Overview of Angola’s oil and gas sector and major projects.

Angola has become a leading area for hydrocarbon exploration in sub-Saharan Africa, and it is the region’s second largest oil producer (after Nigeria). Experts believe that production will reach 1 mm bpd by 2003.

The country is slowly recovering from its civil war, which stretched from 1975, after gaining independence from Portugal, to 2002 where a ceasefire agreement was signed following the death of Jonas Savimbi, leader of the UNITA rebels. The peace process is still continuing, and there is relative stability in Angola. The country’s president, Jose Eduardo dos Santos has declared that he will not run in the next election. Angola has also been elected as Africa’s regional representative on the UN Security Board from 2003 to 2004.

 The war destroyed much of Angola’s infrastructure, displacing anywhere from 2,5 – 4 million people. The economy is strongly dependent on its oil sector, which accounts for around half of its GDP and over 90 percent of its export revenues.

The majority of Angola’s oil is found in offshore Cabinda, which produced more than half of Angola’s oil and is responsible for nearly all of its foreign exchange earnings. As a result, political tension often runs high in the area, as separatists demand a larger share of oil revenue for the province’s population.  The province currently receives 10 percent of taxes paid by Chevron Texaco and its partners operating offshore in Cabinda. Crude reserves are also found around the city Soyo, offshore in the Kwanza Basin north of Luanda and offshore on the north coast. Angola produces high quality crude oil with an API gravity ranging from 32 degrees to 39.5 degrees. Sulphur content is from 0.12 – 0.14 percent.

Angola’s national oil company, Sonagol, is the sole concessionaire for exploration and production and the only way a foreign company can enter this market is via joint ventures and production sharing agreements (PSA) with Sonagol. Presently, the biggest overseas companies operating in Angola are: Chevron Texaco, TotalFinaElf and ExxonMobil.

Production
Crude oil production has increased by nearly 600 percent since 1980, and output averaged 742,000 bpd in 2001. Production averaged around 897,000 bpd within the first eight months of 2002, and the figure is estimated to rise to one million bpd in 2003.

Block Zero (Area A, Area B, and Area C), located offshore the enclave of Cabinda, accounts for most of Angola’s crude oil production, although large new reserves have been discovered offshore mainland Angola. The Chevron Texaco subsidiary, Cabinda Gulf Oil Company (CABGOC), is the operator of the Block Zero fields, with a 39.2 % share in the joint venture.

Other partners include Sonangol (41 %), TotalFinaElf (10 %) and ENI-Agip (Agip 9.8 %).

Angola’s largest producing oil fields are Takula (Area A), Numbi (Area A), and Kokongo (Area B). Chevron Texaco was fined $ 2 million for environmental damage in August 2002, stemming from a pipeline leak in June 2002. The company estimated that it was still losing around 12,000 bpd in crude oil, since it refused to use the pipeline until measures could be taken to prevent further leaks.

In August 2001, CABGOC and its partners announced the commencement of production from the Nemba Norte platform. The platform, completed in March 2001, initially produced 20,000 bpd. Nemba Norte has yet to reach peak production of about 50,000 bpd, but will have produced an average of about 42,000 bpd for the year 2002.

Nemba Norte crude is transported by pipeline to the Malongo Terminal for export. It is anticipated that production levels on Block Zero will be maintained or possibly raised to 600,000 bpd, by the implementation of further field development and enhanced oil recovery. CABGOC plans to invest nearly $ 4 billion in field development activities over the next few years.

ExxonMobil’s subsidiary Esso began construction of the Xikomba deepwater development in Block 15 in August 2002. Discovered in 1999, the Xikomba field is located 230 miles northwest of Luanda, and is estimated to have recoverable reserves of around 100 mm barrels of oil; at its peak it is expected to produce 80,000 bpd. Production will consist of 9 sub-sea wells connected to a Floating, Production, Storage, and Offloading (FPSO) vessel, and the first oil is expected to be extracted near the end of 2003.

Procurement, fabrication, and installation of flexible flowlines and risers that are to be connected to the FPSO, as well as the installation of various sub-sea equipment will be handled by Technip-Coflexip. Sonangol is concessionaire of the block, while Esso holds a 40 % interest, BP Exploration Angola has a 26.67 % share, Agip Angola Exploration B.V. holds a 20 % interest, and Den Norske Stats Oljeselskap has the remaining 13.33 %.

CABGOC is the operator of Angola’s first producing deep-water block. In January 2000, CABGOC announced that production had begun on the Kuito field in Block 14. First oil from the Kuito field was achieved only 15 months after the award of the contract, making it the fastest cycle time of any project of its kind in sub-Saharan Africa. The Kuito field had initial production of 80,000 bpd, and a peak production level of 100,000 bpd is targeted. Other discoveries on the block, Belize, Benguela, Tomboco, and most recently Tombua, are being developed jointly, and the first four are expected to come on stream in 2005. Initial output should flow at about 140,000 bpd and increase to 200,000 bpd when all fields are on stream.

The French engineering firm Technip was awarded the contract for the construction of a 42-wellhead drilling/production platform for the Benguela and Belize discoveries. The Tomboco discovery, which is further offshore, will probably be tied into this production facility. CABGOC has a 31 % interest on Block 14, and is joined by Sonangol (20 %), Agip (20 %), TotalFinaElf (20 %), and Petrogal (9 %).

Exports
The United States is Angola’s largest importer. Exports to the USA were 313,000 bpd during the first eight months of 2002. Angola was the ninth largest supplier of crude oil to the United States in 2001.

Angola also exports to markets in Europe, Latin America and Asia. Asia is the fastest growing market, and statistics show that China’s oil imports from Angola grew by more than 400 percent in 2001. China’s increased demand for Angolan crude is the result of stricter environmental standards that places a premium on lower-sulphur West African crudes.  Exports to South Korea also rose from $97 million in 1998 to $588 million in 1999.

Exploration
Chevron Texaco and TotalFinaElf may create a consortium to conduct oil exploration activities along the Angolan and Republic of Congo-Brazzaville border. The two nations have agreed to explore the area jointly to avoid conflict over which country has legal rights to the reserves. However, the size of the existing oil reserves is still being studied.

ExxonMobil’s subsidiary, Esso Exploration Angola and Sociedade Nacionale de Combustiveis de Angola made a deepwater oil discovery on Angola’s Block 15 in September 2002. The well, called Reco Reco-1, tested at a rate of 2,640 bpd and was drilled in 4,718 feet of water to a total depth of 12,460 feet. Reco Reco-1 is the thirteenth discovery in Block 15.

BP and Sonangol found oil in the ultra-deep waters of Block 31 in September 2002. The well tested at a maximum rate of 5,357 bpd. BP has a 26.7 percent stake in the block, Esso 25 percent, Sonangol 20 percent, Statoil 13.3 percent, Marathon 10 percent and TotalFinaElf has five percent.

Canadian Natural Resources signed a four year production sharing deal with Sonangol in September 2002, enabling it to explore for oil in Block 16, which 1.2 million acres in size and located 72 miles offshore. Canadian Natural is the operator, retaining a 50 percent working interest in the block. Odebrecht Oil and Gas Angola have 30 percent and Sonangol controls the remaining 20 percent.

Several significant discoveries have been made on deepwater offshore Block 17, located northwest of Luanda. The Girassol field was discovered in 1996 in 4,500 feet (1,365 meters) of water. Girassol is estimated to contain 725 mm barrels of recoverable reserves. TotalFinaElf, operator with 40 % interest in the Block 17 PSA, and its partners ExxonMobil (20 %), BP (16.67 %), Statoil (13.33 %), and Norsk Hydro (10 %) decided to fast-track the development of the Girassol field.

Production began in 2001, and by 2002 was producing 120,000 bpd, more than half of its expected peak production of 200,000 bpd. Additional discoveries have been made on Block 17, including Dalia (1997), Rosa (1998), Lirio (1998), Tulipa (1999), Orquidea (1999), Cravo (1999), Camelia (1999) and Jasmin 1 (2000). The Dalia field, with an estimated 1 bn barrels of recoverable reserves, will be developed using a FPSO. First oil from Dalia is expected by the end of 2004.

The Mavacola-1 discovery on Block 15 was announced in May 2001. Mavacola-1, which flowed at a test rate of 3,200 bpd, is the eleventh discovery made on the block since the Kissanje discovery was made in February 1998. Other recent discoveries on Block 15 include Vicango-1 (2001), Mbulumbumba-1 (2001), Batuque (2000), Saxi-1 (2000) and Mondo (2000). Block 15 contains an estimated recoverable hydrocarbon potential of over 3.5 bn boe.

Plans for multiple developments on the block are being developed. The Kizomba-A project will develop the Hungo (1998) and Chocalho (1999) discoveries. An FPSO vessel will be utilized for the Kizomba-A project, with production scheduled to start before the end of 2004. Production is targeted to eventually reach 250,000 bpd. The Kizomba-B project, also projected to reach 250,000 bpd, will develop the Kissanje, Marimba (1998), Dikanza (1998) and Xicomba (1999) discoveries. First oil from Kizomba-B is not expected before the end of 2005.

ExxonMobil (40 %), the operator, BP (26.67 %), Agip (20 %), and Statoil (13.33 %) are the participants on the Block 15 PSA. The Kizomba-C project will also encompass multiple fields, though it is still in the planning stages. So far, the $ 3.5 bn project is expected to develop the Batuque, Saxi, and Mondo fields, and may begin producing oil by 2006 or 2007. 

Refining and Downstream
Fina Petroleos de Angola refinery in Luanda has a crude oil processing capacity of 39,000 bpd. The refinery is a joint venture between Sonangol (36 %), TotalFinaElf (61 %) and private investors (3 %). TotalFinaElf  plans to raise capacity to 60,000 by 2004. Two processing units will be enlarged and a third scrapped to boost efficiency. The refinery needs to be upgraded by 2005 to meet product specifications and deadlines as stipulated by SADC, which includes phasing out lead and increasing octane content in gasoline.

Angola is presently developing plans for a new 200,000 bpd refinery, to be located in the central coastal city of Lobito. Eighty percent of the products refined at the new facility will be exported regionally. Construction will commence before the end of 2003 and the refinery will come onstream by 2007. Equity must still be finalized, but it is envisaged that Sonangol will retain 50 percent, a foreign technical partner will have 20 percent, a foreign financial partner will secure 20 percent and the remaining 10 percent will be retained by entities in SADC.  Sonangol is investing $3 – 5 billion and is using Dresdner Kleinwort Wasserstein as their financial advisor.

Sonangol Distribution, TotalFinaElf and Sonangalp (a joint venture between Sonangol (51 percent) and Petrogal (49 percent) provide product distribution and marketing in Angola.

Natural Gas
Natural gas reserves in Angola are estimated at 1.6 tcf. New discoveries could push reserves to 9.5 tcf and possibly as high as 25 tcf. Around 85 percent of natural gas in Angola is flared, the remainder is reinjected to aid in oil recovery and processed in the production of LPG. The World Bank estimates that Angola accounts for 30 percent of natural gas flared in Africa.  Plans are underfoot to reduce natural gas flaring and to increase commercial usage of natural gas. CABGOC has developed two zero-flare fields, Nemba and Lomba, and will develop a third – Kuito.

Chevron Texaco (32 percent), Sonangol (20 percent), BP (12 percent), ExxonMobil (12 percent) and TotalFinaElf (12 percent) will develop a LNG project that would convert natural gas from offshore oil fields (Blocks 1, 2, 3, 4, 15, 17 and 18) to LNG for export.  The facility will be located in Luanda and initially will consist of one LNG train with a capacity to process 4 million tpy of LNG. The $2 billion LNG project is expected to run by 2007.

Electricity
Angola’s electricity generating capacity stood at 586MW in January 2000. Capacity is split evenly between thermal and hydroelectric units, hydroelectric facilities generate more than two thirds of Angola’s electricity. Only 15 percent of Angola’s ten million residents has access to electric power.

Angola will embark on a major reconstruction of its power sector infrastructure, after much of it was destroyed by the 27-year civil war.  Plans include the recovery of productive capacity of the state owned electric utility, Empresa Nacional de Electricidade (ENE), by rehabilitating its hydropower stations. The government plans to create a national grid by linking three electricity grids and establishing linkages with neighboring countries.

The Energy Minister announced in 2002 that a new dam in Dala municipality was to be built to provide the Moxico province with electricity. Construction will commence in 2003. Lueno, Moxico’s capital, will receive a 1.5 MW generator.

Odebrecht, a Brazilian construction company, is currently rehabilitating the Matal facility and has completed construction of a new hydroelectric facility at Capanda on the Kwanza River.  When completed, Capanda is likely to nearly double Angola’s electricity generating capacity.

Energy Overview

Minister: Petroleum                               Jose Maria Botelho de Vasconcelos

Minister: Energy and Water                   Luis Filipe da Silva

Proven Oil reserves (01/01/02)               5.4 bn barrels

Oil Production (Jan – Aug 2002)             897,000 bpd crude oil

Oil Consumption (2002)                          31,000 bpd

Net Oil Exports (2002)                           866,000 bpd

Refining Capacity (01/01/2002)               39,000 bpd

Natural Gas Reserves (01/01/02)            1.6 tcf

Natural Gas Production (2000)               20.5 bn cf

Natural Gas Consumption (2000)            19.8 bn cf

Electric Generation Capacity (01/01/02)  586 MW

Electricity Generation (2000)                  1.2 bn kWh (59.7 percent hydroelectric, 40 percent thermal)

Oil and Gas Industries

Organization:                 Sociedade Nacional de Combustiveis de Angola

                                    (Sonangol), state owned

Major Oil Fields:            Takula (Block Zero), Numbi (Block Zero), Kokongo (Block Zero), Pacassa (Block three), Cobo/Pambi (Block three)

Major Refineries            Fina Petroleos De Angola-Luanda (39,999 bpd), a new 200,000 bpd refinery at Lobito is scheduled to begin construction in 2003

Major Oil Terminals       Luanda, Malango (Cabinda), Palanca, Quinfuquena

Foreign Oil Companies   Ajoco, BHP, BP, Canadian Natural Resources, ChevronTexaco, Daewoo, Engen, ENI-Agip, ExxonMobil, Falcon Oil, Fortum, Gulf Energy Resources, INA-Naftaplin, Lacula Oil, Marathon Oil, Mitsubishi, Naftgas, Naphta-Israel, Norsk Hydro/Saga, Occidental, Ocean Energy, Pedco, Petrobras, Petrofina, Petrogal, Petro-Inett, Petronas, Phillips, Prodev, Shell, Statoil, Teikoku, TotalFinaElf.

Source:  Alexander Oil and Gas & EIA

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