OIL AND GAS
Overview
Oil is Angola’s most important industry. Production soared between 2000 and 2010, recently overtaking Nigeria as Africa’s largest producer.
Angola now offers a more stable and secure environment than many of its competitors in the Gulf of Guinea.
The national oil company, Sonangol, established in 1976, works in partnership with various international oil companies through joint ventures (JVs) and Production Sharing Agreements (PSAs) to produce and supply Angola’s oil.
The oil industry is dominated by the upstream sector – exploration and production of crude oil and natural gas. To date, the downstream sector – refinery and distribution of the products derived from crude oil – remains underdeveloped.
One oil refinery in Luanda for example is unable to meet domestic demand of 65,000 barrels per day. The government is, however, addressing this. A refinery in Lobito capable of refining 200,000 barrels a day is, after long delays, expected to begin construction this year.
The oil rich continental shelf off the coast of Angola has been divided into 35 ‘blocks’. The off-shore fields north of Luanda – blocks 0-4 – account for the majority of Angola’s oil with the richest sources off the northern-most province of Cabinda – block 0. Explorations along the entire coastline have resulted in further substantial discoveries.
Oil was first discovered inland in 1955 in the Kwanza basin near Luanda. But it wasn’t until the late 1960s, when the offshore Cabinda reserves were discovered, that the oil industry took off. By independence in 1975, oil had overtaken coffee as Angola’s leading export.
Production steadily increased throughout the 1980s. In the 1990s international oil companies reported major discoveries in the deeper waters further off the coast. In the wake of the civil war in 2002 production soared to approximately 2 million barrels a day.
Angola produces light sweet crude oil containing low volumes of sulphur. It is perfect for the processing of gasoline, kerosene and high quality diesel. From January 2010 Angola had proven oil reserves of over 9 billion barrels. The actual figure may be significantly higher.
In 2007, Angola officially became the 12th member of the Organization of the Petroleum Exporting Countries (OPEC) and assumed the presidency of the organization in 2009.
Natural gas is a direct by-product of oil production. The natural gas industry still needs significant investment to capture its full economic potential. Estimates suggest Angola has natural gas reserves in the region of 11 trillion cubic feet.
Much of the gas is currently flared or vented due to the lack of viable alternative options. But the Angolan government is now seeking to make more productive use of the resource. Converting some of it into Liquefied Natural Gas (LNG) for export and using some for domestic electricity production are just two possible options.
LNG will provide additional economic benefits as well as offering more environmentally friendly management of the natural gas. Angola is capable of supplying approximately 5 million tonnes of LNG for over 20 years.
The primary companies involved in Angola’s natural gas exploration and production – as part of the Angola LNG project – are: Chevron(with a 36.4% stake in the market), Sonangol (with a 22.8%), BP (13.6%), Total (13.6%), and ENI(13.6%).
Exploration and production is focusing on the offshore Blocks 0, 14, 15, 17 and 18. Onshore, LNG is being produced near the northern town of Soyo in Zaire province.
Company Profiles
Profiles of the key oil and gas companies in Angola.
Sonangol
Background
The Angolan state oil company, Sonangol, was established in 1976 on the eve of Independence from Portugal. The former Portuguese company, ANGOL, was nationalized and split into two companies: SonangolU.E.E. (later to be rebranded Sonangol E.P.) and Direcção Nacional de Petróleos. In the same year, Sonangol was formerly recognized as the state-owned company mandated to manage Angola’s abundant hydrocarbon resources.
The Angolan state oil company, Sonangol, was established in 1976 on the eve of Independence from Portugal. The former Portuguese company, ANGOL, was nationalized and split into two companies: SonangolU.E.E. (later to be rebranded Sonangol E.P.) and Direcção Nacional de Petróleos. In the same year, Sonangol was formerly recognized as the state-owned company mandated to manage Angola’s abundant hydrocarbon resources.
As post- independent Angola descended into civil war many of the multinational oil companies working in Angola, including Texaco (now Chevron) and Shell, fled their operations in the country. The newly established Sonangol successfully managed to appropriate much of the infrastructure and workforce abandoned by the companies. Still lacking qualified Angolan personnel, the company began sending students to Italy and Algeria to receive training.
With the establishment of the subsidiary Sonangol P&P in 1992, Sonangol became actively involved in the exploration and production of oil. Sonangol is now widely considered one of the most sophisticated state-owned oil companies on the African continent. As the company’s website explains, “Despite having the government as the sole shareholder, Sonangol has always been governed as if it were a privately owned company and is under strict performance standards to ensure efficiency and productivity.”
Current Dynamics
Sonangol has grown well beyond the borders of Angola. It now maintains offices in the USA, the UK, China, and Singapore. It has expanded operations and now has exploration ventures in to Cape Verde, Congo-Brazzaville, Gabon, São Tomé and Príncipe, Brazil and Cuba. Whilst in Iraq, Sonangol acquired licenses to drill in the country’s riskiest regions.
Sonangol has grown well beyond the borders of Angola. It now maintains offices in the USA, the UK, China, and Singapore. It has expanded operations and now has exploration ventures in to Cape Verde, Congo-Brazzaville, Gabon, São Tomé and Príncipe, Brazil and Cuba. Whilst in Iraq, Sonangol acquired licenses to drill in the country’s riskiest regions.
The company’s numerous subsidiaries include:
- Banco Africano de Investimentos (BAI),
- MSTelcom – Angolan mobile phone network operator,
- Sonair – Airline Services,
- Sonangol Distribuidora – supplying downstream petroleum products to the domestic market,
- Sonangol Shipping – providing transportation of crude petroleum,
- Sonagas – developing Angola’s Natural Gas exploration and production
As the Economist Intelligence Unit notes, “Sonangol is well respected in the oil industry”. Sonangol ultimately holds control of all hydrocarbon interests in Angola. Sonangol P&P as an operator produces approximately 6% of annual oil production in Angola. The remaining 94% of production is drawn from projects licensed by Sonangol to various International Oil Companies.
With numerous contracts involving several different subsidiaries, Sonangol is often accused of ignoring conflicts of interest and favouring self-benefiting arrangements.
In January 2011 Sonangol awarded exploration rights to 11 deep-water sub-salt blocks after several years of postponement. The awards bring three newcomers to the Angolan oil fields – Statoil, Repsol and ConocoPhillips (currently involved in the construction of the Angola LNG plant in Soyo). Total, ENI, BP and Cobalt were also awarded operatorships for the new blocks.
Growth of international deep-water exploration slowed following the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. Angola’s deep-water potential, however, remains strong after significant finds by Eni in the same year. The awarding of the rights paths the way to some of the deepest exploration in the Gulf of Guinea and the first significant exploration effort in West Africa’s subsalt region, which, it is suggested, hold similar potential to that of Brazil where large deposits have recently been discovered.
Chevron
Background
Chevron (formerly Texaco) has a long history in Angola beginning in the 1950s. Chevron discovered Angola’s first offshore oil and gas field in 1966. Three decades later, in 1997, the company discovered Angola’s first producing deep-water well. Chevron is now spearheading the growth of the natural gas industry in Angola with the largest stake (36.4%) in the Angola LNG plant under construction in Soyo.
Chevron (formerly Texaco) has a long history in Angola beginning in the 1950s. Chevron discovered Angola’s first offshore oil and gas field in 1966. Three decades later, in 1997, the company discovered Angola’s first producing deep-water well. Chevron is now spearheading the growth of the natural gas industry in Angola with the largest stake (36.4%) in the Angola LNG plant under construction in Soyo.
Chevron operates through its subsidiary Cabinda Gulf Oil Company (CABGOC) and hold leases in some of Angola’s most profitable offshore blocks, including Block 0 (39.2%) situated in relatively shallow waters just off the coast of Cabinda. It holds leases in Blocks 2 (20%) off the shore of northwest Angola, and 14 (31%) in deep waters further west of Block 0. It also holds interests in the Fina Sonangol Texaco (FST) onshore block.
Current Dynamics
Chevron is one of Angola’s largest oil producers. With interests in deep-water, shallow-water, and onshore blocks as well as holding the greatest stake in Angola LNG, Chevron is widely considered to have the most diversified portfolio in Angola. It is one of the largest employers of Angolan staff in the country – more than 2,900 Angolans, 86% of the total workforce in the country.
Chevron is one of Angola’s largest oil producers. With interests in deep-water, shallow-water, and onshore blocks as well as holding the greatest stake in Angola LNG, Chevron is widely considered to have the most diversified portfolio in Angola. It is one of the largest employers of Angolan staff in the country – more than 2,900 Angolans, 86% of the total workforce in the country.
Besides holding the biggest stake in Angola LNG – the single largest investment ever made in the country – Chevron has reportedly invested $1.9 billion in the Sanha condensate project in Block 0. Rather than venting or flaring the oil-associated-gas from this particularly lucrative block, Chevron is using a 198,000 horsepower compressor to re-inject the natural gas back into the reservoir. When the Angola LNG plant is fully operational, the re-injected gas will be re-extracted. Sanha’s Liquefied Petroleum Gas (LPG) floating production, storage and offloading (FPSO) vessel, Chevron claims, is the largest in the world.
The company has an impressive Corporate Responsibility profile in Angola, particularly in Cabinda where it has been involved in numerous education and health programs claiming that over 2 million individuals, throughout 16 of Angola’s 18 provinces, have benefitted directly.
It has however also been the focus of significant criticism in the Angolan exclave. Cabindan separatists are quick to point out that Chevron’s early operations in the 1950s and 60s occurred when Cabinda was a Portuguese protectorate distinct from the Angolan colony. They further suggest that Chevron has effectively financed the Angolan government’s hold on Cabinda since.
In 2002 Chevron was fined $2 million by Angola’s Ministry of Fisheries and the Environment for oil spills effecting Cabinda. Investigations suggested that the spills were due to obsolete piping. Despite reportedly spending $108 million replacing pipes, Chevron continues to face accusations of pollution and was blamed again when oil washed ashore in 2010.
ExxonMobil
Background
Following the merger between Exxon and Mobil in 1999, ExxonMobil has become the largest of the six oil supermajors – non-state owned oil companies consisting of BP, Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell and Total. The company has consistently been listed as one of the largest publicly traded companies in the world and is reported to be responsible for approximately 3% of total world oil production.
Following the merger between Exxon and Mobil in 1999, ExxonMobil has become the largest of the six oil supermajors – non-state owned oil companies consisting of BP, Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell and Total. The company has consistently been listed as one of the largest publicly traded companies in the world and is reported to be responsible for approximately 3% of total world oil production.
The principle subsidiary operating in Angola, Esso Exploration Angola (Block 15) Limited, has been operating in Angola since 1994 when it signed a sharing (40%) contract for Block 15 with Sonangol. After several large discoveries (nearly 5 billion barrels to date) Esso Angola began construction of Kizomba A floating production, storage and offloading (FPSO) vessel in 2001. In operation since 2004, Kizomba A is the world’s largest oil FPSO vessel.
ExxonMobil also holds a stake in Blocks 17 (20%), 31 (25%) and 32 (15%) where explorations are underway.
Current Dynamics
ExxonMobil now has 5 FPSO vessels, and 2 sub-sea wellhead platforms operating in Block 15 making it one of the most lucrative in Angola. The block is producing over 700,000 barrels per day at peak production.
ExxonMobil now has 5 FPSO vessels, and 2 sub-sea wellhead platforms operating in Block 15 making it one of the most lucrative in Angola. The block is producing over 700,000 barrels per day at peak production.
Despite being the larger company, ExxonMobil still lags behind its fellow-US competitor Chevron in Angola. However, with its rapid success with Block 15 –reportedly setting a new world record cycle times with lowest unit-development costs for projects of equivalent size and complexity – the company is widely expected to overtake Chevron in total annual production within the next 5 years.
In 2007 ExxonMobil pulled out of the Angola LNG project, reportedly due to “commercial developments”. However, Block 15 is due to be the first to deliver gas to the LNG plant in Soyo.
The ExxonMobil Foundation acts as the “primary philanthropic arm” of the corporation. Through partnerships with various organisations, including ADPP Angola, Africare, Pathfinder and USAID, ExxonMobil has contributed to numerous health and education projects in the country. The company’s Malaria initiative has reportedly enabled the distribution of hundreds of thousands of mosquito nets throughout Angola.
Recent Developments
In March 2011, ExxonMobil were reported to have ceased production in the Xicomba oil field (where they have a 40% stake). At its peak, in 2003, the field was reported to have produced 80,000 barrels per day. This figure slipped to 30,000 in 2010.
In March 2011, ExxonMobil were reported to have ceased production in the Xicomba oil field (where they have a 40% stake). At its peak, in 2003, the field was reported to have produced 80,000 barrels per day. This figure slipped to 30,000 in 2010.
BP
Background
BP is currently the third largest energy company, and the fourth largest company, in the world. When BP merged with Amoco in 1998 it became, overnight, the biggest producer of oil and gas in the United States. Following the merger, BP adopted Amoco’s operations in Angola where it had been involved in the oil industry since the 1970s.
BP is currently the third largest energy company, and the fourth largest company, in the world. When BP merged with Amoco in 1998 it became, overnight, the biggest producer of oil and gas in the United States. Following the merger, BP adopted Amoco’s operations in Angola where it had been involved in the oil industry since the 1970s.
BP’s primary operations in Angola are in the ultra deepwater Block 31 – located off the north west of Angola. With a 26.67% stake in the Block, BP has held operatorship since 1999. Between 2002 and 2004 the extremely lucrative Plutao, Saturno, Venus and Marte (PSVM) fields were discovered. Production is scheduled to start this year with 150,000 barrels per day predicted for 2012.
BP also holds stakes in Blocks 15 (26.67%), 17 (16.67%) and 18 (50%). It holds a 13.6% stake in the Angola LNG project.
Current Dynamics
BP held an excellent track record in deepwater drilling until the massive 2010 oil spill in the Gulf of Mexico. The Deepwater Horizon blowout cost the company dearly. In the same year, BP experienced numerous difficulties in Block 31 with production reportedly falling to 170,000 barrels per day – down from 211,000 in 2009. BP’s total oil production is reported to have dropped by 15%.
BP held an excellent track record in deepwater drilling until the massive 2010 oil spill in the Gulf of Mexico. The Deepwater Horizon blowout cost the company dearly. In the same year, BP experienced numerous difficulties in Block 31 with production reportedly falling to 170,000 barrels per day – down from 211,000 in 2009. BP’s total oil production is reported to have dropped by 15%.
The company is hoping to revive its fortunes with the start of production in the PSVM fields scheduled for this year. Recent discoveries in Block 17 – the Cravo Lirio Orquidea Violeta (CLOV) project under the operatorship of Total – where BP hold a 16.67% stake could also contribute towards this regrowth. Drilling is expected to begin 2012 with production scheduled for 2014.
Recent Developments
Angola’s Minister of Petroleum, Jose Maria Botelho de Vasconcelos, announced technical audits will be conducted to avoid a spill similar to that of the Gulf.
Angola’s Minister of Petroleum, Jose Maria Botelho de Vasconcelos, announced technical audits will be conducted to avoid a spill similar to that of the Gulf.
