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* Angola pushes ambitious reform, anti-corruption drives
* Oil price crash prompts majors to idle all drilling rigs
* Privatisation push, off to a rocky start, plows ahead
By Noah Browning, Dmitry Zhdannikov and Libby George
LONDON/LAGOS, May 20 (Reuters) - The coronavirus pandemic
has done in a handful of months what even a 27-year civil war
did not: it has brought oil drilling to a halt in Angola,
Africa's second-largest oil producer.
The consequences could be grave for a poor country that
relies heavily on oil revenues and is saddled with debts that
exceed its economic output.
The halt in oil exploration, which has not been previously
reported, could represent a setback for one of the most
ambitious economic reform drives on the continent, aimed at
cleaning up corruption and attracting foreign money. It comes as
Angola seeks buyers in its push to privatise state energy
assets, which is central to the reform process.
An oil price crash last month to two-decade lows has
prompted all international energy majors operating in Angola -
Total, Chevron, ExxonMobil, BP and Eni - to idle or ditch their
drilling rigs, according to company sources, Refinitiv
ship-tracking data and industry experts.
France's Total, responsible for almost half of
Angola's oil output, told Reuters it would not drill for more
oil for now due to the coronavirus crisis, instead focusing on
current production.
"We have suspended all our drilling activities like all
other operators in Angola," it said.
Sarah McLean, senior analyst at IHS Markit, said it was the
first time since its records began in 1984 that Angola had not
had a single rig drilling. The London–based information provider
had expected at least 10 rigs to be operating there by the end
of 2020, the highest number for any African nation this year.
The Angolan finance ministry and president's office did not
respond to Reuters requests for comment, nor did state oil giant
Sonangol, which works in partnership with the foreign oil
majors.
DAMAGED, DOCKED, DORMANT
Angola's prospects looked bright going into 2020.
Energy majors increased their exposure to Angola in the wake
of reforms to investment laws by President João Lourenço, who
took power after almost four decades of rule by Jose Eduardo dos
Santos, and greater transparency at Sonangol.
They planned to operate more drilling ships in Angola than
anywhere on the continent to tap tantalizing new offshore
discoveries this year.
Then COVID-19 struck.
As global demand fell off a cliff amid lockdowns, oil
companies lopped billions from planned spending.
Angola, with its relatively high-cost offshore fields, was
among the first on the chopping block. Reduced demand from the
virus's first victim, China - the top destination for Angolan
oil - also hit the southern African country hard.
Total, in a bad portent, had already cancelled one drill
ship after a March 7 technical problem. The vessel is now parked
off the Canary Islands, according to Refinitiv tracking data.
The French producer has since idled three other drill ships;
Transocean Skyros and Maersk Voyager were sent to docks at the
capital Luanda while Seadrill West Gemini lies dormant at Walvis
Bay in Namibia, the tracking data shows.
Total did not comment on specific ships, but said it hoped
to restart gradually "as soon as the situation allows".
U.S. major Chevron cancelled its contract with rig
supplier Valaris, in late March, and parked the drill ship,
Valaris 109, in the capital. A Chevron spokesman said it would
continue "cost-managed production" at existing fields.
Meanwhile, two offshore discoveries which Italy's Eni
described as "significant" last year are now on ice, the company
told Reuters.
American firm ExxonMobil and Britain's BP,
the other oil majors in Angola, have also cancelled planned
drilling until at least 2021, according to industry sources.
Exxon and BP declined to comment.
SELLING 'THE OCTOPUS'
Any time would be bad for Angola's drilling to dry up.
Yet the crisis comes at a key juncture for its reform drive,
which it is counting on to help improve living standards for the
population of over 32 million. According to the Oxford Poverty
and Human Development Initiative's global poverty index, about a
third of Angolans live in "severe poverty".
The country is seeking to attract investors for a sweeping
privatisation programme of state assets including energy assets
like parts of Sonangol, but also a swathe of other interests
like ports, banks and telecoms firms.
The programme, launched last August, had already got off to
a rocky start.
Angola has yet to sell any major assets of Sonangol, which
its petroleum minister described as a sprawling "octopus".
Several assets scheduled for sale last year have meanwhile yet
to be tendered, while the only announced purchases have been of
a slaughterhouse firm and farm complex which netted $35 million
from local buyers in April.
Angola was aiming to shed smaller assets before privatising
30% of the whole Sonangol group via an IPO in 2022. That
timeline, always ambitious, now seems unlikely, according to
Nick Branson, senior Africa analyst at Verisk Maplecroft.
"The idea of a Sonangol IPO just seems hopelessly
optimistic," he said.
"There are so many moving parts and such a lack of appetite
for these sort of transactions anyway. Look at how long it took
Saudi Aramco," he added, citing the long struggle by Saudi
Arabia to privatise their state oil firm amid flagging prices.
Despite its problems, Angola has announced the tendering of
state-owned bank BCI and parts of Sonangol's ports and logistics
businesses in recent weeks.
Gonçalo Falcão, a Brazil-based partner in UK-based law firm
Mayer Brown, which advises potential buyers on aspects of the
privatisation drive, said the government would not settle for a
fire sale.
"It's still to be seen how many competitive bidders emerge,"
he said, noting the state could postpone tenders if it deems
offers too low.
"They're trying to send a message that, okay, we're
struggling, but we will continue going forward with our plans
because we're a reliable country and we've made a huge effort to
make our companies transparent and reduce corruption."
SERVICING DEBT: $9 BLN A YEAR
President Lourenço has been seeking to tackle a troubled
legacy after Angola clawed its way out of a 1975-2002 civil war,
one of the world's longest. The country is ranked as one of the
world's most corrupt, in 146th place on a list of 183 countries,
according to Transparency International.
After he took power in 2017, he moved to remove dos Santos's
children from key roles. Dos Santos's daughter, Isabel, had been
running Sonangol, while his son, Jose Filomeno - now on trial -
had run the sovereign wealth fund.
Despite Angola earning praise for its anti-corruption drive,
the economy - which draws a third of state revenues from oil -
was in a precarious position before the pandemic.
The country received a record $3.7 billion loan from the
International Monetary Fund last year. It also owes billions to
China and holds the largest single bilateral debt burden in
sub-Saharan Africa, where it is the number 3 economy.
Its debt-to-GDP ratio has climbed to the highest in around
two decades, above 100%, and servicing its borrowings eat up $9
billion a year.
"The Angolan state owns a major universe of companies -
telecom companies, water companies, electricity," said Falcão of
Mayer Brown. "I wouldn't say they are desperate, but keen to
make revenue, and they think a good investment opportunity six
months ago would still be a good investment today."
(Additional reporting by Bate Felix in Paris, Stephen Jewkes in
Milan, Karin Strohecker Ron Bousso and Julia Payne in London;
Editing by Pravin Char)
