Angola: An Adjusted Timeline for Frontier Exploration
In a bid to incentivize investment into frontier exploration, the National Agency of Petroleum, Gas and Biofuels (ANPG) announced its second oil and gas licensing round last year, as part of its six-year licensing strategy that began in 2019. Three blocks in the Lower Congo Basin and six blocks in the Kwanza Basin will be allocated as part of the public tender in 2020. While data packages are currently available for the nine blocks – and the announcement of the launch of public tender was initially intended for the end of May – current economic constraints caused by COVID-19 may lead to adjustments to this date, according to the ANPG.
The majority of this year’s blocks were previously offered in 2014, however, no licenses were awarded due to unfavorable fiscal terms and lack of exploration and production capacity from the companies that proposed bids. In 2021, eight blocks in the offshore shelf and deepwater Lower Congo Basin will be allocated for concessions via Public Tender and/or Limited Public Tender. Onshore acreage will be made available through Public Tender in 2023, including four blocks in the Congo Basin and eight blocks in the Kwanza Basin. Another Limited Public Tender will take place in 2025, with 10 pre-salt blocks offered in the deepwater Kwanza Basin, which has been shown to hold considerable quantities of gas.
In 2019, Angola launched its first oil and gas bidding round in eight years, listing nine blocks in the frontier Namibe Basin and one block in the Benguela Basin for public bidding, while 15 blocks were opened for direct negotiation. In December last year, the ANPG awarded Total with Blocks 20/11 and 21/09 in the Central and South-Central Kwanza Basin, in water depths ranging from 300 -1,800 meters. Drilling to date in the two blocks has led to the Bicura, Cameia, Golfinho and Mavinga discoveries, and Total and its partners are continuing to unlock the full value of these prospects through the creation of a development hub. The national concessionaire also awarded Eni with operatorship of frontier Block 28, at water depth ranging from 1,000 – 2,500 meters and located in the unexplored Namibe Basin.
Terms and Conditions
Under the terms of the Presidential Decree 52/19, petroleum concessions are to be awarded through three mechanisms: public bidding, limited public bidding and direct negotiation. While the announcement of the public tender for the 2020 round may be delayed, the blocks may still be available for direct negotiation. Public tender is derived from Presidential Decree 86/18, which was passed in April 2018, under which Sonangol is entitled to a 20% stake in research operations, in the case that it is not the operator of the block. Limited public bidding restricts bidding to a number of previously selected companies and applies to blocks and contract areas that have been returned to the State. Eligible bidders are selected from companies that have demonstrated knowledge, expertise and technical and technological competence operating in Angola. Under direct negotiation, successful companies must enter into a service-at-risk contract, meaning that the company bears all exploration costs, and in return, recovers costs through the sale of the oil or gas if exploration proves successful. These companies must also demonstrate relevant proven experience, expertise, technical and technological capabilities operating in Angola or other oil provinces.
Marginal Field Focus
The six-year concessions strategy serves to drive investment in frontier exploration and halt declining reserves by bringing in a new wave of explorers that will bring discoveries into production. Starting in 2025, exploration opportunities are expected to represent over 50% of Angola’s production. Angola’s upcoming licensing rounds include a focus on the development of marginal fields, which refers to oil fields that do not produce enough net income to qualify as a commercial field experiencing a change in technical or market conditions. The development of marginal resources – estimated to contain approximately three billion barrels – is a key element of the ANPG’s efforts to boost production of existing resources, along with unifying development areas to maximize resource conversion in reserves, improving secondary recovery systems and developing additional resources in mature fields. With the current price of the barrel hovering around $35, this may drive heightened exploration of marginal and onshore fields, which are less resource-intensive than the yield of offshore and deep-water discoveries. For blocks in the research phase of development, the ANPG is focusing on renewing operating licenses to maximize geological potential and refining basin studies to intensify exploration activity both onshore and offshore. Through marginal field development, Angola aims to attract a greater diversity of exploration and production players that can operate smaller onshore and shallow water resource plays, including Angolan, African and international independents.