On Its Own Soil

The country’s largest private oil firm, SOMOIL CEO Nelson Pacavira spoke to Africa Energy Series – Angola, about how SOMOIL accounts for a small percentage of Angola’s total production through its stakes in Blocks FS and FST.

How has SOMOIL adapted its strategy to the current market conditions?

The sudden drop in crude oil prices in 2014 caused considerable losses in overall revenues for most oil and gas companies, including SOMOIL. It demanded a review of strategy – not only to overcome the crisis, but also to survive in the mid- to long-term. Therefore, given the change in global oil and gas market conditions, the main shareholders of the company decided to start a process of a phased restructuring and redefinition of the company’s overall strategy.

In 2016, the strategy was focused on our exploration and production segment, aiming to not only improve its profitability through increased production but also to reinforce its position in the local market by acquiring more valuable assets. With the new strategy approved, new strategic objectives were also defined and the top priorities of the company were increasing reserves and crude oil production, significantly reducing the operating costs and developing local competencies to mitigate the excessive dependence on foreign manpower and services. To meet these objectives in the short- and mid-term, a five-year business plan was generated and approved, with implementation at the beginning of 2018. SOMOIL’s primary objectives for the rest of 2019 and 2020, are to arrest production decline, ensure asset integrity, reduce operability cost and increase productivity while ensuring safe operations.

As part of the approved five-year plan, the last year was dedicated to adjusting the organizational structure of SOMOIL, by reinforcing the upstream part of the business with more qualified personnel and contracting more reliable and qualified services. Also, we are identifying new development opportunities within Blocks FS and FST following new seismic acquisition and interpretation, optimizing production performance by executing minor good workovers and improving facilities efficiency on Blocks FS and FST, and keeping Block 2-05 operational while seeking for partners and concessionaire approval for a full block re-development plan.

What is the capacity of national oil companies (NOCs) in Angola and Africa to contribute to economic growth and nation-building?

The capacity of NOCs in Angola is still very limited, mainly because of the very limited access to foreign capital to buy and pay for high-quality services. Nevertheless, the potential in Angola is significant, especially with the government’s new approach to the sector that is highly advantageous for the rest of the continent but also considers the specificities of each country in Africa. NOCs should begin to position and expand themselves as more holistic energy companies, maintain a measure presented in the renewable energy sector as SOMOIL has started in solar energy.

IOCs should have a limited but fixed and reserve percentage farm-in option for NOCs with an option for financial carry through the exploration phase. This will facilitate growth and ensure knowledge transfer which, in general, instills a very high demand in NOCs, especially in Africa.