INTSOK Annual Market Report (2011-2014) ANGOLA

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INTSOK Annual Market Report 2010 Main Markets - Angola Angola market introduction Angola’s production reached almost 2 mboepd in 2008 compared to a previous level of 750 kboepd in 2000. The increase was driven by deepwater developments coming in production. Production in 2009 amounted to 1.9 mboepd with oil accounting for more than 95%, keeping Angola among the top 15 oil producers globally. Going forward, production is expected to see a slight decline towards 2012, primarily led by a decrease in production on the continental shelf. From 2012 onwards, production is expected to recover and experience a substantial growth reaching levels up to 3.75 mboepd towards 2020. This growth is forecast to mainly come from deep and ultra deep water developments. As of 2010, reserves in producing assets amounted to 6.7 bnboe, with over 90% coming from oil. Resources in fields under development accounted for more than 3 bnboe with similar levels of liquids and dry gas while resources in discoveries amounted to 10 bnboe. The end of Angola’s long-running civil war in 2002 coincided with a significant lift in its oil production. The considerable rise in Angola’s fortunes was confirmed when the country formally joined OPEC in 2007. During 2009, Angola held the OPEC presidency and became, at least for the year, Africa’s largest crude oil producer (largely due to shut-in of Nigerian production caused by Niger Delta security issues) with an output of 1.82 mbblpd. The NOC Sonangol is the architect behind the crude oil windfall profit tax regime that currently regulates the E&P sector in Angola. In 2008 oil revenue from this tax regime accounted for over 80% of the state’s total revenue stream. Established in 1976, Sonangol owns the hydrocarbon rights on behalf of the state, acts as an E&P company, and is the concessionaire and tax collector in the PSCs it enters into with IOCs. It can have a major influence on the choice of contractor awards, and is a strong driver for local content policies. Local company priority is given for contracts requiring limited capital and technical competence. Angolan state and/or private companies receive preferential rights if their proposal is not more than 10% higher than what is proposed by other companies. All companies involved in oil exploration and production must contribute to the training of nationals. There are deadlines for a progressive substitution of expatriate workers in national companies with locals, with the staffing goal being 70% Angolans. However, Sonangol recognized before the post-civil war oil boom that mandating complete adherence to local content regulations before local capacity had been developed would have driven away major investments, and thus Sonangol has so far been flexible in its approach to IOCs regarding local content. Sonangol has been able to cooperate with IOCs in ensuring that technology and skills transfer occurs during projects, and has set up local companies in partnership with service contractors such as Technip, Saipem, FMC and Acergy. Though Sonangol has managed to improve the status of the local service providers, local infrastructure and skill sets are seen to be limited – all but the simplest construction materials and technical expertise must be imported. Luanda harbor is congested and does not have the capacity to deal with rising imports, leading to frequent backlogs and delays in material delivery. New harbors are planned, but it will take time for them to materialize. Onshore exploration had been stymied for a long time by the civil war, and is still hindered by rebel activity in the Cabinda region. In spite of the drawbacks, Angola and Sonangol have been able to attract a balanced mix of players. Substantial production operations are carried out by Majors: BP, ExxonMobil, Chevron and Total are all having operated production from Blocks 0, 14, 15, 17 and 18, with ENI expected to join the operator’s club in a few years with production from Block 15/06. Sonangol became a deepwater operator in 2009 with the start of Gimboa. Significant non-operators include Statoil and Sinopec. While Sonangol has been able to position itself as a reliable partner for IOCs and service contractors, Angola continues to have a distinct problem when it comes to doing business as corruption and bureaucratic mismanagement continue to mar economic progress. Setting up and operating a business in Angola is considered by industry to be more costly than normal. Angola is 162nd on Transparency International’s Corruption Perceptions Index (down from 158th in 2008). 2
INTSOK Annual Market Report 2010 Main Markets - Angola 1 Angola offshore market The surge in Angolan crude production over the past few years was driven by technologically complex deepwater developments, helmed by many of the largest IOCs. The coming years are expected to bring another upward production surge to 2.5-3.0 mbblpd by the end of the decade, with the newest crude oil production additions coming from a mix of deepwater and ultra-deepwater projects. Natural gas production in Angola is primarily associated gas production, and is in most cases vented, flared or re-injected. Plans are underway to capture and export most of the wasted gas as LNG, and some gas is also being earmarked for domestic electricity generation. Sanctioned projects expected to start up by the end of 2012 include Pazflor (Total) in deepwater Block 17, PSVM (BP) in ultra-deep water Block 31, and Kizomba Satellites Phase I (ExxonMobil) in deep water Block 15. Block 17 is expected to see FID on the CLOV project (Total) during 2010, while BP expects FIDs on its deep water Block 18 West project and the PAJ project in Block 31 during 2011, and Chevron also plans a 2011 FID for Mafumeira Sul in the shallow water Block 0 concession. Chevron figures highly in the list of projects in FEED or pre-FEED stage, with several projects pending within deepwater Block 14: Lucapa, Lianzi and Negage. ENI is reportedly fast-tracking its Sangos & N’Goma discoveries in deep water Block 15/06, with plans to shift the Xikomba FPSO once that field has reached economic cut-off. Later phases of ExxonMobil’s Block 15 Kizomba satellites will add further production growth. Thus, Angola offshore continues to develop in a rapid pace. Questions are being raised whether the service industry has the capacity to handle all the developments planned by the operators. The past years have seen schedules sliding for several Angolan offshore projects, and the future will probably bring similar delays. One should also note that as an OPEC member Angola is nominally bound to OPECmandated production cuts. During 2009, Angola complied with about 40% of its mandated OPEC-cuts. The Angolan offshore market is characterized by large field development projects. The market saw a slight reduction in 2009 as the field development and subsea expenditure dropped. The market grew steadily over the period 2004-08 with large projects such as Benguela-Belize (Chevron), Dalia (Total), Rosa (Total), the phased Kizomba development (ExxonMobil), and Greater Plutonio (BP) being executed. As these projects moved from the investment to the production phase, Pazflor (Total) and CUBEAUTO Chart S(ChartType:ColumnStacked ;Legend:Custom;GridLinesX:off;GridLinesY:off;LegendX:0;LegendY:0;Palette :Default;PaletteText:off) F(Country:Angola;On Off Shore:Offshore) C(INTSOK Category:Reservoir and Seismic,Field Development,Subsea,Well,Operations,Non E&P Expenditure) R(Year:2004-2014) V(Value:USD million) Figure 1: Offshore Market by Category – Angola Table 1: Offshore Market by Category – Angola CUBEAUTO Report S(FontSize:6;Format:#,##0) F(Country:Angola;On Off Shore:Offshore) C(Year:2004-2014) R(INTSOK Category Table:R&S,Field Development,Subsea,Well,Operations,Non E&P) V(Value:USD million) USD million 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 R&S 338 392 438 711 755 601 674 435 326 264 464 Field Development 1 023 1 182 1 577 2 144 2 117 1 269 1 211 1 334 1 085 1 457 3 431 Subsea 1 278 2 097 3 438 2 589 1 747 2 067 4 212 4 018 3 163 3 083 4 755 Well 1 632 2 375 2 526 3 923 4 356 3 957 4 570 3 494 2 569 2 788 3 865 Operations 1 284 1 465 1 711 2 515 2 984 2 428 2 353 2 284 1 951 2 068 2 837 Total 5 554 7 511 9 689 11 883 11 959 10 322 13 019 11 565 9 094 9 661 15 351 PSVM (BP) were the only major new development projects sanctioned in 2007-2008. The market seems likely to increase in 2010-11 with projects such as PSVM (BP), Kizomba D (ExxonMobil), and CLOV (Total) in the pipeline. In 2014 contributions from these projects together with projects such as the N’Goma and Sangos developments (ENI) will move the overall market beyond USD 15 billion. 3
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INTSOK Annual Market Report (2011-2014) ANGOLA

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