Angola renegotiating with its crude buyers

The Angolan government is trying to renegotiate some of the deals it has with term buyers of the country's crude, as part of broader steps to tackle macroeconomic pressures.

The ministry of finance said the move aims to "reprofile financing facilities" with unnamed counterparties, to "better reflect the current market environment and Opec+ production quotas". It said it hopes to conclude this process "in the very near future".

State-owned Sonangol's key customers are in China. The firm usually allocates between 7-10 cargoes to Chinese term buyers each month, and reserves the right to sell between 2-4 cargoes on the spot market. Around 80-90pc of all Angolan crude exports end up in China.

Angola's July crude export programme shows Sonangol has only eight of the month's 38 cargoes, an unusually low number. Five of them have been allocated to Chinese state-owned Sinochem, the biggest term buyer of Angolan crude, and the rest are as yet unallocated.

Other key Angolan term crude buyers are Chinese trading firm Unipec, India's state-controlled IOC, Portugal's Galp and US-based refiner P66.

Angola has been struggling for years with falling production from maturing fields. This has been compounded by the fall in oil prices this year, by Angola's need to adhere to output limits under the Opec+ agreement and by the effects of the Covid-19 pandemic. The cumulative impact of all this has led the government to apply for relief under a G20 programme designed to allow for suspension of debt service payments from 1 May until the end of the year.

Angola joins a growing list of west African crude exporters that have turned to outside assistance during the Covid-19 pandemic. The IMF has granted funds to Opec members Nigeria and Gabon from its Rapid Financing Instrument, which provides swift and low-access fiscal aid to countries facing an urgent balance of payments need.

By Ben Winkley and Nicola De Sanctis