How ‘princess’ of Angola lost her oil crown

On October 6, with the dust still settling on Angola’s first change ofpower in 38 years, new President Jo?o Lourenço sat down withinternational oil majors at the presidential palace in Luanda.The top executives in Angola of Chevron, Total, BP, Eni and Exxon saidthe oil sector was being devastated by delays in project approvals atSonangol and a backlog of payments owed by the state oil company,according to four oil industry sources with knowledge of the meeting.They warned Lourenço that Angola’s production would decline from 2019unless swift action was taken to tackle problems at the firm, which washeaded by Isabel dos Santos, daughter of his presidential predecessor,the sources said.They declined to be named because the discussions were confidential.Six weeks later the president fired dos Santos, Africa’s richest woman who is nicknamed the “princess” in Angola.The oil majors all declined to comment on the meeting.Lourenço’s office and Sonangol did not respond to requests for comment.It was a highly unusual gathering; foreign oil firms operate nearly allof Angola’s production and hold huge sway, but meeting the president as aunited group was almost unheard of.The nature of the discussions has not been previously reported.The talks, and subsequent events leading up to dos Santos’ dismissal,shed light on the reasons behind her ouster — a decision neverofficially explained.They offer new insight into the current state of the most importantcompany in Angola, which relies on oil for a third of its economicoutput and over 95% of exports, and the big challenges facing the newmanagement of the debt-laden firm.The dismissal also points to the waning power of the dos Santos family,which has dominated Angolan politics and business for decades.Isabel dos Santos’ father José Eduardo had ruled the country since 1979,amassing wealth for his relatives who own companies in almost everypart of the economy.Billionaire dos Santos, who had been Sonangol chair since June 2016, hassaid she was in the process of restructuring to root out waste andcorruption at a company that was struggling even before oil pricesplunged in mid-2014.Her representatives declined to comment for this story, and insteadpointed Reuters to two statements, issued in the days after her exit,when she outlined her achievements including reducing debt to $7bn from$13bn, raising annual revenue to $15.6bn from $14.8bn and cutting costs.In her departing speech to staff, she said the company had been “nearlybankrupt” when she took over, devastated by the oil-pricecollapse.”Memories are short,” she added.However, according to interviews with 10 sources, including the four oilindustry sources as well as officials from Sonangol and the government,Lourenço was frustrated with the slow pace of change at the company.On October 13, a week after meeting the oil majors and 17 days aftertaking office, the president ordered government ministers, Sonangol andinternational oil companies to form a 30-day working group to review thestate of the industry.The group’s meetings, many of them led by new Secretary of State for Oil Carlos Saturnino, were tense, the sources said.Saturnino, an oil industry veteran, had been fired by dos Santos fromhis role as head of production and exploration at Sonangol last yearwhen she accused him of gross mismanagement.Even though dos Santos had launched a turnaround plan, huge hold-ups inthe approval of projects were strangling the oil sector, according tothe sources.Her board had implemented a system for checking projects submitted byforeign oil companies which in practice exacerbated the problem, theysaid.She had also created a gulf between her board and the rest of thecompany by surrounding herself with foreign consultants, said thepeople, who declined to be named due to the confidential nature of theindustry review and related discussions.The working group concluded there was “a near paralysis” at Sonangol, according to a government source.As the group assessed the state of the industry, Lourenço met Sonangol’sbiggest lenders — including the Bank of China, Standard Bank andStandard Chartered — to understand Sonangol’s financial situation andsecure lower lending rates, according to a source familiar with thetalks.“Lourenço realised Sonangol needs money fast,” said the source, addingthat the company had been seeking to restructure some payments.Standard Bank declined to comment, citing client confidentiality, whileStandard Chartered and Bank of China did not respond to requests forcomment.Sonangol’s direct debt to Chinese banks and lending consortia includingChinese banks stood at $3.8bn at the end of 2016, according to thecompany’s annual report.Oil industry sources told Reuters this debt now stood at about $3bn, plus another $3bn to majors, contractors and traders.Of that, nearly $1bn is owed to trading firms Trafigura and Vitol underloans guaranteed by oil or product exports, according to a source closeto Sonangol.The government itself also last year took out a further $6.9bn loan fromthe China Development Bank that it lent to Sonangol, $3.8bn of whichthe firm used to refinance debt, according to an International MonetaryFund report.Supporters of dos Santos, who are familiar with her work at Sonangol, said the debts dated back to before her tenure.They said the company was now in better financial state.The slow pace of restructuring, they say, was due to the scale of the job and restraints imposed by the state on selling assets.Her dismissal, according to them, was purely political and part of a campaign by the president against her family.With consensus in government building fast against dos Santos, she responded with a charm offensive.In London, she met CEOs of major oil companies at an industry conference.On October 18, she did a rare live interview at the Reuters office in the city’s Canary Wharf financial district.In the Reuters interview, she described her relationship with the newpresident as one of “full alignment”. But she gave a hint that her daysat Sonangol may be numbered, when asked if she would stay to see throughthe transformation of the firm.“Once the foundations have been laid and are right, it doesn’t matterwho steps in as long as the plan is good,” said dos Santos, who hasstakes in businesses from telecoms to diamonds.The charm offensive was too little, too late.On November 15, dos Santos and most of her board were sacked.She was replaced by the man that had become her nemesis: Saturnino.Foundations notwithstanding, the new management faces the tasks ofgetting projects moving again, repaying billions of dollars owed to oilmajors, contractors and traders, and servicing billions more dollars ofdebt owed to Chinese banks.An executive at Sonangol said a massive round of lay-offs had beendelayed until after the election and the task would also now most likelyfall to the new team.Lourenço, however, appeared confident of Sonangol’s potential when heattended the board’s inauguration on October 16, describing the companyas a “golden goose”. “Take good care of her,” he said. - Reuters