This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 9, 2017).
LUANDA -- Angola was once a magnet for the world's biggest oil companies, drawing billions of dollars in investment from BP PLC, Exxon Mobil Corp. and others back when crude prices were rising to $100 a barrel. Now, foreign companies have all but given up on new ventures there.
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BP PLC partially pulled out of an offshore block, taking a $750 million write-down this year. Halliburton Co. and other oil-service companies blamed falling revenue on declining activity in regions including Angola. Total SA of France is reshuffling personnel to cut costs while Italy's Eni SpA is renegotiating service contracts.
Energy companies have reduced capital spending in Angola more than in any other sub-Saharan African country, with an estimated $67 billion in spending cuts from 2015 to 2020, according to the consulting firm Wood Mackenzie. Angola's oil-drilling rig count has fallen from a peak of 19 in February of 2014 to three rigs in October.
In an era of $60-a-barrel crude, Angola has become a challenging place for big-oil companies. Because of the high costs of pumping from the country's deepwater reserves, oil companies need an average oil price of almost $73 a barrel for projects to break even.
"Today we are looking for the profitable barrel, the good barrel," said Guido Brusco, managing director for Eni Angola and a member of the board of the Angolan Exploration and Production Companies Association.
Mr. Brusco said oil companies could still invest in Angola, but only if its leaders "make the right decision at the right time" on a series of reforms.
Oil companies have complained privately to the government about money-losing contracts, a turgid bureaucracy and slow decision-making from the state oil company, Sonangol.
Angola's leaders say they are trying to address the oil companies' concerns this year.
In November Angola's new president, Joao Lourenco, dismissed his predecessor's daughter, Isabel dos Santos, as chairwoman of Sonangol. She is Africa's richest woman, according to Forbes. Executives had complained that Sonangol became less responsive to industry concerns during her tenure.
"Sonangol has lost its focus," said Lago de Carvalho, a former Sonangol executive.
Ms. dos Santos said in October that she was working to solve the oil industry's problems. She couldn't be reached for comment.
Angolan officials also have pledged to provide more flexible contracts and reduce bureaucratic hurdles.
The goal is to achieve "economic balance and satisfy investors as well as the government," said José Maria Botelho de Vasconcelos, the country's petroleum minister until September. The country's current oil minister, Diamantino Pedro Azevedo, didn't respond to requests for comment. Sonangol declined to comment.
Firms such as Chevron, BP and Angola's biggest foreign oil investor, Total, helped build Angola's oil industry into a global powerhouse, driving its production up to 1.7 million barrels a day in 2016 from 718,000 barrels a day in 2000.
The boom in oil money helped crown Angola's seaside capital, Luanda, as the world's most expensive city, as high oil prices fueled a construction boom and droves of skyscrapers. Angola joined the Organization of the Petroleum Exporting Countries and paid off billions of dollars owed to foreign creditors.
Now, some construction projects have ground to a halt, symbolized by the unfinished concrete shell of a 300,000-square-meter shopping mall in central Luanda. Angola's oil projects also nose-dived, prompting Halliburton to report that revenue for regions including Africa was down 28% last year.
Last June, BP took the $750 million write-down and stepped away from part of a block after it found more gas than oil. Mr. Vasconcelas said Angola is working on a revamp of natural-gas ownership laws that should be ready by the end of this year.
A handful of new projects are trickling in as oil prices recover. Next year Total is expected to start producing from a big offshore oil field and in December the company agreed to start one new deepwater project with Sonangol.
But oil companies privately complain that requirements that they buy certain supplies from select domestic firms drive up costs. They want to retain more of the petroleum they produce to cover their expenses and to make money from discoveries of natural gas, which under current Angolan law belongs to the government.
Output is "going to start to fall off because there haven't been any of these big projects sanctioned in a few years," said Adam Pollard, a Wood Mackenzie analyst.
(END) Dow Jones Newswires
December 09, 2017 02:47 ET (07:47 GMT)