"Considering the economic constraints brought on by the pandemic, if a company is willing to bring a drill rig to explore, it should be encouraged to do so, as many of these areas which have been closed for 45 years can be revisited successfully."
To what extent has COVID-19 impacted Acrep Angola E&P?
The pandemic imposed a lot of constraints on Acrep’s day-to-day activities. We have been working online since February and while, you can clearly communicate this way, you miss the body language, which is important when running a business. The biggest impact, however, has been the delays to projects that were supposed to start earlier in the year, as almost no international service providers are travelling to Angola. Acrep had three developments scheduled to start late 2020, and while they are still in the budget and business plan, they have all been postponed for at least six months. Furthermore, the oil price took a hit, but at least now in August it seems to have settled at US$40 per barrel.
COVID-19 has also impacted the way the majors are operating with remote work becoming the preferred option and workforces may not return to their previous capacity. For example, Equinor, the third or fourth biggest producer in Angola with around 160,000 bopd, has around seven people in their operating office.
Can you provide an update on Acrep’s operations in Angola?
Acrep has just signed a deal to join Block 1/14 with ENI as the operator together with Equinor and Sonangol P&P. This block has good potential with the participation of two majors, which seems a positive development to ACREP. We have two developments assumed for Block 4/05, which have been delayed but are still in the pipeline. For Block 17 with Total as operator we have two or three interesting developments in the pipeline that will ideally be on-stream in the next three to four years. The shallow area at Block 2 has been delayed but is also on budget. In Cabinda North with ENI we confirmed some reserves which would be interesting for a junior company, but not on the level for a major. A 200 million barrel STOOIP reserves field is a good asset, but the actual cost of drilling and operating makes development of this onshore size asset not possible in Angola.
How do you view the climate for smaller operators in Angola’s oil and gas industry?
The bigger international companies are able to reduce costs by sending people home, while they keep the local staff here. For local companies, the climate is challenging due to the costs involved. For example, last week Acrep was invited to the agency data room for onshore blocks. Ideally this was supposed to attract juniors or small to medium-sized international companies. However, the minimum entry fee to acquire data is US$1 million, whereas Nigeria is asking US$50,000 for similar data. Angola lacks reserves, banks are not open to financings, and the big majors are not going to spend on capex for new projects in the coming years. Onshore holds potential, but this potential will not be realized with such a high entry point, and the approach needs to be changed. Instead of relying on old and expensive data, the smaller companies should be allowed the time and access to look for new discoveries.
Which measures do you think the government should focus on to help revive Angola’s onshore oil production?
Onshore must be a new open book where exploration has to be stimulated and promoted. For a start, the data should be quasi-free for onshore. Secondly, there should not be imposed programs, instead Angola should follow the model made successful by countries such as Timor-Leste and Namibia where recognized companies are allowed to apply for exploration licenses in a wider variety of locations and create their own data. The high costs in Angola are also a major issue. For example, Acrep has participated on the drilling of three shallow wells in Cabinda in the last three years at a total cost of US$90 million. US$30 million per well is not sustainable for onshore exploration with the oil prices we have seen since 2015. Considering the economic constraints brought on by the pandemic, if a company is willing to bring a drill rig to explore, it should be encouraged to do so, as many of these areas which have been closed for 45 years can be revisited successfully.
Where would you like to see Acrep E&P in the next two years, what would you like to achieve in that timeline?
Progress at Block 1/14 is important for Acrep, and we look forward to developing this with our partners. We would like to be more involved onshore, but governmental reforms need be made to make it more attractive for all operators. We also intend to sell some assets to focus and fund the higher potential projects and increase profit margins.
Acrep Angola E&P intends to list on the Angola Stock Exchange and Derivatives in the next two years to help raise the profile of the company. We have been participated in 16 exploration wells with a 45% success rate, which is high in the industry, and for over 15 years, we have been a trusted partner to international and local oil companies. Despite challenges brought on by the oil crash and then the pandemic, we are still here and have valuable local knowledge and experience.