Angola’s state oil company Sonangol is aiming to slash breakeven costs on new oil production to as low as $20 to $30 per barrel and make its contracts more attractive to investors and oil and gas companies, the company’s chief Isabel dos Santos told Reuters.
On the sidelines of the FT Africa Summit in London, dos Santos said changes to the Sonangol board announced last week would help the company revamp new E&P agreements and significantly cut costs.
“We are rethinking all our strategy, with a view of being able to produce barrels within $40-$50 per barrel,” said dos Santos, the billionaire daughter of Angola’s President Jose Eduardo dos Santos.
She said some projects were targeting a breakeven as low as $20 to $30 per barrel, adding the changes were essential so new concession agreements could begin “delivering dollars per barrel, rather than just cost.”
“In the past, we had investments that were quite heavy, quite capex heavy. That leaves us with a portfolio with barrels over $70, over $80, so we have some issues with some fields,” dos Santos said.
Sonangol has been trying since the recent slump in oil prices to reduce costs and attract investment, but dos Santos said bringing in new talent, particularly people with experience at multinational companies and oil majors, could deliver further results.
In a statement Oct. 6, Sonangol said it had saved $1.7 billion thanks to spending cuts since 2014. But it also said it had replaced the chairman of its executive committee, Paulino Jeronimo, who had managed new concessions and relationships with operators.
The company said the functions would now be carried out by two managers who could enable “the faster treatment of the challenges of the sector.”
Earlier in the week, it appointed three new board members to help restructure the company, including former ExxonMobil executive Ivan Sá de Almeida, who used to work for Sonangol.
“We are redrawing our terms and conditions to make them more attractive,” dos Santos said, adding that under the previously designed contracts, “the level of commitment (for companies) was not attractive.”
Sonangol in May canceled an auction of oil exploration licenses for eight blocks, saying the drop in oil prices since the bidding opened had made the terms uneconomic.
Dos Santos said Sonangol had recruited new talent at other levels as well, and had thus far brought in roughly 26 people “on the first and second layers of governance,” including from oil companies such as Chevron and Total, and it was still “looking at different multinationals that had Angolan talent.”