OREANDA-NEWS. The decision by US independent Cobalt International Energy to sell its operating stake in Angola's flagship offshore oil project Cameia and other oil discoveries raises doubts over the future commercialisation of Angola's offshore sub-salt potential.

Cobalt agreed to sell its 40pc stake in offshore blocks 21 and 20 to Angolan state-owned Sonangol for $1.75bn on 22 August. The transaction is subject to Angolan government approval and has an effective date of 1 January 2015. Sonangol already owns a 60pc non-operating stake in block 21 and a 30pc stake in block 20. Under the planned deal Cobalt will also sell its stake in offshore block 9 to Sonangol.

Block 21 contains the 75,000-80,000 b/d capacity Cameia sub-salt project that is scheduled to start production in 2018 after a final investment decision, scheduled before the end of the year.

Block 20 contains the Orca oil discovery, the largest in the Kwanza basin to date, with an estimated resource potential of 400mn-700mn bl. The blocks also hold the Mavinga, Lontra and Bicuar discoveries.

Cobalt and Sonangol today said the timing of the Cameia project start-up will not be affected by the sale. But the sale of the blocks comes against a backdrop of sustained lower oil prices and doubts that current oil prices can justify the commercial development of Angola's sub-salt frontier.

Cobalt has worked to cut the costs of the 300mn-500mn bl resource Cameia development, reducing the original field capacity and its floating production storage and offloading (FPSO) facility from 100,000 b/d. A final investment decision was expected in 2014 but this was delayed.

Angola has promoted the sub-salt region as the source of its future upstream capacity, offsetting declining production at its traditional deepwater post-salt fields.

Sub-salt blocks were awarded to firms including Total, BP, Italian firm Eni, ConocoPhillips, Spain's Repsol and Norwegian state-controlled Statoil in 2011. There has been no commercial production from the blocks as firms continue with exploration and appraisal drilling.

Sonangol has limited upstream operating experience and none in the more technically challenging sub-salt. Its operating budget is also under strain because of lower oil prices. Sonangol could potentially seek a new buyer and operator for Cameia and the two blocks. The Angolan government is encouraging local Angolan firms to have a greater upstream role in the country. The government is also deepening its financial dependency on China, its largest crude customer and financial lender. An Angola-Chinese venture called Sonangol Sinopec International already has extensive non-operating stakes in Angolan fields.

Two Angolan firms with close ties to Angola's ruling elite, called Alper Oil and Nazaki Oil and Gas, were previously shareholders in Cobalt's blocks. The stakes held by these two Angolan firms were eventually transferred to Sonangol after the US Justice Department and other US regulatory bodies investigated the two firms.

Cobalt on 4 August this year announced a loss of $66.8mn for the second quarter of 2015, compared with losses of $94.8mn for the second quarter of 2014.

Sonangol reduced its capital expenditure (capex) by 45pc to $5.55bn last year, as lower oil prices prompted it to cut costs. And spending is likely to fall in 2015. The decline in oil prices hit Sonangol's 2014 profits, which dropped by 77pc on the year to $710mn.