Sonangol Accelerates Divestment and Explores Novel Financing Solutions in Response to Energy Transition

Angola’s National Oil Company (NOC) Sonangol has responded to the changing global financial landscape by accelerating its restructuring program and exploring new financial solutions that meet the requirements of today’s international debt market. Today’s market is significantly impacted by considerations about energy transition, which has become a defining factor for most major oil and gas sector lenders.

As the international community seeks consensus about how to drive energy transition globally, major international banks – including many that are prominently involved in the financing of oil and gas projects – have responded by entering into several agreements, committing to solely finance projects that will attain net-zero emissions between 2030 and 2050. One such agreement is the United Nation’s backed Net-Zero Banking Alliance which represents some of the world’s largest banks from 27 countries with assets of more than $37 trillion. The Net-Zero Banking Alliance requires its members to curtail lending to the oil and gas sector within the next 36 months, ultimately restricting access to finance for companies like Sonangol.

Financing challenges are not unique to Sonangol, especially as the entire sector emerges from a post COVID-19 slump in 2020 which saw demand and oil prices reach historic lows, including dropping below $20/barrel in April 2020. In the U.S. for example, over 107 oil and gas companies filed for bankruptcy, requiring the courts to oversee debt restructuring totaling $98 billion under Chapter 11 bankruptcy rules.

Restructuring for the future

Under the leadership of its Chairman and CEO, industry veteran Mr. Sebastião Gaspar Martins, Sonangol has accelerated its divestment program which it is hoped, will bring in billions of dollars in much needed financing through the sale of non-core assets. Revenue from the sale is expected to strengthen the balance sheet of a much leaner and focused exploration and production entity. Over 70 shareholdings held by sonangol in companies across the world, including in real estate, oil and gas services, financial services, tourism, logistics, telecommunications, aviation and some operating blocks are up for sale.

The vision for a ‘Sonangol of the future’, as set forth by the leadership of the company, is one that will refocus its efforts on running together with its international partners and current operating assets in the most efficient manner possible, while at the same time investing in new exploration projects onshore and in Angola’s traditionally prolific offshore basins.

Sonangol’s restructuring also includes growing investments in the production of renewable energy. Together with oil majors ENI and TotalEnergies, the Angolan NOC has embarked on solar energy projects expected to come online in 2022, with an initial output target of over 60MW. Initial studies to access the potential of Green Hydrogen production in Angola is also underway.

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Source: PetroleumAfrica

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