In June 2016, President José Eduardo dos Santos added Sonangol to his “family assets” by unconstitutionally appointing his billionaire daughter, Isabel dos Santos as the head of the state energy firm in a bid to gain more power. The president, who also axed Sonangol’s former board, caused a stir in the global oil industry.
Sonangol’s oil sales account for more than 90 percent of Angola’s foreign exchange earnings, making the state oil company the biggest source of dollars and state funding.
Isabel dos Santos, after her appointment, pledged to overhaul Sonangol and improve its efficiency and margins to offset the impact of battered oil prices. However, the state oil company has since moved to a debt sinking ship to the extent of not being able to afford toilet paper.
Last month, Chevron Angola gave the Sonangol board a one-week ultimatum to come up with a payment plan for the $300 million debt it owed Chevron.
Chevron stated that an inability to meet the ultimatum would result in them exercising the relevant clause in their Joint Operations Agreement. The clause would enable Chevron to sell Sonangol’s 40 percent stake of Block 0 output to recover the debt. Block 0 average daily production was 85, 000bpd in 2015.
However, Sonangol’s news release, which acted as a response to Chevron’s payment claim, has aroused the anxiety of other foreign creditors. The state oil company has been accused of only paying obligations of companies affiliated to President dos Santos.
It has also been revealed that Sonangol owes BP nearly $135 million. ENI is being owed $125 million while Total is owed $360 million. Chevron’s debt has risen with $380 million. This totals $1.135 billion, apart from undisclosed debts from other foreign and local companies.
After Isabel dos Santos appointment, the International Monetary Fund and the Angolan government cancelled negotiations for a $4.5 billion loan deal which would have boosted their finances especially with a drop in oil prices.
Angola has experienced a dip in their revenues as a result of falling oil prices. This led to China requesting debt payment, estimated at over $25 billion in oil flows. Angola’s oil payments to China have left the country with less oil to spare. China has been their major partner in infrastructural development.
Chevron’s sale threat of Sonangol’s 40 percent stake in Block 0 would devastate the state oil company creating a ripple effect of other debt defaults. The sale would affect Angola’s crude payment to China and defaults to other international partners. The fate of Angola, though unknown, would be catastrophic if prompt rescue measures are not taken.