World Report

Sonangol is the sole concessionaire for petroleum exploration and production in Angola.

ngola’s crude oil production has quadrupled over the past two decades and its known oil reserves have tripled in the last seven years. Production is now over a billion barrels a day and a report by the International Monetary Fund (IMF) has said that the country will most likely double this by 2007. This should have an extremely favourable impact on Angola’s high foreign debt levels, which have reached roughly £5 billion. Additionally, the government has said that it will divert revenue from the petroleum industry into restarting Angola’s other sectors, especially agriculture and manufacturing, and as such, the oil industry will contribute significantly in the diversification of the economy.

Currently Angola is sub-Saharan Africa’s second largest oil producer behind Nigeria. Angolan oil exports amounted to more than £4.4 billion in 2004, £1.6 billion of which the government collected in revenues. Indeed, oil is Angola’s main source of income, representing nearly 50 percent of GDP, 90 percent of exports and almost 90 percent of government revenues. High global oil prices last year helped boost Angola’s growth to over 12 percent. A number of measures have been taken in the last year by the government to increase transparency in the industry. In May of 2004 Angola began participating in the IMF’s General Data Dissemination System, and that month the government also made public an oil sector diagnostic study carried out by the international accounting firm, KPMG.

The majority of Angola’s current production comes from Block Zero in the northern province of Cabinda, which produces approximately 550,000 barrels per day, but this will be eclipsed as deepwater production further south in the Kwanza Basin begins to come online within the next five years.

A number of new discoveries in the past year have been very encouraging. Sonangol, the national oil company, and British Petroleum announced a new ultra deepwater oil strike in February of this year in Block 31 about 223 miles northeast of Luanda, which was followed shortly by another discovery in the same block in April. In October of 2004, Sonangol made a new discovery in its Block 4 in the province of Zaire, and ChevronTexaco announced a significant discovery at the Lianzi 1 exploration well between Angola and Conga Brazzaville. A few months earlier, Sonangol and Esso Angola had announced their seventeenth discovery in the offshore field of Block 15.

Not surprisingly, companies are stepping up their investments. ChevronTexaco has said it will invest £6 billion in 12 new exploration and liquid gas projects over the next five years. The company also announced that the production of liquefied petroleum gas (LPG) would start in Cabinda’s Block Zero in the second quarter of 2005. This is in line with the government’s intention to step up natural gas production and establish a LPG plant at Soyo in the province of Zaire. Angola has substantial natural gas reserves, currently estimated at 1.6 trillion cubic feet. However, industry experts say that new discoveries could boost this number up to as much as 25 trillion cubic feet.

Sonangol is the sole concessionaire for exploration and production in Angola, and works with foreign companies through both joint ventures and production sharing agreements. Sonangol’s main activities are exploration and production, petroleum product supply to the domestic market, and the external marketing of petroleum products and crude oil. The company also has a number of subsidiaries involved in the logistics support of Angola’s oil industry, such as air transport, banking, engineering and shipping.