With low oil prices, Sonangol is in ‘precarious financial situation’

Agence France Presse
Sonangol rode the commodities boom that drove the country’s extraordinary growth after civil war ended in 2002, but today it symbolizes a national economic crisis. (AFP)

LUANDA: Angolan state-owned oil company Sonangol rode the commodities boom that drove the country’s extraordinary growth after civil war ended in 2002, but today it symbolizes a national economic crisis.
The Luanda-based company has increasingly been in focus since Isabel dos Santos, the billionaire daughter of long-time President Jose Eduardo dos Santos, was appointed CEO in June.
She vowed to improve transparency and efficiency at the company, a secretive behemoth that has played a dominant role in many parts of Angolan life in the post-war years.
Concerns over the company’s health have increased in recent months, with reports claiming to shed some light on Sonangol’s alleged struggles to pay its bills and stay afloat.
Maka Angola, a website close to opposition parties, said this month that US partner Chevron had issued Sonangol with an ultimatum demanding a $300-million debt was paid immediately or it would end its long relationship with Angola.
Shortly afterwards, Sonangol issued a statement admitting that “falling oil prices” and “analysis and validation of expenses” had delayed some payments. Without naming Chevron, it added that a $200 million payment had been agreed in addition to a plan on paying off the outstanding sum.
Chevron declined to comment to AFP.
“Sonangol is in a very precarious financial situation with lower oil prices,” said Benjamin Auge, Angola specialist at the French Institute of International Relations (IFRI).
“The company brings in almost all the state’s income, but the operating costs have not fallen drastically, so there are more late payments to the multinationals.”
The end of Angola’s bloody 27-year civil war, combined with high global oil prices, unleashed rapid development in Angola, with the capital Luanda often compared to a new Dubai.
GDP growth peaked at over 20 percent in 2007, but the decline in oil prices, poor governance and lack of investment has seen growth collapse to less than two percent this year.
Sonangol has been hit hard by the new reality.
To compensate for the reduced cash flow, the company sold off some non-oil assets and obtained $15 billion of loans from China Development Bank (CDB) in return for increasing oil delivery to the country.