Angola's state-owned Sonangol plans to adapt to the global energy transition by diversifying its business model to include gas, renewables, biofuels and green hydrogen. But it said it will need make significant investments in crude and natural gas to reverse a steady production decline.
"Sonangol is not against the energy transition," said the firm's executive director Osvaldo Inacio. "We believe it is needed, but it has to be balanced." He said Africa must define for itself what the transition means, and for Angola this will involve monetising its vast resources.
"Introducing renewables into the energy matrix will bring many developmental benefits," Inacio said. "But renewables will not completely replace fossil fuels — rather, a balance must be found whereby the share of fossil fuels is gradually decreased."
Angola's crude exports have been at or near record lows this year, and it was unable to raise its production in line with its Opec+ quota in August according to Argus calculations. Its fields have been in long-term decline, and last year's collapse in oil prices led to delays in the investment and drilling that are vital to offset this process.
Alongside crude and gas investments, Sonangol will invest around $22mn in renewable energy projects this year. It plans by 2027 to have installed 385MW of photovoltaic energy, including three on-grid projects in the south of the country.
At Quilemba, in the province of Huila, Sonangol will develop a 100MW solar plant with TotalEnergies, while at Caraculo, in Namibe, it plans a 50MW solar plant with Italy's Eni. These projects will take 6-12 months to develop and 12 months to construct. In the Cuando-Cubango province, a 40MW solar plant will be installed in two phases, with 20MW completed by 2024 and the rest added by 2027.
Sonangol also plans eight off-grid hybrid projects where solar units are combined with diesel-operated power plants to reduce their diesel usage. The firm said 235MW of solar in overall capacity of 514 GWh/yr will save 128mn l of diesel and avoid 385mn t/yr of CO2 equivalent.
Sonangol will also examine how it can expand in biofuels and green hydrogen produced using renewable energy sources.
Inacio said the firm wants to increase its 20pc stake in the Biocom-managed biofuels plant at Cacuso, in Malanje province. At full capacity the plant will produce 136GWh.
In green hydrogen it has signed an early contract with German engineering group Gauff to develop, finance, build and operate a plant in the country.
But the firm's head of exploration and production Ricardo Van-Deste said oil and gas will continue to play a critical role. The firm will be one of Angola's largest investors in these sectors in the 2022-25 period, he said, in pursuit of an aim to increase output as an operator to a minimum of 10pc of total national oil production. Sonangol has a participating interest in more than 30 assets that will require a high level of investment that, he said, is becoming increasingly difficult.
So Sonangol is evaluating its entire portfolio in a process Van-Deste called "divesting in order to invest." He said the aim is to cut Sonangol's participating interest to 30pc across the board.
The firm wants to increase revenue by investing in assets with low costs and high returns, with priority given to operated blocks, he said, adding that Sonangol is seeking to cut operating costs by 5pc/bl each year with the aim of lowering this to $15/bl within 10 years.
It plans to cut risk by limiting exploration ventures and sharing risk with new stakeholders, and curbing financial exposure by avoiding capital-intensive development projects. It wants to drill 21 exploration wells, with the aim of increasing its average reserves-to-production ratio to seven years or more from six years currently, Inacio said.
Sonangol is further evaluating and implementing options for the monetisation of natural gas.
