Brazil: Angola 2019-2025 New Concession Award Strategy

Last Updated: 2 April 2019
Article by Gonçalo Falcão
Most Read Contributor in Brazil, September 2019

With the aim of increasing oil and gas production in Angola, a new Concession Award Strategy for the 2019-2025 period has been approved by Presidential Decree 52/19, of February 18th.

The general goals of the new strategy are:

  1. Expand geological knowledge of Angola and its petroleum potential;
  2. Increase hydrocarbons discoveries;
  3. Increase competition within the industry and encourage a fair return on investments;
  4. Promote direct foreign investment in the Angolan petroleum industry in order to expand local  know-how and international governance practices;
  5. Promote natural gas exploration through the inclusion of dedicated minimum work obligations when awarding new areas.

Concessions may be awarded under the following three methods:

I. Public Tender:

  • Sonangol to associate with third parties to perform operation within a given area;
  • The Concession is granted by Decree;
  • The Concession contract will take the form of: (i) incorporated joint venture, (ii) unincorporated joint venture or (iii) production sharing agreement;
  • Sonangol must  have a minimum participating interest of 20%;  
  • Sonangol interest must be carried up to a maximum of 20%;

During 2019, the following blocks will be awarded through public tender:

Namibe Basin: Blocks 11, 12, 13, 27, 28, 29, 41, 42 and 43

Benguela Basin: Block 10

During 2020, the following blocks will be awarded through public tender:

Congo Basin: CON1, CON5, CON6

Cuanza Basin: KON5, KON6, KON8, KON9, KON17, KON20

During 2023, the following blocks will be awarded through public tender:

Congo Basin: CON2, CON3, CON7, CON8

Cuanza Basin: KON1, KON3, KON7, KON10, KON13, KON14, KON15, KON 19

II. Limited Public Tender

The tender process is accessible to companies meeting the criteria specified in the Decree and applies to special areas, most notably areas abandoned or relinquished by Sonangol.

During 2021, the following offshore blocks will be awarded through limited public tender:

Blocks 7, 8, 9, 16, 33, 34 and free areas within Blocks 31 and 32

During 2025, the following offshore blocks will be awarded through limited public tender:

Blocks 22, 24, 25, 26, 35, 36, 37, 38, 39 and 40

III. Direct Award

In this case, Sonangol will directly hire (through risk service agreements) selected contractors to explore certain concessions.

During the first half of 2019, direct negotiations of the following blocks should be concluded:

Blocks 6, 30, 44, 45, 46 and 47

Exploring new frontiers

One of the pillars of new strategy is the study of several unexplored regions within the country through new seismic acquisition campaigns (preferably of a multi-client type). The areas surveyed will be the Etosha, Okavango and Cassange interior basins, as well as onshore and offshore areas of the Namibe Basin. The interior basins outlined above will be divided into blocks by 2022 and offered for bid in 2023. Simultaneously, all pre-salt blocks returned to the State following the 2012 campaign should be thoroughly re-evaluated in order to be offered in 2025. Finally, additional data will be acquired from productive areas within the Congo basin in order to assess remaining exploration potential in areas close to existing production facilities.

The new Angola National Agency for Petroleum, Gas and Biofuels

On December 28, 2018, President  João Manuel Gonçalves Lourenço enacted Decree No. 49/2019 ("Decree"), published in the Official Gazette on February, 6, 2019, creating the National Agency for Petroleum, Gas and Biofuels ("ANPG" or "Agency") in Angola. The Decree approves the by-laws of the agency, reorganizing the hydrocarbons sector in the country, which was previously administered by SONANGOL, the Angolan Concessionaire for Oil & Gas Exploration and Production Activities. The creation of the ANPG has the practical result of extracting from SONANGOL its regulatory role, turning it into a "pure" E&P company no longer tied into a dual regulatory and operational role. This is a model successfully adopted by other countries, having the merits of concentrating into an independent State-owned agency the strategic role of managing the petroleum sector without being directly involved in operations. Having an entity properly staffed and fully dedicated to regulatory functions should increase efficiency, improve responsiveness and contribute to a better business environment within the Angola petroleum sector.

The Decree establishes that SONANGOL and ANPG must assess the human resources and assets owned by SONANGOL for the correct allocation between them. In order to assure contractual stability, it also recognizes the rights and obligations arising from previous contracts executed by SONANGOL.

The statute also establishes the responsibilities of the Agency, such as the implementation of necessary actions for the procurement and management of oil and gas contracts, as well as formulation of the government's public policy. The Agency is also responsible for monitoring technical and technological development in order to adjust the legislation accordingly and to promote and stimulate investments in the oil, gas and biofuels sector.

According to the statute, ANPG has generic powers to: (i)  implement national petroleum policy; (ii) coordinate with other regulators on matters of common interest; (iii) propose plans and programs for the revaluation of reserves and exploration of hydrocarbon resources in the country; (iv) promote studies for block delimitation procedure; (v) promote concession bids; (vi) execute the respective contracts; and (vii) stimulate the research and adoption of new technologies focused on the oil market.

Furthermore, the Decree also grants a series of specific powers to the Agency, including:

(a) establishing the rules on the planning of reservoirs and exploration in the country;

(b) regulating and executing the block delimitation procedure for the purpose of granting the activities of research, exploration and production;

(c) establishing the rules for the execution of the geology and geophysics services applied to oil exploration, aiming at the creation of a seismic survey for commercialization on a non-exclusive basis;

(d) establishing the procedures for the declaration of public utility for the purpose of expropriation and institution of administrative easement of the necessary exploration areas for the development of oil, gas and biofuel production, pipelines, terminals, as well as monitoring compliance

(e) creating the regulatory framework, including authorizing the provision of transportation and storage services;

(f) proposing the development of codes of conduct and manuals of good practices for  the entities subject to its jurisdiction;

(g) submitting proposals for legal documents;

(h) appraising and proposing general and special conditions for the performance of petroleum operations that are outside the scope of its authority;

(i) developing actions to support and foster programs for staff training, research and publication of studies;

(j) identifying and disseminating the best international practices, referencing universal or regional standards related to the oil sector as well as studying their applicability in the national market;

(k) promoting data surveys and concession bids;

(l) negotiating and executing contracts;

(m) issuing an opinion on the transfer to third parties of quotas or shares that represent more than 50% of the capital stock of an associate of the national concessionaire;

(n) verifying the declared reservoirs of associates (i.e., participating interest holders);

(o) assessing the reports and other management instruments submitted by concession operators;

(p) auditing the activity of the operators in order to evaluate the risks and verify technical, financial, legal and accounting regularity;

(q) performing the necessary acts to address audits exceptions;

(r) monitoring all activities carried out under hydrocarbon research and production contracts;

(s) informing the relevant entities of illegal acts that do not fall within the scope of its powers, in order to enable the appropriate punitive procedures;

(t) promoting the adoption of precautionary measures necessary to avoid severe or irreparable damages; and

(u) fielding complaints by competitors, service providers and the general public and referring them to the authorized entity.

The management of the Agency is composed of a president, a board of directors, a fiscal council and a technical council, whose powers are defined in the Statute.

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© Copyright 2019. Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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