Sinopec could take stake in Mozambican LNG and Angolan Oil through Galp

Chinese company Sinopec could take a stake in Portuguese oil company Galp Energia and is one of two major international oil firms interested, according to the weekly Jornal Economico.
Angolan oil company Sonangol is considering a sale of its stake in Galp Energia, and Sinopec is reported to be among the strongest suitors for the acquisition. It would give it substantial positions in Mozambican LNG and Angolan oil blocks, as well as other assets in Brazil.

Sinopec is already a partner of Galp Energia, after it bought 30 per cent of the Portuguese oil company´s assets in Brazil (Petrogal Brasil) in 2012. This deal enabled Galp Energia to finance exploration activities in its blocks in very deep waters off Brazil.

Among Galp´s most coveted assets is a 10-per-cent stake in the Area 4 concession of the Rovuma basin of northern Mozambique. This is expected to become one of the major natural gas-producing areas of the world in four to five years.

Chinese oil major CNPC holds a 28.6 percent of Mozambique Rovuma Venture. Other major shareholders are ENI and ExxonMobil, which each hold 35.7 percent. The remaining interests in Area 4 are held by Empresa Nacional de Hidrocarbonetos E.P. and Kogas, which each hold 10 percent.

Sonangol´s stake in Galp Energia is indirectly owned, through Amorim Energia, a “holding” that controls 33.34% per cent of the Portuguese energy company´s capital.

This “holding” company is majority-owned by Portuguese family Amorim (55%), along with Angolan company Esperanza, of which Sonangol holds 60% and businesswoman Isabel dos Santos, daughter of former president José Eduardo dos Santos, the remaining 40%.

According to Jornal Económico, the Angolan company wants to sell its stake swiftly, in order to reduce its total debt.

In a recent interview, Angolan president João Lourenço said that it is “very unlikely” that Sonangol will be interested in retaining its stake in Galp Energia, given that the investment in the Portuguese company is a “dispersal” of its assets.

Another asset likely to be sold by Sonangol is its 19.94% stake in Banco Comercial Português, Portugal´s largest private bank, which has Chinese group Fosun as majority shareholder. This sale would have to be approved by the European Central Bank and would take longer than that of Galp Energia.

During his recent visit to Portugal, Lourenço revealed that representatives from Portuguese bank BCP met him last Friday “very worried, to know if Sonangol was going to leave (the bank´s capital) or not”, and that his answer to them was to “keep calm and sleep peacefully.” There is, he added, only a “general orientation” within the oil company´s privatisation process and no particular intention to offload Portuguese assets, only a case-by-case analysis of the companies.

“We have never explicitly referred to business here in Portugal” in terms of sales of Sonangol´s assets, Lourenço said.

The oil company will divest its holdings in about half of its businesses — 52 out of the present 100 — particularly those like banking, which are not its core business.

While Galp Energia´s activities are core to Sonangol – and the Portuguese company is profitable – immediate financial needs are pressing it to sell. In addition, relations between both of Esperanza´s shareholders have deteriorated steeply, to the point that Isabel dos Santos and the new CEO of Sonangol, Carlos Saturnino, have threatened each other with court action.

The financial offer, which will vary according to the oil price in international markets — which has plummeted in the last few weeks — will be decisive for the sale.

Another issue is the specifications of the contract between Esperanza´s shareholders: Isabel dos Santos might have the power to block the sale or have a preference to buy the stake.

Galp Energia is considered the biggest company in Portugal, along with EDP – Energias de Portugal.

While Sonangol´s stake is small at less than 10%, it is decisive in terms of management, given that over 59% of Galp´s capital is currently free-floated. The Portuguese state owns 7,5% through Parpública.

According to Galp´s latest financial statement, more than 80% of EBITDA originated from international activities, with new units in Brazil and Angola – the Kaombo project in Angola’s Block 32 — contributing to a 10% increase in oil and gas production in the third quarter from the same period a year earlier. Adjusted third quarter net income totalled €212 million, a 35% improvement from the same quarter a year earlier.

Average daily production in the Brazilian unit increased to 94,900 barrels per day, while that in Angola reached a total of 7,400 barrels per day.

In accumulated terms, in the full nine months, average working-interest production totalled 105,300 barrels per day and net-entitlement production reached 103,900 barrels per day.

From January until September 30th, capital expenditure reached €597 million, of which 80% was allocated to the exploration and production business.

Investment in development and production reached €289 million and was mainly allocated to activities in block BM-S-11 and block 32, along with the investment in the Coral South project in Mozambique.

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