Oil Wealth: Angola's Blessing Or Curse?

Angola's oil industry has grown substantially since the first commercial oil discovery in 1955. Today, Angola is one of the largest oil producers in Africa, with the sector accounting for almost 75% of the country's revenues. However, the country's dependence on oil revenue has made its economy vulnerable to crude oil price volatility. While the oil industry has brought significant wealth, it is unclear what effect this has had on the lives of Angolans, especially considering the country's recent civil war and ongoing issues with poverty.

Oil revenue funds Angola's commitments under the Paris Agreement

Angola, the second-largest oil producer in sub-Saharan Africa, relies heavily on its oil and gas industry. Oil and gas products make up more than 90% of its exports, with crude oil exports alone accounting for US$39.94 billion in 2022. The petroleum industry is key and accounts for almost 75% of the country's revenues.

Angola's economy is also heavily dependent on oil exports, with oil production and supporting activities contributing about 50% of its gross domestic product. Data for 2019 shows that petroleum products accounted for more than 95% of its exports.

Angola has ratified the Paris Agreement, committing to reduce its greenhouse gas (GHG) emissions by up to 35% by 2030 unconditionally. Additionally, the country agreed to a conditional mitigation target of a further 15% reduction, making its commitment one of the most ambitious among the signatory countries.

To achieve these targets, Angola has set a five-year goal of reducing carbon intensity in electricity production. The country plans to boost electricity production by investing in renewable energy sources such as hydroelectric plants and solar energy systems. Over the last decade, more than US$17 billion has been invested in the renewable energy sector, with further investments expected to increase the annual green energy output to US$23 billion by 2022.

The success of Angola's strategy to meet its commitments under the Paris Agreement will be measured by the National Monitoring System for emissions, which will be installed in all sources of energy production, including the oil industry.

Oil exports account for 90% of Angola's exports

Angola's oil industry is dominated by the upstream sector, with almost 75% of its oil production coming from offshore fields. The country is the second-largest oil producer in sub-Saharan Africa and an OPEC member, with an output of approximately 1.37 million barrels of oil per day. Oil exports account for more than 90% of Angola's total exports, with crude oil exports alone accounting for US$39.94 billion in 2022.

Angola's economy is heavily dependent on its oil and gas industry, and hydrocarbon revenues are crucial for funding the country's commitments and improving the livelihoods of its citizens. The country holds 9 billion barrels of proven oil resources and 11 trillion cubic feet of proven natural gas reserves, which represent significant potential for further economic development and business opportunities.

The oil-rich continental shelf off the Angolan coast is divided into 50 blocks, but the number of blocks is expected to double with the auctioning of new blocks from 2019 to 2025. Angola's upstream oil and gas market shows promise and is likely to attract increased investment in the coming years. The country's first commercial onshore oil deposits were proven in 1955, and its first offshore discovery, the Malongo, was made in 1968.

The government of Angola has implemented a series of reforms to boost the oil sector, including creating a new oil and gas regulator, the National Agency for Petroleum, Gas and Biofuels (ANPG), and restructuring the state-owned oil company, Sonangol, to focus on research, production, and petrochemical activities. These reforms, along with increased oil production and prices, have provided a much-needed boost to Angola's economic recovery and investments in other sectors.

However, as with any heavily petroleum-dependent economy, market volatility in the oil and gas sector significantly shapes Angola's investment landscape. The country's high production costs, which average US$40 per barrel, and the limited investment in new and mature exploration and production fields between 2014 and 2018 have impacted its daily oil lifts. Additionally, Angola's dependence on oil revenue has made its economy vulnerable to crude oil price volatility.

Overall, while oil exports account for a significant portion of Angola's exports, the country is working to diversify its economy and reduce its dependence on the oil sector. The combination of regulatory, fiscal, and legislative reforms, along with the size of oil discoveries, provides cautious optimism for Angola's recovery and the continued interest of domestic and foreign investors.

Angola's oil industry is dominated by the upstream sector

The Angolan government has implemented a series of reforms to boost the oil sector, including the creation of the National Agency for Petroleum, Gas and Biofuels (ANPG) to regulate upstream operations and award concessions. The government has also introduced fiscal incentives to attract investment and plans to auction a significant number of new blocks for exploration and production.

The upstream market in Angola faced challenges during the COVID-19 pandemic due to decreased demand for crude oil, but it is expected to recover with the discovery of new reserves and government initiatives. The offshore segment is anticipated to witness significant growth due to the potential for crude and natural gas deposits. However, the shift towards renewable energy sources may limit the market's growth.

Upstream activities in Angola include ultra-deep-water projects pursued by major oil companies such as Total and BP. These projects involve significant investments and technological capabilities to explore and produce oil from deep-water reserves. Onshore activities are limited, with some private companies facing delays in their operations.

Overall, Angola's upstream oil and gas sector is expected to grow, driven by government initiatives, the discovery of new reserves, and the potential of offshore deposits. However, challenges related to market volatility, high production costs, and the shift towards renewable energy sources may impact the sector's growth.

Angola's oil production grew by 15% annually from 2002 to 2008

Angola's oil production grew by an average of 15% annually from 2002 to 2008. This growth was the result of production in several deep-water fields discovered in the 1990s. The first deep-water field to come online was the Chevron-operated Kuito field (Block 14) in late 1999. Since then, IOCs led by Total, Chevron, ExxonMobil, and BP have started production at additional deep-water fields and are developing new ones.

Angola's oil industry has grown substantially since the first commercial oil discovery in 1955 in the onshore Kwanza Basin. Deep-water exploration in Angola began in the early 1990s, and in 1994, deep-water blocks were licensed, leading to more than 50 significant discoveries. Oil production boomed as several deep-water fields came online from 2002 to 2008. In 2007, Angola became a member of the Organization of the Petroleum Exporting Countries (OPEC).

Angola's economy is heavily dependent on its oil industry, with about one-third of the country's GDP rooted in the oil sector. Crude oil, natural gas, and refined oil account for almost all of the country's exports. Angola is the second-largest oil-producing country in sub-Saharan Africa and an OPEC member, with an output of approximately 1.37 million barrels of oil per day. The country holds an estimated 9 billion barrels of proven oil resources, which represent a great potential for further economic development and significant business opportunities.

The Angolan government has implemented a series of reforms to boost the oil sector, including creating a new oil and gas regulator, the National Agency for Petroleum, Gas, and Biofuels (ANPG), and restructuring the state oil company Sonangol. These reforms have resulted in quicker approvals of work plans, leading to new discoveries and the development of oil fields by companies such as TotalEnergies and ENI.

The oil sector in Angola faces challenges such as limited investment and high production costs, which average USD 40 per barrel. However, the government's reforms and the country's vast oil reserves present opportunities for increased investment and production in the coming years.

Angola's oil revenue has funded its civil wars

Angola's oil revenue has undoubtedly played a role in funding its civil wars. The country's oil wealth has been a key factor in the conflict, with both the government and rebel groups relying on these financial resources to sustain their military efforts.

During the Angolan Civil War, which lasted from 1975 to 2002, the government used oil revenues to fund its military operations. The country experienced an oil production boom between 2002 and 2008, with production at its deepwater fields taking off. This increase in oil production and the resulting revenue likely contributed to the government's ability to sustain the war effort.

The conflict also impacted the oil industry itself, with increased attacks by the rebel group UNITA leading the government to sell more drilling licenses to fund the war. This resulted in a rush of multinational oil companies offering hundreds of millions of dollars to explore new areas of the seabed. The conflict created a complex dynamic where companies were eager to exploit Angola's oil resources, even as the country was ravaged by war.

The revenue generated from oil sales provided a significant source of funding for both sides of the conflict. On the government side, the money was used to purchase military hardware and sustain their forces. On the rebel side, UNITA derived funds from diamond exports to pay for their weapons.

Angola's oil industry has a long history, with the first commercial oil discovery dating back to 1955 in the onshore Kwanza Basin. The country is now one of the largest oil producers in Africa, with oil and gas products making up more than 90% of its exports. This heavy reliance on the oil industry makes it vulnerable to price volatility and market fluctuations, which can have significant economic impacts.

Despite the challenges posed by the civil war, some oil companies were able to operate relatively undisturbed. For example, the Chevron subsidiary, Cabinda Gulf Oil Company (CABGOC), continued its operations throughout the conflict and helped export the country's first cargo of crude oil in 1968.

In conclusion, Angola's oil revenue has played a significant role in funding its civil wars, with both sides leveraging the country's natural resources to sustain their military efforts. The oil industry's presence in Angola has created a complex dynamic, with companies eager to exploit the country's resources even amidst the devastation of war.

Frequently asked questions