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Sonangol Operations & Background.

Sonangol began operations in 1976, one year after Angola gained independence from Portugal. It is the sole concessionaire for liquid and gaseous petroleum E&P onshore and on the country's continental shelf. It is the only entiry offering and awarding E&P blocks in the country as well as controls the operations of foreign E&P companies in Angola.

Created through the nationalisation of the Portuguese firm ANGOL, Sonangol's activities include E&P, sales, transportation, oil refining and fuel retailing. These activities are performed autonomously or in partnership with IOCs, which include Agip (ENI), Ajoco (Japan), Braspetro, BP, Chevron, Daewoo, ExxonMobil, StatoilHydro, Marathon, Neste Oil, Petrogal, Repsol/YPG, Shell, Sinopec, Svenska, Teikoku and Total. These are some of Sonangol's main partners. The main oil producers among these firms include Chevron, ExxonMobil, Total and BP.

Sonangol produces 62,000 b/d from onshore fields, including Jimbao which went on stream in early 2008. The latter field's output will be more than doubled eventually. Sonangol says it is working to become a leader in the international market and in particular, the African market, as well as fulfill a dual role as both an integrated and competitive company. It is engaged in the communities in which it operates and provides health, safety and environmental improvement services.

Marking the firm's 33rd anniversary, Songangol CEO Manuel Vicente on Feb. 25 told reporters the company's net profits in 2008 were up 30% on 2007 to $2.9 bn, but said the global financial crisis would likely delay moves for a listing on stock exchanges overseas. Sonangol had previously expressed interest in listing on exchanges in Johannesburg, New York and a planned Angolan exchange. He said Sonangol was to continue with its investments in the petrochemical industry, increase its storage capacity and sales of fuels in the country.

Vicente said Sonangol aimed to expand beyond banking, and could raise its 10% stake in Portuguese bank Millenium Bcp, as well as boosting its investments in the Portuguese real estate sector. Despite the world financial crisis, Vicente said his firm still had the capacity to continue with the investments it had planned, including construction of the Lobito oil refinery, in Benguela province.

He said discussions were under way about a third refinery in the northern oil town of Soyo, adding: "We are inviting private investors for this project". China, which pulled out of the Lobito project, has shown some interest. Sonangol has 45% in Amorim Energia, which controls 33.3% of Portuguese oil firm Galp Energia.

Sonangol is oriented towards the following activities:

The diversification of its operations and assets in order to reduce its dependence on oil price fluctuations.

The development of refining, crude oil sales and derivative distribution as competitive businesses.

The creation of Angola LNG (ALNG) in partnership with Chevron and other IOCs and the development of a petrochemicals business.

The generation of options for re-positioning of Sonangol's business support areas.

Sonangol is a corporation with several units. As it expanded, its Administration Council determined in recent years that it was necessary for a new visual brand to give a cohesive and unified image for the entire Group.

Thus, in November 2004 a redesigned logo was introduced as its visual identity. The new brand preserved the same colours of the original, but it was modernised. All corporate stationery as well as some assets such as fuel tanks, airplanes, helicopters and storage tanks already display the new visual identity.

Since October 2003, downtown Luanda has seen the beginnings of Sonangol's new HQ. Construction began in late 2004 and continued through the recent weeks. This will have a modern architecture and will integrate amenities such as parking garage and restaurants. The new HQ will be the working place for Sonangol Holding's employees as well as employees of some subsidiaries.

History: From the nationalisation of ANGOL in 1976, two companies were formed: Sonangol UEE and Direccao Nacional de Petroleos. ANGOL Sociedade de Lubrificantes e Combustiveis Sarl, which was founded in 1953 as a unit of the Portuguese company SACOR, marketed and distributed fuels, lubricants and LPG in Angola.

Decree 52/76 instituted Sonangol as a state-owned company whose mission was the management of hydrocarbon resource E&P in Angola. Despite having the government as the sole shareholder, it says, "Sonangol has always been governed as a private company and is under strict performance standards to ensure efficiency and productivity".

After the incorporation of Sonangol, a management committee was established to create the necessary infrastructures for the company to start developing its business. The management committee was later converted into a board of directors.

In the aftermath of independence several oil firms abandoned Angola for one reason or another, leaving behind infrastructures and former employees. Sonangol bought the premises of Texaco, Fina and Shell and through an agreement acquired those of Mobil. Sonangol absorbed former employees of oil companies which once operated in Angola. The following is a chronology of the main events:

Lack of qualified nationals for the oil industry forced Sonangol to concentrate on the training and professional development of its employees. The first group of students was sent to Italy with scholarships co-aided by ENI. A larger group later went to Algeria.

The first sponsored students graduated and returned to Angola by the end of 1970s. They became the driving force behind a more modern Sonangol. Focusing on diversifying its activities, Sonangol has developed JVs and set up companies to promote the social development of Angola and the expansion of the group. More than 30 units and JVs are now part of Sonangol group.

With a mixed economic status, Sonangol has expanded into other activities and today is self-sufficient in many things. With headquarters in Luanda, Sonangol has representations in the whole country. Overseas the company has offices in Brazzaville, Congo; Hong Kong, China; Houston, USA; London, England; and Singapore.

In 2006 having celebrated its 30th anniversary, Sonangol has built a solid reputation in the oil industry in Angola and abroad. This resulted from close relationships with the oil companies which operated, or which have interests and investments, in Angola. During three decades Sonangol has expanded into a group of integrated companies and in the process became Angola's leading distributor of refined products and promoter of social and human resources development.

All companies of Sonangol group are independent business units with their own management structure. They report to the Administration Council. Sonangol's E&P unit encompasses all activities related to oil and gas E&P. Downstream units include refining, marketing, distribution and shipping companies. Whenever required, Sonangol Holding provides its subsidiaries with financial, manpower administration and service resources for support.

The Administration Council is the primary decision-making body in matters of overall strategy and the authorisation for investment expenditures for the Group. It is the Administration Council which determines corporate strategies regarding performance, rentability and international expansion of Group Sonangol.

Angola's crude oil marketing and/or trading is the core activity of Sonangol's units in London, Houston and Singapore.

The grease and lubricants of the group's brand NGOL are produced and marketed by Sonangol Distribuidora. This unit also retails propane tanks, heating appliances and car care products. Sonangol's SonAir provided air transport to the oil industry through a fleet of planes and helicopters. SonAir also offers destinations to some countries in Africa and a direct passenger and cargo flight to Houston. Marine transport is divided into two units: Sonangol Shipping which carries crude oil, and Sonaship which transports petroleum products and provides refuelling services to vessels in Angola's ports or within its maritime shoreline.

Telecommunication services for Sonangol group are carried out by MSTelcom which has three types of communication: radio transmission, microwave telecommunications and national and international satellite VSAT communications. Essa provides professional training related to work safety in the oil industry. Sonangol has most of its insurance, risk management and retirement funds consolidated in a subsidiary AAA - Financial Services: Financeiros. SonAsia, set up in early 2004 in Singapore, sells Angola's crudes to the Asian continent. AAA was established in January 2001 with HQ in Luanda. Its activity is risk management for the oil industry, insurance brokerage and pension fund management.

Sonangol Congo was set up in 1998 with HQ in Kinshasa. Its focus is on fuel marketing, storage, transport and imports. Since 1997 Sonangol has been a shareholder in Empresa Nacional de Combustiveis, SARL (ENACOL) in Cape Verde marketing fuels and providing related services. China Sonangol Int'l Holding was set up in mid-2004 and has its HQ in Hong Kong for oil and gas E&P. Sonangol is shareholder in Banco Africano de Investimentos (BAI) and Banco do Comercio e Industria (BCI). BAI is as full service bank. BCI was recently privatised (see omt9-AngolaFeb26-07).

Petroleum Minister Botelho de Vasconcelos on Feb. 12, 2009, said construction of the Lobito refinery, costing the state $8 bn, was part of a strategy to re-launch the economy over the next few years. He was speaking in Lobito at a meeting where the project's co-ordinators presented the venture's details. He said the project would bring an end to imports of fuels, noting: "Angola currently imports 70% of fuel and other derivatives, and with the refinery in operation this would no longer be done".

The refinery would initially process 150,000 b/d of crude oil. In the second phase the plant will run at 200,000 b/d. Work on the refinery, which began in January, was expected to take 40 months. The refinery is being built some 10 km north of the city of Lobito and the project management consultant (PMC is Kellogg, Brown & Root (KBR) of the US.

In Luanda, Sonangol on Feb. 13 pledged to normalise the system of supply of fuels which had been facing constraints since Feb. 8. It said: "For operational reasons, the supply to fuel stations of Luanda has not been going in a satisfactory manner, which has been contributing to the great crowding of vehicles at those places".

Speaking at a press conference on the occasion of Sonangol's 33rd anniversary, the NOC's Board Chairman Manuel Vicente on Feb. 25 said Sonangol will continue with its planned investments in the petrochemical industry and build up its capacity to store and sell fuels in the country. He said Sonangol had recorded a growth of its capital and obtained a gross profit of about $2.9 bn in 2008, up about 30% on 2007. As to its businesses abroad and intent to capitalise the company, Vicente said Sonangol will expand its investments beyond the banking sector, into the real estate business in Portugal. He asserted that, despite the world financial crisis, the company still had a capacity to meet its planned investments, with emphasis on construction of the oil refinery in Lobito and the LNG plant in Soyo, in the northern province of Zaire. Established on Feb. 25, 1976, Sonangol, a public company, is responsible for the implementation of Angola's petroleum E&P policy and the strategy to diversify the country's economy through downstream ventures both at home and abroad. After meeting with Angolan President Jose Eduardo dos Santos in Luanda, visiting Sao Tome and Principe PM Joaquim Rafael Branco on Feb. 20, 2009, said his government was about to sign a deal with Sonangol to help start pumping crude oil from the tiny African island nation's coast. He said the partnership with Sonangol could also be open to other oil companies. He did not provide further details. Sao Tome and Principe, mostly known for its key export crop - cocoa - recently discovered enormous oil reserves off its coast in the Gulf of Guinea. The country's government has since been looking for a partner to tap into these reserves. Branco told journalists after the meeting: "The oil exists. It is a blessing of God and it will soon be explored". Sonangol oversees all of the oil E&P activities in Angola, which rivals Nigeria as sub-Saharan Africa's biggest oil producer.

Portugal's Galp Energia (GALP) has also been in talks with Sao Tome and Principe's government on a possible partnership. There have been proposals for GALP to join Sonangol in the Sao Tome venture. If such a partnership works, this would be a very big boost for Angola which is one of the top oil producers in Africa.

Ghana and Angola on Feb. 24, 2009, affirmed their commitment to renew and strengthen bilateral ties for their mutual benefit. Vice President John Dramani Mahama has called for the required processes to get underway so that the two countries could start their co-operation. Mahama made the call when an Angolan delegation led by Jose Gurreiro Alves Primo, Angolan Ambassador to Ghana, paid a courtesy call on him at the Castle, Osu. He noted the friendly ties between the two countries and the role of Ghana in Angola's liberation struggle and independence and said it was necessary the two nations forged a united front for their economic development.

Vice President Mahama said Ghana recognised the potentials of Angola in the oil industry and reiterated that strengthened collaboration between Ghana and Angola would allow Ghana to benefit from Luanda's expertise for the development of Ghanaian manpower for its new-found oil industry. He recalled Ghana's contribution to Angola's building industry through the then State Housing Corp in Angola and expressed the wish that this collaboration would be renewed.

Minister Botelho de Vasconcelos told reporters as he was prepared to leave for Germany on a visit that Luanda intended to co-operate with German companies in the petroleum sector. As part of a governmental team led by the Angolan head of state, Botelho de Vasconcelos added that the two countries did not have any agreement signed yet in the oil sector, a situation expected to change soon. The governmental delegation was made up by the Ministers of Foreign Affairs, Assuncao dos Anjos, Public Works, Higino Carneiro, Finance, Severin de Morais, Culture, Rosa Cruz e Silva, Commerce, Idalina Valente, and Economy, Manuel Nunes Junior. Angolan President Jose Eduardo dos Santos then began a 48-hour work visit to Germany, under the invitation of his counterpart Horst Kohler.
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Publication:APS Review Oil Market Trends
Article Type:Company overview
Date:Mar 9, 2009
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