Angola positioned to be second largest African oil producer

March 27, 2002
Oil companies will spend $20 billion developing deep waters off Angola during the next 5 years, positioning the West Africa nation to become Africa's second largest oil producer. Oil production there "will overtake that of Libya by 2006," according to the Centre for Global Energy Studies.

By OGJ editors
HOUSTON, Mar. 27 -- Oil companies will spend $20 billion developing the deep waters off Angola during the next 5 years, positioning the West Africa nation to become Africa's second largest oil producer, said the Centre for Global Energy Studies in a late March report.

Field development plans in Angola suggest that the country's oil production "will overtake that of Libya by 2006," CGES said. Angola now ranks third behind Nigeria and Libya, having surpassed Egypt and Algeria after production began from Girassol field.

With spectacular successes off Angola in recent years—"at least 21 oil discoveries since 1996"—the country's oil reserves have skyrocketed to more than 10 billion bbl from 1.5 billion bbl in 1995, CGES said. Four key blocks—14, 15, 1, and 18 operated by Chevron Corp., ExxonMobil Corp., TotalFinaElf SA, and BP PLC, respectively—are responsible for most of the reserves.

The recent discoveries turned around Angola's oil production, which had slipped to 725,000 b/d in 2001, CGES said. Output rose by more than 200,000 b/d during the first 3 months of this year as Girassol, Angola's $2.5 billion offshore development, reached its production plateau months earlier than expected, CGES reported.

Dry ultradeep, prolific blocks
Ultradeep water off Angola has proved disappointing, CGES said, with no discoveries, and the onshore Kwanza basin to the south of the capital, Luanda, is also uninspiring.

The country's four prolific blocks, however, could almost double Angola's current oil production as early as 2006, despite recent steep production declines in onshore and shallow water developments—a 5% production decline at Kuito, Palanca, and Soyo fields dropped production by 15,000 b/d in 2001.

Output from TotalFinaElf-operated Girassol field will be supplemented by production from nearby discoveries such as Rosa, Lirio, and Tulipa to maintain plateau production of 200,000-250,000 b/d. In addition to Girassol, TotalFinaElf is developing a second group of discoveries on Block 17, which centers around Dalia field.

Similar in scale to Girassol, with a reserve potential of 840 million bbl, Dalia will come on stream in late 2005, building up to a production plateau of 200,000 b/d. Like Girassol, nearby discoveries Perpetua, Violetta, Oequidea, and Anturio will be tied back to the Dalia floating production, storage, and offloading vessel to prolong peak levels of output, CGES said.

ExxonMobil's Xikomba project, which targets Xikomba and Marimba fields on Block 15, will contribute an additional 31,000 b/d of oil output to the Angolan total when it comes on stream in 2003, with production rising to a peak level of 80,000 b/d in 2004, CGES said.

Angola's oil production should average more than 1 million b/d in 2004 as the Kizomba A development on the same block, which contains Hungo and Chocalco fields, begins producing in 2004, yielding an additional 250,000 b/d at peak production.

Billion-bbl plays
ChevronTexaco's Benguela and Belize fields in Block 14 should contribute 52,000 b/d and 48,000 b/d, respectively, at peak, and on Block 18, BP's Greater Plutonio project, the country's fourth billion-bbl development, will contribute an additional 250,000 b/d. Both are due on stream in 2005, with peak production expected within a matter of months.

In 2006 ExxonMobil will start up its Kizomba B project, targeting Dikanza and Kissanje fields, CGES reported. By 2006, Angola should be producing 1.7 million b/d and 1.9 million b/d by 2007, becoming Africa's second largest oil producer behind Nigeria.

Jose Barosso Manquiera, a director at Luanda's Ministry of Petroleum, has said that Angola's oil production should reach 1.9 million b/d within the same timeframe, a figure in line with the CGES production estimate.

CGES sees Angola's oil production reaching "an annual average level of 1.85 million b/d in 2007." Based solely on known discoveries, Angola's oil production should remain "1.9-2.0 million b/d until the end of the first decade of the new century," the analyst said.

Policy changes
The Angolan government's earlier anxieties concerning the pace of development have eased somewhat recently, CGES said. In November 2001 state-owned Sonangol had announced a new policy direction.

Fearing that simultaneously producing several projects could lead to a 10-year growth curve in Angola's oil production followed by "an equally dramatic crash," the government suggested that new deepwater projects might be sanctioned only on a sequential basis to conserve crude oil. Sonangol was requested to study how best to manage reserves to production figures over a 35-year period instead.

The government then initiated an output cap, by limiting the maximum production rate per project, lengthening the time between development approvals, or delaying subsequent developments within each block—none of which was received favorably by oil companies that had paid huge bonuses and invested substantial sums in exploration, CGES reported.

Recently however, Angola's oil minister Jose Bothelo Vasconcelos, clarified the new policy by assuring oil companies that "no restrictions would be placed on any of their existing offshore oil developments;" however, he also said no new blocks would be offered for licensing in 2002.

"With plenty of large projects in the pipeline for development, and a number of deep and ultradeepwater blocks in the early stages of exploration, Angola can well afford a moratorium on new exploration licenses for the time being," he said.