Due to production difficulties in Nigeria, Angola has become Africa’s
top oil producer, and the authorities in Luanda, with help from the
Chinese, are planning to keep it that way
After 12 months at the helm of the Organisation of Petroleum Exporting Countries (OPEC), Angola hopes that during 2010 it can cement its position as Africa’s top oil producer. Through a combination of disregarding its OPEC quotas and the fall in Nigeria’s production, Angola has inched its way to the top spot. With a number of key projects coming on stream in late 2009 and into 2010, it might just succeed.
“In some ways Angola is the leading oil producer in Africa by default, in terms of Nigeria’s production going down,” says Jonas Horner, an analyst at Eurasia Group in Washington. “But that does not take away from the fact that they have also been able to raise their production dramatically and that they have a lot of ambition.”
In February, Manuel Vicente, chairman of state-owned oil company Sonangol said production would average around 1.65m barrels per day (bpd). Angola’s OPEC quota should have cut this to around 1.5m bpd, but by the end of the year the country, keen to make up for lower oil prices, was flaunting its quotas and producing 1.7m-1.9m bpd.
Unlike many of Angola’s oil-producing neighbours in the Gulf of Guinea, the country appears to be a bastion of stability, having been ruled by President José Eduardo dos Santos for 30 years, which is attractive to investors.
Monday Okoro, a vice-president of oilfield services company Schlumberger, which has a number of contracts in Angola, says: “Definitely, the stability that Angola enjoys is helping investment, and that’s what any country needs for continuous investment to grow.”
Okoro, who is also Schlumberger’s
Angola general manager, adds: “The country represents a very strong future for production in West Africa, and with all the investment going into Angola today, it could make Angola a very strong
producer for years to come.”
This sentiment is echoed by French oil major Total, which during 2009 invested more than $4bn and hopes to increase its production levels by at least one-third over the next two years.
“Angola is a key country for us and it has very high potential,” says the company’s vice-president for exploration and production in Angola, Frédéric Cegarra. “We all know that after 30 or 40 years of war, it is not very easy to get people with all the areas of expertise that we need. We also have the constraint of very high costs of living and housing. But investing in Angola has many advantages: you have stability, a stable contractual environment and a solid legal framework. That means we can plan to invest without being too anxious about the future.”
Oil major boosts
Among the key projects expected to boost Angola’s annual production in 2010 are Chevron’s Tombua-Landana project in Block 14, Total’s Pazflor in Block 17, BP’s ultra-deepwater Block 31 and ExxonMobil’s Kizomba Satellites
in Block 15, although this may not come on stream until 2011.
Smaller operators are also hoping to make their mark in Angola next year. Brazilian state-owned Petrobras drilled its first exploration and production well in late 2009 and will start to develop Block 18 over the coming months. Angola is Petrobras’s second-biggest exploration market after Brazil, and according to Brazil’s ambassador to Angola, Afonso Cardoso, the company plans to invest more than $3bn in the country between now and 2012. Italy’s ENI will continue its exploration of Block 15, while
Maersk is expected to start its first
exploration in Block 23 next year.
Sonangol, which remains the regulator and chooses which companies operate which contracts under production-sharing agreements, continues its operations in the shallow water at Blocks 2, 3, and 4 through Sonangol Pesquisa e Produção. Meanwhile,
Sonangol’s gas arm, Sonagas, has begun drilling a high-temperature gas exploration well which could pave the way for substantial offshore gas discoveries. Natural gas reserves in Angola are estimated to be more than 11trn cu ft.
As well as talk of investments and projects in Cape Verde, São Tomé e Príncipe and Ecuador, and banking and real estate deals in Portugal, a number of Sonangol’s onshore subsidiaries are developing a new refinery in Lobito and a liquefied natural gas plant in Soyo. The new $8bn refinery, being built by Sonaref and Houston-based KBR,
formerly a part of Halliburton, is badly needed as Angola imports 60% of its transport and heating fuel, leading to 40-car-deep queues snaking around petrol stations in Luanda, some through the night.
Angola’s game, or rather Sonangol’s, caught the eye of the international business community when the oil company invoked its right of first refusal for a 20% share of Block 32 held by US-based Marathon Oil on 10 September. China National Offshore Oil Corporation and China Petroleum and
Chemical Corporation were planning to buy the block – with estimated recoverable reserves of 1.5bn barrels of light crude – in a 50-50 joint venture for $1.3bn. But as a 20% equity holder (with partners ExxonMobil holding 15%, Petrogal 5% and operator Total 30%), Sonangol had the right to buy the stake for the price on offer – and did so. The reasons for Sonangol’s decision to block the Chinese consortium – apart from Angola trying to reduce its dependency on China as some analysts suggest – remain as opaque as the date of the next bidding round.
Postponed from 2008 due to parliamentary elections, the licensing round was expected in 2009 but put back again to allow a new constitution and new presidential elections. With changes to the voting system likely, no election is expected until 2012, which means that the round could be put back an additional three years.
While there is much talk internationally about when the next bidding round will open, Schlumberger’s Okoro believes that within Angola the delays have had little effect. “The bidding rounds don’t have any impact on
current business because there is enough work already allocated to operators, and if they were to perform all their work we’d still all be busy,” he says. “Future bid rounds will definitely add some spice, but over the next five years there is enough work.”
Operators and service companies also have their work cut out to keep up with Angola’s rigorous demands for local content. International firms are
required to ensure more than two-thirds of their workforce is Angolan and to make commitments to training and local development, like building schools and supporting community health services. While these schemes are improving lives for some, most Angolans are left wondering how their resource-rich country continues to be dogged by power failures and blackouts.
Turn the lights on
The Empresa Distribuidor de Electricidade de Luanda has pledged to spend $100m to build new substations. Investment into hydropower continues, with a number of new projects coming online, including two new Russian-financed hydro-power stations on the Kwanza River in Malanje and Kwanza Norte provinces.
A project to link the Inga dam in the Democratic Republic of Congo to South Africa through Angola and Namibia appears to be on hold, but following South African President Jacob Zuma’s visit in August other projects, including cooperation on refining, could start to take shape. Meanwhile, most Angolans rely on diesel-guzzling generators to power their homes and offices, and the poorest, in the slums of the capital Luanda or in remote rural villages, just make do without power. |
