The termination of Sonangol’s right to participate in the 2020 concession biddings for the Terrestrial Basins of Lower Congo and Kwanza has rendered the tender much “lighter” for the firms that were due to finance the Angolan oil company to as much as 20 percent.
This was said by the business director of the National Agency of Oil, Gas and Biofuels (ANPG), Hermenegildo Buila, during a webinar for further clarification on the process, aiming the Africa / Asia / Europe markets.
The official explained that Sonangol enjoys the right of preference in any concession tenders taking place in Angola, and also to getting financed to as much as 20 percent of the exploration costs involved, which is a right that has been terminated in the tenders for the nine blocks of the onshore basins.
According him, under the Terms of Reference (TR) for the 2020 tenders, Sonangol rescinds the above mentioned right.
The TR refer to the 2020 tenders for new oil blocks, which covers three terrestrial basins in the Lower Congo (CON 1, CON 5 and CON 6) and six others in the Kwanza terrestrial basin (KON 5, KON 6, KON 8, KON 9, KON 17 and KON 20).
Hermenegildo Buila explained that the termination of the national oil company’s right definitely makes the Terms of Reference more competitive for all companies wishing to participate in the tender announced on 30 April this year.
He stressed that the termination of Sonangol’s participation in the 2020 tender is one of the measures of incentive adopted to encourage domestic and foreign investment.
In addition to the incentives, in the tenders for the above mentioned nine terrestrial blocs, the ANPG cancels the
signature, commercial discovery and production bonuses, a decision made with the consent of the concerned authority.
The manager explained that the cancellation of the two above elements of the TR, with the fact that ANPG wants companies, in the first phase of their activity in the blocks, to be solely focused on direct work on their shares, without other types of charges that could imply further financial transactions.
“That’s how ANPG, with prior consent from the body in authority, eliminated the mandatory payment of bonuses from the Terms of Reference. There are no bonuses in the Terms of Reference for bids for the onshore blocks”, he stressed.
Another incentive for national and foreign investment was the elimination of “Ring Fence”, a concept used in blocks tenders in Angola, known in the international market as a country that awards blocks with large surfaces.
"By law, they are declared as areas of development, where costs can only be recovered with the production of these areas", he explained.
With the elimination of the “Ring Fence”, the concept of a single area emerges for these onshore tenders, which means that the costs of the blocks are recovered with the same production, said the official.
Buila explained that the concept of developing areas ceases to exist, being replaced with that of block or concession.
The TR also includes the issue of the “profit oil” in favor of the contractor.
In this component, the sharing of profit oil, in all its expansion, is in favor of the contracting group (even with higher rates of return) and not of the concessionaire, as defined in other TR.
ANPG also brings as an incentive the “cost oil” element and the high investment premium in favor of the investors, with a view to promoting a greater return on earnings.
"These are elements that we believe will bring financial strength and a significant return to investors," said the senior ANPG official.
Another new element in the TR includes the obligation to pay 10 percent social and environmental protection contributions, due from the first year of the commercial production.
According to Hermenegildo Buila, social projects contributions do not apply to 100 percent national companies.
With these tenders, ANPG says it has opened opportunities for small and medium-sized companies in the sector, as well as the creation of new jobs.
