-plus year old Luanda refinery was already approved and that it would see the facility’s processing capacity expand by as much as four-fold by 2021, to what would amount to around 240 thousand barrels per day.

According to the available figures, this development alone could cover 80% of the country’s fuel needs and ease the pressure on national oil company, Sonangol.


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