As oil production in Nigeria slumps, hurt by political failures and a violent campaign to disrupt foreign oil operations by rebels in the Niger Delta, oil-importing nations have been able to take some comfort in the stabilization of Angola.
Since the end of the impoverished African country's 27-year civil war in 2002, it has become one of the fastest-growing economies in the world, largely due to exploitation of its deepwater oil and natural gas resources.
Angola passed Nigeria last year to become the largest oil producer in Africa. That's as much due to Nigeria's failures to realize its potential as Angola's progress. Nigeria has 36 billion barrels of proven oil reserves, three times Angola's, but nearly half of Nigeria's output is shut in, analysts say, mainly due to unrest over the inequitable distribution of the country's vast oil wealth.
In June, Angola led the world in oil exports to China, and in the first half of 2009 only Saudi Arabia shipped more to the hungry eastern giant, partly because Chinese refineries are equipped to handle Angola's crude.
As Nigeria's production has steadily fallen to about 1.7 million barrels per day, Angola's has steadily climbed to 1.8 million, up from less than half a million barrels per day in 1990, and 750,000 in 2000.
The rise in production adds to the diversity of global oil supply, balancing out Africa's frenetic west coast. "The market feels it can predict what is happening in Angola a little more reliably," says IHS Cambridge Energy Research Associates analyst Peter Jackson. CERA analysts expect Angola could boost production to 2.5 million barrels per day by 2015, with a helping hand from
In the coming decades, oil importers will rely more on Africa, which currently produces just 12% of the world's oil, particularly the U.S. Angola ranks right behind Nigeria as the sixth-largest exporter of crude oil to the U.S. But with falling production in Mexico--second to Canada as the largest exporter of crude to the U.S.--and Venezuela, also in the top four, the U.S. will look to countries on Africa's west coast to fill the gap, says Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy at Rice University.
"The key suppliers that we have relied on, with the exception of Saudi Arabia, are shrinking and we need to be thinking about where our future supply is going to come from," she says. "Angola is at the top of that list. And it's not an exemplary African government, so it's going to create some headaches."
Transparency International ranks Angola among the most corrupt countries in the world, 158th out of 180, along with Equatorial Guinea at No. 171, another oil-rich country on the western coast of Africa.
Home to 12.8 million people, with a life expectancy of 38 years, Angola's GDP grew by an average of 16% per year between 2006 and 2008. Per capita GDP is $8,800, while a reported two-thirds of the population lives on less than $2 a day. Less than 10 years ago, there were few hotels in the capital city of Luanda, but today it's gearing up to host the Africa Cup of Nations soccer tournament in 2010. In rapid order, it has become a member of OPEC and its oil minister is currently serving as president of the cartel.
Much of Angola's growth has come courtesy of international oil companies investing offshore, in association with the national oil company, Sonangol.
ExxonMobil's net production in Angola in 2008 averaged 145,000 barrels per day on a 3 million acre canvas spanning four deepwater blocks. Chevron, which invested $13 billion in Africa in the past five years, says it is Angola's largest foreign oil industry employer.
In 2008, Chevron averaged 181,000 barrels of oil per day. With others, Chevron is building Angola's first liquefied natural gas plant, breaking ground in 2008. Through wholly owned subsidiary Cabinda Gulf Oil, Chevron has a 31% stake in the $3.8 billion Tombua Landana offshore project. It is expected to hit first oil in the second half of 2009 and produce more than 100,000 barrels per day by 2011. The San Ramon, Calif.-based corporation dubs it "one of the largest man-made structures on earth."
"Looking forward, Chevron has more than a dozen other significant capital projects in various phases of completion in Angola," says Houston-based Chevron spokesman Scott Walker.
With partner StatoilHydro, Angola's Sonangol is also pushing the limits. It hit first oil in April in the Gimboa field, the first deepwater oil project operated by the state-owned company.
China, keen for oil to power its factories, has become an active investor in the country, as well as a leading provider of financial assistance for infrastructure and development projects--aid that has come with few of the strictures demanded by Western institutions like the IMF and the World Bank.
China entered the Angola oil industry in earnest about five years ago, along with several onshore infrastructure projects, while extending the African country a $7 billion credit line.
Angola has quickly become China's largest African trade partner, with bilateral trade volume hitting an all-time high of $25.3 billion in 2008--the lion's share being oil.
Earlier this month,
"Sinopec will have a stronger view, a stronger position in the longer term," says Chris Brown, Africa energy analyst for Wood Mackenzie, a consultancy. He adds that there are still many petroleum projects in the pipeline in Angola, nearly all offshore.
"The bigger problems in Angola are more to do with costs and keeping costs down because their production comes from the deep water and the ultra deepwater, neither of which are cheap," he says. "And you've got to get all these projects through Sonangol."