Angola’s energy company Sonangol enters new era of efficiency and transparency to boost nation’s economy

Noah Pitcher( Global Politics Correspondent )

Noah Pitcher is a global politics correspondent for Today News Africa covering the U.S. government, United Nations, African Union, and other actors involved in international developments, political controversies, and humanitarian issues.

Co-authored by

Simon Ateba( Chief White House Correspondent )

Simon Ateba is Chief White House Correspondent for Today News Africa. Simon covers President Joe Biden, Vice President Kamala Harris, the U.S. government, the United Nations, the International Monetary Fund, the World Bank and other financial and international institutions in Washington D.C. and New York City.

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While oil has always been a fundamental piece of Angola’s economy and its foremost sector, recent improvements made to Angola’s state oil company Sonangol have set the nation up for better long-term economic success and energy production.

In Angola, although the government is trying to diversify the country’s economy, oil remains the main source of revenue. According to data from the World bank, Angola’s oil sector accounts for one third of its gross domestic product and roughly 95 percent of its exports. Oil exploration has been a vital part of Angola’s economy for decades.

The Organization of Petroleum Exporting Countries’ most recent report indicated that Angola has surpassed Nigeria as the largest oil exporter in Africa, exporting roughly 1.16 million barrels of oil per day.

Since Angola’s state oil company Sonangol was created in 1976 shortly after the nation gained independence, it has provided jobs, has been a vital part of the economy, and developed Angola’s oil sector into what it is today. In addition to its subsidiary companies, it employs approximately 13,000 people.

However, the company came under heavy criticism several years ago as it became engulfed in corruption and scandals as well as accusations of lack of transparency.

Former Sonangol Director Isabel dos Santos, who had been appointed by her father and longtime Angolan president José Eduardo dos Santos, was fired just two months after current Angolan President João Lourenço assumed office in 2017.

In 2021, a Dutch court found Isabel dos Santos guilty of corruption and ordered her to return $500 million in energy shares to Angola. The United States has even barred her from entering the country due to her corrupt behaviors.

Since João Lourenço took office as President of Angola in 2017, the company has been drastically transformed. According to Transparency International, corruption in Angola has gone down by roughly 53 percent in the time that Lourenço has been President.

Under the new administration, the oil company, Sonangol, has improved dramatically. As the administration has taken steps to combat corruption, transparency and accountability have become greater priorities.

The prosperity of the Angolan economy is heavily dependent on its oil sector, so the continued success of Sonangal is fundamentally important to the everyday lives of Angolans. The improvements that the company has made regarding transparency and accountability translate to the overall better well being for the nation. They have also generated some tangible international recognition for Angola.

On June 16, Angola became the 28th African nation and the 57th country in the world to join the Extractive Industries Transparency Initiative (EITI), the global standard for the good governance of oil, gas and mineral resources. EITI seeks to address key governance issues in the extractive sectors.

The ceremony in Brussels, Belgium, was attended by Angola’s Minister of Mineral resources, oil and gas, Diamantino Azevedo, who headed his country’s delegation, while Sonangol was represented at the highest level by its CEO Sebastião Pai Querido Gaspar Martins.

“Angola has the opportunity to use the implementation of the EITI to strengthen its anti-corruption efforts, strengthen Sonangol’s modernization and ensure that the extractive sector contributes to the modernization of domestic resources,” the chairperson of the EITI Board, Helen Clark, said while welcoming Angola to the body on June 16.

Angola’s Minister of Mineral resources, oil and gas, Diamantino Azevedo, responded that the implementation of the EITI “will support the government’s objectives of strengthening transparency and guarantee that the Executive assumes the political will to strengthen the national instruments of good governance.”

“With this new stage, the country intends to continuously improve the business environment and the investment climate, which will contribute to the mobilization of revenue and to obtain a direct positive impact for the Angolan citizens. Angola’s membership of the EITI means the beginning of a new era for the country,” he added.

Sonangol’s CEO, Sebastião Pai Querido Gaspar Martins, described Angola joining EITI as a milestone. “Sonangol, as a flagship oil company, integrated in the country’s value chain and energy sector, is pleased with the admission of Angola to the EITI, a measure that is fully aligned with its policies of transparency and efficiency in the performance of its activity,” he said. “This milestone reinforces Angola’s commitment, also assumed by the company, to responsibly manage its natural resources, in favor of the country’s development and for the benefit of its population, with an action guided by the best international practices.”

The admission of Angola into EITI was the culmination of several years of work that started in 2019 when Angola’s President João Lourenço expressed the country’s intention to join EITI, which was launched in September 2002 by the then UK Prime Minister Tony Blair, following the world summit on sustainable development in Johannesburg, after years of academic debate and lobbying by various players, including civil society organizations and companies in the oil and gas industry.

As part of its bid, Angola formed a multi-stakeholder group that included representatives from the government, civil society and industry to oversee the process, three interest groups that are expected to work together to strengthen the extractive governance in Angola in line with national objectives.

Apart from its international recognition in the areas of transparency and accountability, Angola is also setting up itself up for success when it comes to refining its own crude.

Several oil producing countries in Africa have to rely on refineries outside the continent to refine their crude. Nigeria, for instance, sends its crude abroad and brings back refined products because it does not have enough functioning refineries at home.

To make fuel cheaper for Nigerians at the pump, the government has to subsidize the cost with billions of dollars each year, money that can be used to develop the nation.

President João Lourenço wants to solve such a difficulty for Angola for good with the construction of a big refinery in Cabinda.

The Cabinda Refinery, a project valued at $1 billion, will have an installed capacity to process 60,000 barrels per day, after completing its three implementation phases, which will transform it into a total conversion refinery capable of producing gasoline, diesel, LPG, fuel oil, Jet A1 and kerosene.

Throughout those stages, it is estimated that at least 1300 jobs will be created, between the construction, assembly and operation of the refinery, most of which will be allocated to the local population.

Economists say the Cabinda refinery represents a fundamental step towards the economic development of Angola because the increase in the internal capacity to process crude oil reduces the country’s dependence on imports and contributes to considerable foreign exchange savings.

In addition, it is a good example of international cooperation for development and technological specialization between the United States and Angola.

The project is already at an advanced stage. On May 2, the Cabinda Refinery equipment was tested in Houston, Texas, United States, at the facilities of VFuels, the company responsible for its construction.

VFuels is a full service oil and gas engineering, design, and fabrication firm that specializes in modular process equipment. The company says it designs and fabricates modular refineries and gas plants using its experience and expertise in modular construction.

The result of the Factory Acceptance Test was positive, and it was followed by the shipping phase to Angola. The Factory Acceptance Test is one of the decisive moments in the construction of all refineries as it verifies and certifies that the equipment produced and packaged meets the functionality and the defined objectives, before delivery at the destination.

Among other innovations of the equipment is the construction of a modular unit of 30,000 crude oil distillation of a single line built to date worldwide, and which is an integral part of the Cabinda Refinery.

After the tests were completed, Angola’s Minister of mineral resources, oil and gas, Diamantino de Azevedo, said it was a fundamental moment for the implementation of the strategy defined by the government, which aims at the independence of the country in terms of its own production of petroleum products.

“This is, in fact, a crucial step for the Cabinda refinery to start production and, at the same time, for the pursuit of the objectives that we defined at the beginning of our functions,” he said.

Sonangol’s CEO, Sebastião Pai Querido Gaspar Martins, also praised the moment, describing it as another milestone for the country’s refining strategy, “which aims – as our Minister of Guardianship emphasized – the country’s independence from the import of refined products”. . We are going to use the natural resources we have to produce refined products on Angolan soil, with Angolan citizens”.

Atanas Bostandjev, CEO of Gemcorp, expressed his satisfaction with the results achieved and with the end of a stage that is crucial for the Cabinda Refinery to start operating this year. “Gemcorp has focused on contributing to the development of Angola and its economy, with the Cabinda Refinery being one of our most relevant projects, as it will change the paradigm of the oil & gas sector in the country. We therefore know that this is the right path and that Gemcorp will remain committed to its timely completion,” he said.

But successes in the Angolan oil and gas sector do not stop there. The government is doing much more than improving transparency and accountability, intensifying the fight against corruption or building a refinery in Cabinda that is expected to create thousands of jobs for Angolans. It is also setting itself up for success in the production of fertilizers.

Construction formally began on an industrial fertilizer complex on June 28 in Angola’s Zaire province. Made possible by a consortium formed by Sonangol through its Gas and Renewable Energy Business Unit (UNGER) and by Grupo Opaia SA, the plant is expected to produce 500 thousand tons of fertilizer per year, generating around 3,200 jobs in the construction phase and providing 1,500 jobs in the factory maintenance management stage.

Angola is also set to become a supplier of green hydrogen for renewable energy. Sonangol agreed in June to build a factory with two German engineering firms.

For years, many experts have asserted that Africa has great green energy potential. Russia’s war on Ukraine has caused many countries to re-evaluate their dependency on oil and on Russia, and European countries such as Germany are now looking to work with Angola to fulfill their green energy plans.

As Angola looks to expand its green energy production, President João Lourenço has cautioned that a transition toward a low-carbon economy should be gradual and strategic, saying at a May industry conference, “Saving the planet shouldn’t bring more hunger and misery to the people of countries that depend on oil revenues.”

For Sonangol, “generating oil richness is also an opportunity to value the human asset and open pathways to the growth of Angola,” the oil company says.