Angolan oil moving into Africa's No 2 spot: heavy investment in Angolan deepwater oil sources is now bearing fruit as the country is likely to leap-frog other African oil producers and secure its position as Africa's second largest oil producer over the course of the next few years. What bearing will this have on the economy?

Author:Ford, Neil
Position:ENERGY - Company overview
 
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Angola's emergence as a serious player in the global oil sector has been underlined by the publication of its latest production figures. After several years of slow output growth--from 800,000 barrels a day (b/d) to 900,000b/d--the fruits of the multi-billion dollar deepwater investment programme are finally feeding through. Production reached 1.3m b/d during the final quarter of 2005 as a result of higher production onshore in Cabinda and the announcement of first oil on the Kizomba deepwater development. With the first of the new deepwater fields now being brought on stream, the government's target of producing 2m b/d by 2008 now seems eminently within reach.

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Official Angolan government figures indicate that oil production averaged 1.25m b/d during the course of 2005, a steep jump on the year before. In addition, the government's estimate of proven oil reserves has finally been increased from 5.4bn barrels--widely regarded as an underestimate--to 12.4bn barrels.

Angola is already sub-Saharan Africa's second biggest oil producer behind Nigeria, but it is in an excellent position to overtake countries such as Libya and Algeria in the table of oil powers on the continent as a whole. BP Angola alone predicts that it will produce 400,000b/d in Angola by 2010 from blocks 18 and 31, which it operates, and blocks 15 and 17, on which it is an equity partner.

In 2005, oil generated 90% of all Angolan exports by monetary value, 80% of government income and 50% of GDP--all figures that were boosted by the high international price of oil. According to the government, this enabled it to produce a budget surplus for the very first time since independence. With elections due in 2007, the government is now expected to commit an increased proportion of its revenues to development and infrastructural projects.

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The lion's share of oil sector investment is provided by foreign oil firms, however, so such spending plans will not have any effect on the level of funding committed to oil industry developments.

Government efforts to ensure that Angola makes the most of its oil production are also beginning to pay off. The country's current refining industry is confined to the Fina Petroleos de Angola plant in Luanda, which is owned by a consortium of Total, state owned oil firm Sonangol and private investors. With processing capacity of 39,000b/d it is certainly large enough to supply the bulk of domestic consumption...

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