Angola’s Oil Sector Making A Comeback After OPEC Exit

In 2023, Angola officially announced that it was leaving OPEC amid a disagreement over oil production quotas, ending its 16-year stint in the cartel. Angola, Africa’s second-largest crude producer, became the fourth country to leave OPEC after Indonesia, Qatar and Ecuador left in 2009, 2019 and 2020, respectively. 

Relations between the South African country and OPEC came to a head after OPEC gave the green light to the United Arab Emirates to increase its production by 200,000 barrels per day (bpd) to 3.2 million barrels in 2024, but lowered Angola’s quota to 1.1 mb/d, roughly in-line with the country’s declining production. 

However, the move did not go down well with Angola,“Our role in the organization was not deemed relevant. It was not a decision made lightly — the time has come,” Angola’s Mineral Resources Minister Diamantino Azevedo said while announcing the withdrawal.

And now it appears that Angola’s recalcitrance is beginning to pay off. Angola’s average daily oil production hit 1.134 million barrels in the first three quarters of 2024, good for a 4% increase compared to 2023 production. According to the Angola Press Agency, government stabilization measures have contributed to the uptick in production, with the gains attributed to the commissioning of new oil wells and interventions in various concessions.

Luckily, the country is also witnessing a surge in both onshore and offshore oil and gas discoveries coupled with rising exploratory activity. A few weeks ago, Nigerian multinational energy company Oando PLC was awarded operatorship of Block KON 13 in Angola’s Onshore Kwanza Basin by the Angolan National Agency for Petroleum, Gas, and Biofuels (ANPG). Block KON 13 is located in the prolific Kwanza Onshore Basin with estimated prospective resources of 770 to 1,100 million barrels of oil. With a 45% participating interest, Oando’s subsidiary Oando Energy Resources will lead the development of the block as operator, alongside Effimax (30%) and Sonangol (15%) as co-venturer.

Related: Gulf States Go Big on Solar

Last September, pan Angola-Brazil focused exploration and production company Corcel announced that its contractor, Metatek Group, has completed the acquisition of data phase of the Enhanced Full Tensor Gradiometry Survey (‘eFTG’) on Block KON-16. Corcel holds an operated and controlling interest in KON-16,  a large (1000 sq km) block in the onshore Kwanza Basin.

Back in 2020, Exxon Mobil Corp. (NYSE:XOM) announced that it has, together with its partners, discovered hydrocarbons in Block 15 off Angola in the Bavuca South prospect. This was the block’s 18th discovery, but the first since 2003. According to Exxon, the Valaris DS-9 drillship drilled the Bavuca South-1 well 365 km northwest from the coast at Luanda in 1,100 m (3,608 ft) of water, encountering 30 m (98 ft) of good-quality, hydrocarbon-bearing sandstone. Exxon owns a 36% interest in the block, with BP Exploration Angola (24%), ENI Angola Exploration (18%), Equinor Angola Block 15 (12%) and Sonangol P&P (10%) being its partners.

Uphill Task

That said, Angola is facing a herculean task in its bid to return to its former glory. The country’s production when it joined OPEC in 2007 clocked in at 1.66 million b/d, peaking at 1.88 mb/d a year later. From there the country’s output somewhat plateaued, dropping slightly to 1.80 mb/d by 2015 before going into a steep decline in the subsequent years. Angola’s major challenge has been a failure to attract enough investments for its aging, deepwater oil fields. Whereas the country’s oil deposits at first drew the attention and deep pockets of corporate majors BP Plc (NYSE:BP), Exxon Mobil Corp. (NYSE:XOM), and Chevron Corp. (NYSE:CVX), its deepwater fields have declined faster than those onshore. Before its exit, Angola repeatedly failed to meet OPEC production quotas. Further, the country’s tax regime has also deterred investment, a situation that worsened when crude prices slumped from 2014 to 2016.

Angola will also be keen to avoid the so-called ‘resource curse’ that has afflicted many resource-rich African nations. To wit, in August, Mozambique officially started exporting liquefied natural gas (LNG) after years of delay thanks to rampant corruption and political instability. Back in 2010, Anadarko Corp. (now a subsidiary of Occidental Petroleum Corp.) and Italian energy giant Eni S.p.A. announced the discovery of approximately 180 trillion cubic feet of natural gas reserves, equivalent to ~29 billion barrels of oil, in Mozambique’s supergiant offshore basin of Rovuma, immediately catapulting the south African nation to a potential global LNG superpower. As you might expect, there was a stampede by oil and gas majors including ExxonMobil (NYSE: XOM), TotalEnergies, Shell (NYSE:SHEL), Eni S.p.A. and China National Petroleum Corp. (NYSE: SNP) coming in to stake their claims.

But it was not long before terrorism and the long tail of the “hidden loans” corruption scandal, in which senior officials had formed state-owned companies that borrowed billions of dollars off-the-books, started to cast a pall on the economy and took a toll on investor confidence. 

Mozambique was plagued by a 16-year civil war that ended in 1992, yet resurgent armed conflict remains a major challenge. The root causes, as always, have been underdevelopment and corruption. Over a period spanning more than five years, a notorious terrorist organization that aligned itself with the Islamic State carried out dozens of attacks, especially in the Cabo Delgado province. The insurgency killed more than 1,500 people and displaced another 250,000 in the country’s north.

Thankfully, the country’s current outlook is far more positive than it’s been in decades, with Mozambique having managed to attract significant investments after President Felipe Nyusi was sworn in in 2020.

“The completion of this international venture is a sign of the recognition by the market that Mozambique offers a stable, transparent and predictable environment for the realization of multi-billion investments, where high technology stands out in order to monetize resources in a phase of the energy transition, therefore it must bring pride to all Mozambicans, ” President Nyusi said after the first shipment of gas under a long-term purchase and sale contract with British giant BP. 

Angola will be looking to Mozambique for some important lessons as the country starts to unlock its gas riches valued at nearly $100 billion.

By Alex Kimani for Oilprice.com

source : oilprice