Sonangol’s New Dawn

The core question over the future of Angolan oil is answered. João Lourenço is not sitting idle while the descendants of former president José Eduardo dos Santos rule over the country’s most profitable and important institutions. The take down on Sonangol’s board of directors and, specifically, Isabel dos Santos, which was ousted from the company last week, marks João Lourenço’s decisive statement that he is now truly the president of Angola, and not a puppet of the previous administration.

If his supporters expected effective action from the new president, most were certainly surprised by how quickly he acted to regain control over the country’s most important companies. Only 50 days into office and he did away with Isabel dos Santos and three other top executive administrators at the national oil company.

He also suspended a contract between Angola’s national television, TPA, for the management of its second channel with Semba Comunicações, a media company controlled by Welwitshea dos Santos and José Paulino dos Santos, two other of the former president’s sons. While José Filomeno dos Santos remains at the helm of Angola’s sovereign fund, the new president has suspended a contract with Bromangol, a company that had a monopoly on food lab analyses in Angola, which has ties to José Filomeno. Demands for Filomeno to resign are coming from several corners of society, but the feeling is that it is up to the president now.

Goodbye to the old

Family feuds aside, however, this is an important moment for Sonangol – the company that has sustained the Angolan state since independence and built a reputation for being one of the most technically capable and competent national oil companies (NOCs) across the continent. But that reached a breaking point in 2015, when it verged on bankruptcy.

Years of rentier-like behavior by the Angolan leadership, rewarding party cronies with high positions at the helm of the oil company and its many subsidiaries, endangered the very core of the company’s activities.

This summer, Isabel dos Santos gloated about the successful financial results she had achieved as president of the company since June 2016. According to her, the fact that the earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 36 percent over the 12-month period was a demonstration of the fundamental reforms she had undertaken at the helm of the company. She preferred not to focus on the fact that despite that, the company’s profits fell by 72 percent.

The two previous administrations of Sonangol, first led by former vice-president Manuel Vicente and then by his right arm Francisco de Lemos, had left the company in a crisis. Isabel dos Santos’ rise to the top, with her credentials as the most successful business woman in Africa, created a lot of expectations for reform, which never materialized. There was cosmetic change, rather than action to address the fundamental issues, arguably because the leadership lacked the technical knowledge that had once made Sonangol a company respected across the industry. Above all, the dos Santos daughter forgot the company’s position as regulator of the oil industry. Left and right, oil operators complained about delayed licensing and project approval. Without those, companies were unable to invest in exploration and production.

Sonangol itself walked out of its exploratory efforts. In 2014, the company had drilled 27 wells; in 2015 it drilled 7; and in 2016 it had drilled no more than three wells. Seismic acquisition saw similar developments. Without exploration there are no discoveries, and reserves deplete rapidly. It is hard to overestimate the consequences of this strategy for the sustainability of the Angolan oil industry, the life blood of the country’s economy.

The situation became so dire that, just this October, the oil operators in the country held direct meetings with president João Lourenço. Never in 40 years of oil industry history had that been necessary. Sonangol was always responsive to the needs of its partners. On October 6th, BP Angola, Cabinda Gulf Oil Company (Chevron), Eni Angola, Esso Angola, Statoil Angola, and Total E&P met at the presidential palace. Six days later, a working group led by Diamantino Azevedo, recently-appointed Minister of Petroleum, was formed to design, within 30 days, a strategy to answer the needs of the companies.

New beginnings

Now, with the appointment of Carlos Saturnino, the former president of Sonangol’s exploration and production unit, to president of the board of directors, there could be hope for a return to the company’s old ways. Isabel dos Santos fired him in 2016.

Saturnino has led Sonangol’s contract negotiations for over 10 years, is an experienced negotiator and knows the ins and outs of the company like few. He is well known by all the industry’s players and is well placed to rebuild relationships of trust with them.

In a way, the 18 months Isabel dos Santos spent at the helm of the company seem lost in her own flair, trying to highlight her managerial skills rather than making the company work, and alienating many people in the meantime.

Now, the brighter future of Sonangol seems to lie in its past, in the technical ability, in the tough and well-informed contract negotiations, in the separation of the political power form its management decisions. Hopefully, Saturnino will represent that return to a knowledge based administration that the company so desperately needs and Lourenço will allow him and his team to do their job without interference, as it was at the time when Sonangol was known around the world as an island of competence in an otherwise chaotic economy.

We will wait to see, but the story seems to be painting a brighter picture for Angola’s future, with the end of political control over the company’s administration.

Isabel dos Santos has been using her Instagram account to post quotes from CEOs of major oil companies apparently supporting her work in the NOC. It seems a bit out of place. The general understanding is that the richest woman in Africa was left fragile when her father stepped down from the presidency and that her business prowess was due more to her father’s contacts than her skills.

Hopefully this will bode well for Sonangol, and for the Angolan oil industry, the beating heart of a nation in dire need of a transfusion.

NJ Ayuk JD/MBA is a leading energy lawyer and a strong advocate for African entrepreneurs, he is recognized as one of the foremost figures in African business today. A Global Shaper with the World Economic Forum, one of Forbes’ Top 10 Most Influential Men in Africa in 2015, and a well-known dealmaker in the petroleum and power sectors. He is the founder and CEO of Centurion Law Group.

 

João Gaspar Marques is an Energy analyst and a seasoned Africa specialist with in-the-field reporting experience from Africa’s petroleum hotspots.

Share
This entry was posted in Angola News, Main and tagged , , . Bookmark the permalink.

Comments are closed.