Energy Capital & Power spoke with Frederico Martins Correia, Associate Partner, Energy, Resources & Industrials at Deloitte, about how the professional services firm is supporting Angola’s economic rebound following rising barrel prices.
WHAT IS YOUR ASSESSMENT OF ANGOLA’S ENERGY MARKET IN COMPARISON WITH OTHER SUB-SAHARAN AFRICAN MARKETS?
Angola is currently the second-largest oil producer on the continent. As a result, the COVID-19 pandemic has had a profound impact on Angola’s state budget if we compare it to other countries in the region. Oil prices faced a significant decline during the first phase of COVID-19, a challenging period that led to the closure of all markets within the energy industry with no exceptions. The production cuts implemented by OPEC and OPEC+ brought the oil price to $75 per barrel. Considering this global vision, I would estimate that Angola could count on a positive gap in the public budget for one to two more years, as the state budget has been planned based on an oil price of around $35-40. There is a positive gap that must be leveraged by our government to invest in developing public infrastructures. The outlook for Angola is positive and it is currently one of the best markets to invest in the sub-Saharan African Region.
THE ANGOLAN GOVERNMENT ANNOUNCED SEVERAL TAX INCENTIVES PACKAGES TO ATTRACT MORE INVESTMENT WITHIN THE ENERGY SECTOR. HOW EFFECTIVE WILL THOSE INCENTIVES BE FOR CURRENT AND FUTURE INVESTORS?
What we are seeing in the oil and gas industry is that the international oil companies (IOCs) seem to be willing and pleased to maintain their current operations, or even reinforce their investments. Some IOCs are launching new research and development projects, which is a positive sign when it comes to the oil and gas reserves levels. Onshore licenses issued seem to be attractive, as shown in the bid results published by the National Agency of Oil, Gas and Biofuels in July 2021, and that is another positive sign for this industry both in Angola and on the continent.
Angola has a relevant footprint in natural resources with capacity to generate power through water, wind and solar power plants, which enables a fair energy production mix between fossil fuel and renewable sources. Moreover, Angola has consistent gas reserves and the associated gas that was flared in the past is now being piped to the Angola LNG plant in Soyo. This achievement has contributed to decarbonizing the national upstream sector, and today, Angola’s upstream carbon footprint is considerably lower than the global average rate.
In addition, the installed capacity of power generation in Angola should turn to five to six gigawatts in the next five to ten years, with a ratio of 75-80% of the total installed capacity pending in renewable sources, which is a very good indicator of the country’s energy transition strategy and capacity.
HOW DO YOU SEE DELOITTE’S OPERATIONS IN ANGOLA EVOLVING IN THE NEXT FIVE TO TEN YEARS?
First, we hope the revamp of the oil and gas industry remains within this decade. Next, investments in infrastructure and health should be reinforced to enable better conditions for society. Also, investing in renewables will enable greater power generation capacity and a more effective transmission and distribution system within the country, in turn yielding a positive impact on agriculture and manufacturing industries, which could establish an integrated value chain. One of the key challenges across Africa is that we have gaps within the value chains. Angola needs to support a more integrated vision that encompasses power sustainability, agriculture and manufacturing to foster a robust commercial purpose to society.
This will enable a significant boost to employment and the creation of wealth. Deloitte will maintain its operations in Angola: we currently have 350 people working in the country covering complex fields of professional services including audit, consulting, tax and business process operations. We are serving all of the key sectors, namely, oil and gas, power and utilities, banking, health and the public sector. Our aim is to preserve the Deloitte footprint in Angola, keep our operations as a reference on the continent, and continue serving the region in cooperation with our colleagues in South Africa, the Democratic Republic of the Congo, Congo, Gabon and Benin.