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Sonangol Raises Angola Oil Output, Seeks Bids for 15 Blocks

Feb. 25 (Bloomberg) -- Sonangol EP, Angola’s state energy company, boosted oil output by 4.5 percent last year and plans to spend $8.8 billion on exploration in the next decade, Chief Executive Officer Francisco de Lemos Jose Maria said.

The company is targeting daily output of 2 million barrels by 2017, he said today at a news conference in Luanda, Angola’s capital. Sebastiao Gaspar Martins, a board member, said Sonangol plans to seek bids this year for 15 onshore oil areas, 10 of them in the Kwanza basin near Luanda and five in the Congo basin in the nation’s north. Sonangol produced 1.81 million barrels a day in January, according to data compiled by Bloomberg.

Angola is Africa’s biggest oil producer after Nigeria. Almost all its output comes from Atlantic Ocean fields operated by companies such as Total SA, Chevron Corp., Exxon Mobil Corp. and BP Plc. Production last year didn’t increase as much as Sonangol had planned because of delays in the start of the PSVM fields, operated by BP, and an expansion of block 14, which is run by Chevron.

“We’re now back on track and production is expected to grow,” Baptista Sumbe, a company board member, said at the conference. Construction of a liquefied natural gas plant, Angola LNG, may be finished in four to six weeks, and an announcement of first fuel from the project, which cost at least $9 billion, would follow, Sumbe said.

Oil production should increase in 2014 from projects in blocks 31, 0, 15/06, 32, 20 and 21, said Martins.

Earnings Drop

Sonangol posted net income of $1.24 billion in 2012, de Lemos Jose Maria said. Earnings before interest, taxes, depreciation and amortization fell to $5.21 billion last year from $5.96 billion in 2011, he said. The company generated revenue of $46.97 billion last year, the CEO said, without providing a corresponding number for 2011. He forecast a 7 percent decline in revenue for 2013, declining to elaborate.

Company officials gave no details of their 10-year spending plan to explore for oil and gas. It was unclear if some of the blocks marked for bidding overlap the Quissama National Park that lies in the middle of the 23 block Kwanza basin zone. Nadiejda Santos, a spokeswoman for Sonangol, didn’t immediately reply to an e-mail today seeking comment.

The onshore blocks are considered an opportunity for Angolan companies to participate more actively in the country’s oil economy. They would require less capital than drilling wells on the seafloor, which has largely been the domain of large foreign companies.

Fuel Subsidies

Sonangol will cut fuel subsidies this year, while it remained unclear exactly when and by how much, Sumbe said. Subsidies amounted to 6.3 percent of economic output in 2011, according to the International Monetary Fund. Gasoline sells for 60 cents a liter across the country.

Sonip, the property division of Sonangol, has sold 18,089 units of about 30,000 flats built in five suburbs of Luanda before the sales were suspended Feb. 22 to assess the program, Marnarda Van Dunem, a Sonip official, said at the conference. Three of the five apartment developments are sold out and sales are to resume March 4, she said.

The projects were promoted by the government as a means to spread Angola’s oil wealth and raise living standards after a 27 year civil war ended in 2002. By the fourth quarter of last year many of the projects remained empty because they were too expensive for most Angolans to buy. President Jose Eduardo dos Santos then ordered prices to be cut to make them affordable, and Sonip carried out the directive Feb. 5 while adding a rent-to-own option.

The new prices range from 1.5 million kwanzas, or $15,600, to 18 million kwanzas, while the former prices weren’t given. Regular bank loans are difficult for many Angolans to obtain because they lack traditional collateral. The rent-to-own option requires a year’s rent in advance.

To contact the reporter on this story: Colin McClelland in Luanda at cmcclelland1@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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