Sonangol Puts Ex-Cobalt Blocks on Sale

Angola’s producer Sonangol CEO Carlos Saturnino has put up its 70% stake in blocks 21/09 and 20/11 for sale. The controversial assets, once operated by US independent Cobalt, are located in the country’s offshore Kwanza basin.

The blocks hold major undeveloped oil fields and also significant gas reserves. Angola is mulling -- but has yet to adopt -- a new tax regime that would make development of the gas economic. BP now holds the other 30% in both blocks.

Announcing its plan at a press briefing February 28, Saturnino said that Sonangol’s aim is to slash its debt and gradually recover from the fall in oil prices since 2014. He invited potential bidders to analyse the data on the blocks and said his goal is have a smaller and more agile Sonangol, adding that it also plans to sell some on its stakes in local banks.

Sonangol agreed in December 2017 to buy Cobalt’s 40% operating interests in both blocks for $500mn. A previous Sonangol CEO in August 2016 cancelled a $1.75bn deal with Cobalt to buy its stakes, triggering a bruising dispute between the two financially-strapped firms that eventually forced Texas-based Cobalt to seek protection from bankruptcy. A Texan bankruptcy court approved Cobalt's $500mn deal on January 26 2018, which ended the dispute, and thus Sonangol’s existing 30% stakes increased to 70%.

In mid-2016, Sonangol announced a major gas find on block 20/11 called Zalophus, with 2.8 trillion ft³ gas and 313mn bbls condensate in place, totalling 813mn boe.

But in 2017 BP relinquished its 50% stake in another gas-rich Angolan block (24/11) and announced a $750mn writedown of its interests there, because of the lack of any regime enabling licensees to sell the gas. At the time Sonangol was chaired by Isabel dos Santos. Shortly after her father stepped down as Angolan President in 2017, she was sacked and new managers were appointed at Sonangol who indicated they might consider incentives for gas. Analysts say, if these were to be approved, it could lead to potential floating LNG projects in Angola being tabled by foreign oil producers active offshore Angola.