Gas Prices In Angola: A Costly Affair

Angola has untapped oil and gas resources estimated at 9 billion barrels of proven crude oil reserves and 11 trillion cubic feet of proven natural gas reserves. The country's petroleum industry is key to its economy, accounting for almost 75% of Angola's revenues. As of June 6, 2022, the retail price for gasoline in Angola was on average $0.37 per liter, with diesel at $0.31 per liter and LPG at $0.23 per liter. In comparison, the average price of gasoline worldwide was $1.46 per liter. As of June 10, 2024, the price of octane-95 gasoline in Angola was 300 Angolan Kwanza per liter, while the average price of gasoline globally was 1123.42 Angolan Kwanza per liter. Angola is a leading oil producer on the continent, recently surpassing Nigeria and Algeria. However, the country still depends heavily on imported refined petroleum, spending over $2 billion annually on these imports.

Gasoline prices in Angola are lower than the global average

As of June 6, 2022, the average retail price of gasoline in Angola was $0.37 per liter. In contrast, the global average pump price for gasoline was $1.46 per liter. This price disparity indicates that gasoline prices in Angola are significantly lower than the global average.

On June 10, 2024, the price of octane-95 gasoline in Angola was 300 Angolan Kwanza per liter. During this period, the global average price of gasoline was 1123.42 Angolan Kwanza per liter. The substantial difference in prices between Angola and the global average is evident, with Angolan gasoline prices being considerably more affordable.

The low gasoline prices in Angola can be attributed to various factors, including the country's oil production and exports. Angola is one of the leading oil-producing countries in Africa, and its oil industry plays a significant role in the country's economy. The country's crude oil reserves and production capacity contribute to a steady supply of gasoline, which helps keep domestic prices low.

Additionally, Angola's regulated fuel market could also be a factor in maintaining lower gasoline prices. The country's fuel prices may not fluctuate as frequently as in other nations with free-market fuel pricing. The government's influence on fuel pricing could stabilize and potentially reduce gasoline prices for Angolan consumers.

Moreover, the cost of gasoline in Angola is also influenced by the local currency, the Angolan Kwanza. The value of the local currency relative to other currencies can impact the purchasing power of Angolan consumers. A weaker currency could make imports more expensive, but it may also result in more affordable fuel prices, especially when compared to prices quoted in stronger currencies like the US dollar.

Angola's gas prices are in Angolan Kwanza

Angola's gas prices are given in Angolan Kwanza, which is the country's national currency. The kwanza was introduced following Angola's independence and is named after the Kwanza River. Four different currencies using the name kwanza have circulated since 1977. The first kwanza, AOK, was in use from 1977 to 1990 and had a remarkably stable exchange rate of 29.918 kwanzas to the US dollar.

The novo kwanza, AON, was introduced in 1990 and replaced the kwanza at par. However, Angolans could only exchange 5% of their old notes for new ones, exchanging the rest for government securities. This currency suffered from high inflation.

In 1995, the kwanza reajustado (plural kwanzas reajustados), with the ISO 4217 code AOR, replaced the previous kwanza at a rate of 1,000 to 1. Inflation continued, and no coins were issued. Despite the exchange rate, the old kwanza had such a low value that the smallest denomination of banknote issued was 1000 kwanzas reajustados.

Finally, in 1999, a second currency was introduced, simply called the kwanza. It replaced the kwanza reajustado at a rate of 1,000,000 to 1. This currency is subdivided into 100 cêntimos. While it initially suffered from high inflation, its value became stable until 2016 when it started devaluing again. As of August 2024, the mid-market exchange rate for 1 USD is 878.07077 kwanzas.

As of June 2024, the price of octane-95 gasoline in Angola is 300 Angolan Kwanza per liter. In comparison, the average price of gasoline worldwide during this period is 1123.42 Angolan Kwanza. As of June 2022, the retail price for gasoline in Angola was 0.37 US dollars per liter, while the average pump price worldwide was 1.46 US dollars per liter.

Angola's gas industry is key to its economy

Angola's gas industry is a key component of its economy, with the petroleum sector accounting for almost 75% of the country's revenues. Angola holds an estimated 9 billion barrels of proven crude oil reserves and 11 trillion cubic feet of proven natural gas reserves. The country currently produces approximately 1.16 million barrels of oil per day, with a record high of 2 million barrels per day in 2010.

The Angolan government has implemented a series of reforms to boost the gas industry, including transferring concessionaires' rights from the national oil company Sonangol to the National Agency for Petroleum, Gas and Biofuels (ANPG). The ANPG is responsible for regulating upstream operations and awarding concessions blocks for onshore and offshore exploration and production fields. To stimulate investments, the ANPG planned a six-year licensing round to auction a total of 50 new blocks on various basins.

Angola is a leading producer of oil in Africa, recently surpassing Nigeria and Algeria. However, it is heavily dependent on imported refined petroleum, spending over $2 billion annually. To address this, the government is prioritizing refinery development, with upgrades to the country's only operating facility in Luanda and three new projects in the pipeline. Angola's oil and gas sector faces challenges, including high production costs, bureaucratic contract signing and renewal processes, and difficulties in securing financing.

The natural gas industry in Angola is also important, with the country holding 27 trillion cubic feet of reserves. While Angola has been slow to monetize its gas resources, focusing mainly on crude oil production, it is now launching initiatives to harness the power of natural gas. The Angola Liquefied Natural Gas (LNG) plant in Soyo is the country's only active gas monetization facility, processing gas from seven offshore fields. The plant has a capacity of 1.1 billion cubic feet of natural gas per day and contributes to reducing gas flaring and greenhouse gas emissions. Angola exports 95% of its natural gas production as LNG but aims to retain 25% of production in-country by 2030 through associated value-added industries.

The development of natural gas projects and infrastructure investment is a priority for Angola, as it seeks to utilize natural gas as a power generation solution and transition to cleaner fuel sources. The country is also exploring the use of natural gas for domestic transportation, with Sonangol relaunching rail transportation services powered by butane gas. Angola's gas industry is key to its economy, providing revenue, addressing fuel shortages, and enabling the transition to cleaner energy sources.

Angola LNG is the first liquefied natural gas project in Angola

Angola LNG is a liquid natural gas (LNG) facility in Soyo, Angola. It is the first liquefied natural gas project in the country and one of the largest energy projects on the African continent. The project cost $9 billion and is one of the largest single investments in Angola's oil and gas industry.

The Angola LNG plant is a single-train facility with a production capacity of 5.2 million tonnes per year. The plant uses ConocoPhillips' proprietary natural gas liquefaction technology (Optimized CascadeSM Process) and is supplied by offshore gas fields on blocks 14, 15, 17, and 18, as well as non-associated gas fields Quiluma, Atum, Polvo, and Enguia. In addition to LNG, the plant also produces propane, butane, and condensate.

The project is presented as environmentally friendly because most of its feedstock consists of associated gas produced with crude oil in offshore fields that is currently flared. LNG production is more environmentally friendly than flaring, but the liquefaction process is energy-intensive, and a significant percentage of the gas must be burned to generate energy for cooling.

Angola LNG is operated by Angola LNG Limited and commercializes associated natural gas produced by Chevron and other crude oil operators. The plant has a capacity of 1.1 billion cubic feet of natural gas processing per day, helping Chevron meet the global demand for cleaner-burning natural gas.

Angola's gas industry has high operating costs

High Production Costs

Angola's production costs are high, averaging US$40 per barrel, which discourages new entrants and limits investments. This is particularly challenging in a competitive global market with lower oil prices. Industry players are under pressure to reduce costs and increase efficiency.

Foreign Exchange Restrictions

Petroleum companies operating in Angola are required to process payments through local banks and in the local currency, the Angolan Kwanza. While there are mechanisms like "consortium contracts" and "tripartite agreements" that offer some flexibility, they require approvals from multiple entities, making the process complex.

Bureaucracy and Delays

The former concessionaire, Sonangol, was known for its slow approval processes, constant impediments, and frequent delays in signing and renewing contracts. This bureaucracy hindered additional investments in mature fields, leading to a natural decline in crude production and a drop in daily outputs.

Difficult Business Environment

Angola's business culture heavily relies on connections, recommendations, and word-of-mouth. Without the right connections, even the best projects may face hurdles in advancing. The sector is challenging to navigate, even for reputable multinationals and local companies.

Macroeconomic Challenges

Angola's underdeveloped infrastructure, including roads and railways, increases operational costs. The enclaved Cabinda province, in particular, requires air transportation of manpower and goods, adding to the expenses. The high living costs in the country also mean companies must pay high salaries to expatriates.

Regulatory Requirements

Angola's regulatory landscape, which includes the Local Content Framework, imposes various obligations on companies. For example, the inclusion of an annual human resources development plan and a detailed training program is mandatory, with failure to comply resulting in significant fines. These requirements add to the operational costs for businesses.

Frequently asked questions