New deepwater fields could see Angola challenge Nigeria as the continent's leading crude oil producer
There is a saying in Angola that if you drop a seed into the soil, the next day you will find a fully grown plant. It could also be said that if you plunge a drill into Angola's seabed, oil will come gushing out.
Oil is the lifeblood of the Angolan government, providing 90 percent of the country's export revenues. The industry is also growing fast since the 1980s, the petroleum industry in Angola has grown at an average rate of
25 percent a year. The country currently produces 800,000 barrels per day (bpd), and output is set to increase considerably over the next decade.
Conservative estimates put Angola's oil reserves at around 10 billion barrels of oil. However, with the recent discovery of several new enormous offshore oil fields, figures as high as 20 billion barrels are being quoted. Angola is quite literally swimming in oil.
It was the Belgian company, Petrofina, that first discovered Angola's oil; in 1955, offshore reserves were found in the Kwanza Basin. The Portuguese colonial authorities did not hesitate to exploit this new-found wealth. They set up Fina Petroeos de Angola (Petrangol), which they owned jointly with Petrofina. The Portuguese also built an oil refinery on the outskirts of Luanda. This old dilapidated refinery still handles most local crude oil processing.
Yet, it was not until 1966 that Angola's true oil-producing potential was realized with the discovery of substantial reserves off the coast of Cabinda. The enclave has since become something of an oil haven, as production completely dominates the economic life of the province.
Then, after independence in 1975, a national oil company, the Sociedade Nacional de Combustiveis de Angola or Sonangol, was set up to manage all fuel production and distribution. Since 1978, Sonangol has been authorized to acquire up to a 51 percent interest in all petroleum exploitation activities.
Angola's largest oil production area is Block Zero off Cabinda, followed by Blocks 1 to 4 off the northern coast near Soyo. In total, there are currently 36 offshore and onshore blocks under license.
However this situation is set to change. The most exciting news for the Angolan economy in recent years has been the discovery of massive new oil fields, most of which remain unexploited. The most significant of these are the Kuito, Benguela, Belize and Landana fields in Cabinda's Block 14; the Girassol, Dahlia, Rosa and Lirio fields in Luanda/Soyo's Block 17; and the Kissanje, Marimba and Hungo fields in Soyo's Block 15.
The French oil giant, TotalFinaElf, has already brought part of the giant deepwater Girassol field onstream. Pumping started at Girassol 2 in December 2001 at 35,000 bpd but has already surged to 205,000 bpd.
TotalFinaElf has used highly sophisticated techniques to bring Girassol 2 into action. It has built a giant oil rig, using underwater robots to lay pipes from the wellheads.
Now, the government has indicated that several more of the lucrative new oil fields will come onstream within the next few years. It predicts that pumping will start at Dahlia in 2003, Rosa and Lirio in 2005, and Girassol C in 2008. Sonangol Chairman and CEO Manuel Vicente is bullish about Angola's future oil production. "We are aiming to produce 1 million bpd by 2003," he says. Government projections suggest that by 2005 Angola will be producing 1.3 million bpd.
At present, Sonangol mainly enters into production sharing agreements, although most previous agreements were joint-ventures.
Oil Minister Jose Botelho Vasconcelos explains why Sonangol has now changed its policy when striking deals with foreign oil companies, "We are a Third World economy, and have difficulty obtaining capital. We therefore prefer production sharing agreements because government investment is only required once a discovery has been declared economically viable."
Sonangol is particularly keen to award concessions for its deep-water sites which require massive investment, despite the existence of large tracts of open shallow water acreage. "This is because all the fields in shallow waters are being depleted," notes Sonangol's Manuel Vicente.
Declining production is also being reported in some of Cabinda's onshore blocks. The volume of oil discovered recently in the Lower Congo and Kwanza Basins, however, far outweighs the declining resources in some of Angola's onshore and shallow water fields.
Angola's oil sector is currently enjoying increased attention from Western countries, especially the U.S., which is anxious to become less dependent on oil from the potentially volatile Arabian Gulf. As a result, the U.S. and its allies are boosting investment in African oil and gas. America's Assistant Secretary of State for African Affairs, Walter Kansteiner, says every fifth gallon in U.S. gas tanks will come from Africa by 2005. Angola's crude oil exports to the U.S. currently amount to about 350,000 bpd, but export volumes are likely to increase together with production capacity.
Forbidden to Flare
A potentially lucrative by-product of oil production is natural gas. At present, about 85 percent of natural gas is flared. The government is currently implementing strategies to reduce this, and aims to end all gas flaring by 2010. It plans to commercialize natural gas by exporting it to the U.S., South America and Europe, and also by converting it locally for domestic consumption.
Sonangol's Manuel Vicente says, "Together with Texaco, we are planning to build a liquefied natural gas plant in Luanda. From now on, we will not authorize anyone to flare gas."
The government also plans to build a pipeline, which would bring the natural gas produced offshore to Luanda and beyond. "Not only do we hope to build a gas plant to supply the capital city, but we also want to open a supply line to Windhoek in Namibia, linked to the South African network," says Oil Minister Jose Botelho Vasconcelos.
Although the grand visions for the commercialization of natural gas are still very much in the planning stage, the very real discoveries of the giant offshore oil fields such as Girassol and Dahlia will propel Angola forward as a leading oil nation, not only in Africa but as an influential player in the world as a whole.