The coronavirus pandemic is expected to provide an avenue for Angola’s development of local content, which has been going on in the country for years. It is also believed that if the pandemic goes on for a longer period and the country is expected to cut its workforce, its years of experience in the upstream division of oil and gas value chain provides local and less expensive industry experts who can replace foreign labour in important roles.
Angola is seen as one of the countries not to be severely hit by the effects of the pandemic, as the international Monetary Fund (IMF) predicted that it would face a -1.4% economic recession. However, the APPO member country is faced with the same challenges as its other oil-producing counterparts on the continent. Travel restrictions, total lockdown of countries, uncertainty as to the end of the pandemic, drop in global demand and other factors have been the effects of these sad times on the African oil market.
The country is unfortunately hit by the crisis at a time when the continent’s second biggest oil producer was hoping on bigger oil revenues to fund economic diversification efforts. The President of Angola, João Lourenço, has been undertaking an overhaul of the regulatory framework in the oil and gas industry. Petroleum production tax was cut from 20% to 10%, while petroleum income tax was reduced from 50% to 25%.
In a webinar organized on Monday, 18th May, by the African Energy Chamber on Angola, participants including: Adilson Paulo, County General Manager for DOF Subsea, Fredrico Martins Correia, Oil and Gas partner at Deloitte, Fredrico Costa, Chief Financial Officer for TechniFMC in Angola and Sergio Pugliese, President for Angola at the African Energy Chamber, predicted that it would take about two years for Angola to recover from the current crisis. However, the country’s outlook post 2021 is promising.
According to participants in the webinar, one of the ways to recover from the economic crisis faced by Angola is for “the government to ease restrictions on visas and cut red tape, and follow its Common-sense Energy Agenda and its Advisory Guidelines on the Safety and Management of Oil Workers.”
The webinar also cited some of the highlights of the local content developments and identified some challenges, citing Nigeria as a case study. An excerpt from (energychamber.org) read:
“More importantly perhaps, the downturn gives an opportunity to develop local players in the exploitation of marginal discoveries. While Angola has been relatively successful in building a local services and fabrication industry through joint-ventures and partnerships with foreign companies, it has so far failed to give birth to the kind of local E&P players one can see in Nigeria for instance. Amongst the several decrees signed by President João Lourenço since he arrived in power is Decree 6/18 of May 18th, 2018 on the development of marginal fields.”
Supporting local content development looks to be the new solution for African countries to generate more revenue from their oil and gas activities. Angola has been doing this for a while. The Nigerian government has also been working on modular refineries to support the private sector in refining of crude. The projections and predictions of participants in the webinar are based on available data on ground. Other unforeseen factors may speed up the economic recovery of Angola or slow it down.
