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Africa's second largest producer of oil

Angola is the second largest oil producer in sub-Sahara Africa and the 15th largest producer in the world, producing, mainly from its offshore fields and offshore in and around the Congo Basin, in the region of some 1.5 million barrels per day (bpd), with the Ministry of Petroleum forecasting production to reach 2 million-bpd by the end of 2007, and Sonangol suggesting that it will continue that rate of production well into the 2020s.

According to Sonangol, exploration has a success rate of some 60% - a draw for international players including BP, Chevron, Exxon-Mobil, Hydro and Total, which, it is thought, will plough an estimated $35 billion-worth of investment into Angola by 2010, and some $100 billion by 2017.

Blocks

There are currently concessions for 35 offshore oil blocks (and 4 onshore) in Angola.
Offshore blocks are located in shallow, deep and ultra deep water with onshore blocks located in Cabinda and Soyo. At present Blocks 0, 2, 3, 14, 15 and 17 are the main producers of oil offshore. The most recent estimates suggest that reserves now stand at 13.6 billion barrels of oil but, it is suggested, this figure is conservative and on the cusp of being upwardly revised, with US Department of Energy figures suggesting that the ultimate figure could be closer to 22 billion barrels of oil. (Ultra deep water Blocks 31 and 32 are considered promising. However, concessions outside the Cabinda Basin have shown little in the way of commerciality.)

Gas reserves

Angola has gas reserves estimated at 79.57 billion cu m the majority of which is currently flared. This is due to change with plans to develop a LNG facility in Soyo and projected to start production in late 2009 or 2010. It would appear that the target end user for the LNG is the Atlantic Basin i.e. either the United States of America or Western Europe.

Angola is not a member of OPEC but has been producing oil since its first commercial discovery in 1955. While figures vary depending on the source, in 2004 oil accounted for approximately 50% of Angola's GDP, and some 90% of exports and 80% government tax revenues.

Sonangol

Established in 1976, Sonangol is the sole concessionaire for oil exploration and manages production in Angola, and either it or one of its subsidiaries (Sonangol Pesquisa & Produção) has a share in many of the block concessions. Controversially perhaps, Sonangol acts as the government's business arm in the oil sector as well as helping regulate the industry (although the Ministry of Petroleum is also a regulator.) Sonangol markets extensively overseas, and has overseas offices in Houston, London, Singapore and Hong Kong.

Who's on the block?

• Roc Oil - Cabinda Southern
• Sonangol - Block 2
• Sonangol Sinopec - Block 3
• Sonangol Pesquisa & Produção - Block 4
• BP - Blocks 18 and 31
• Chevron - Blocks 0 and 14
• Esso Exploration Angola - Block 15
• Total E&P Angola - 17 and 32

Onshore

Most onshore activity in Angola has been suspended, with the exception of the Southern Block of Onshore Cabinda. Roc Oil paid a signature bonus of $6 million in November 2004 signing a 6-year production sharing agreement with Sonangol that will see it through the exploration phase. It has since raised almost $76 million through a share placement in London.

In 2006, the head of licensing at Angola's Ministry of Petroleum Alfredo Rafael announced plans to launch a licensing round for the Kwanza Basin located 60 kilometres south of Luanda. 23 development blocks are to be offered each covering an area of about 1,000 square kilometres. Preference will be given to indigenous Angolan companies but a variety of "mid-size" overseas companies are also expected to express interest.

Shallow water (Blocks 0, 2, 3 and 4)

Block 0 Chevron operates Block 0, which had a total production of 371,000 bpd in 2004. In May 2004 the operator finalised a 20-year extension on its concession until December 2030.

The block is split into two areas A and B. Area A is the most prolific with 13 fields including two major fields Takula and Malongo producing around 248,000 bpd of oil and 4,000 bpd of LPG. Development of the Banzala field is continuing involving the installation of additional well and processing jackets . In 2005 Chevron drilled 5 successful exploration wells in the block with further drilled wells planned.

The Greater Takula infrastructure project involves the renewal and de-bottlenecking of four offshore platforms and onshore treating facilities to increase production and water treatment capacity. Area A's gas management project will eliminate the remaining gas flaring by collecting and re-injecting excess natural gas. Samsung Heavy Industries is expected to deliver the Takula Gas Gathering platform by March 2008.

Block 2 Currently producing around 45,000 bpd. Sonangol is embarking on further developing the Morsa West field. It is understood that Sonangol is looking to develop the project via a fixed platform with dry trees in about 32 metres of water. It is also believed that a jack-up production system is being considered. Fabrication of the platform is to be carried out by a British company in South Africa with first oil production from this field is expected in 2006.

Block 3 Total E&P Angola used to operate fields 3-80, 3-85 and 3-91 but by mid 2005, had returned its interest in field 3-80 after learning it would not have its licence to operate the field renewed. The new operator Sonangol Pesquisa & Producão has re-numbered the field 3-05 and entered a new Production Sharing Agreement (PSA) with China's Sinopec taking Total's share in the field. Block 3 produces up to 120,000 bpd.

Block 4 In late 2004 Sonangol Pesquisa & Produção announced a find in water depths of 700 metres at well 4-41/1. This was its first find as an operator and is expected to produce first oil in 2007. Recoverable volumes are estimated at 50 million barrels with further exploration planned.

Deep water (Blocks 14, 15, 17 and 18)

Block 14 Awarded operatorship in 1995 Chevron has made 9 commercial discoveries in water depths ranging from 280 metres to 1444 metres with production first starting in 2000. Chevron successfully negotiated in 2004 an extension to the exploration period and is planning an extensive 3-D seismic programme of the remaining unexplored areas.

Development plans for the Benguela, Belize, Lobito and Tomboco fields were approved in 2003. Phase 1 of the project was the installation of a drilling and production platform for the Benguela - Belize fields, which began producing oil in December 2005. The Benguela-Belize, Lobito and Tomboco fields are expected to produce 200,000 bpd once they reach peak production in 2007. Phase 2 of the project will focus on the Lobito and Tomboco fields involving the installation of subsea systems, pipelines and wells.

The Tombu and Landana fields are the next major capital project on Block 14 and four contractors are believed to have bid to build a giant compliant tower platform with the contract expected to be placed in July 2006. Capital expenditure on this project is expected to be more than $2 billion and daily production by the end of the decade is expected to be more than 100,000 bpd.

Block 15 Operated by Esso Exploration Angola the Xikomba project began production in late 2003 and is now producing 90,000 bpd. To date 17 discoveries have been made in the Block with water depths ranging from 670 to 1354 metres. It is estimated the Block contains up to 4.5 billion barrels of recoverable reserves.

Kizomba A came on stream in August 2004 and is now producing 250,000 bpd. Expected total investment will reach $3.4 billion. Marimba is a new project being studied as a possible tieback to Kizomba A.

Kizomba B, with an estimated cost of $3.4 billion started production in July 2005 (more than five months ahead of schedule) and is now achieving its daily target output of 250,000 bpd. The project consists of the world's largest FPSO vessel with a storage capacity of 2.2 million oil barrels and a tension-leg platform. Combined output of Xikomba, Kizomba A and B was expected to reach a peak output of more than 550,000 bpd by the end of 2005.

Kizomba C (estimated cost $3bn) is expected to follow by 2008 and is projected to produce between 50,000 - 100,000 bpd. The challenge with Kizomba C is that the fields are farther apart. SBM Offshore has announced that it has signed an agreement for two FPSOs for the Kizomba C development.

ENI has been awarded operatorship of the relinquished areas in Block 15 following a $902 million signature bonus bid. ENI has a 35% stake with the Sinopec - Sonangol joint venture receiving 20%. Other partners in relinquished area are Sonangal P&P (15%), Total (15%), Petrobras, Statoil and a local company Falcon Oil with 5% each.

Block 17 Since discovering its first field on the Block (Girassol) Total E&P Angola has made at least 10 other discoveries. Production from Girassol commenced in late 2001 and has now reached 250,000 bpd. One of its other discoveries (Rosa) has been given the go-ahead to be tied back to Girassol and is on schedule to start production in the 1st half of 2007. Also expected to be tied back to Girassol by 2009 is Lirio.

The Dalia field with a major new build floater scheme is due to start producing oil in the 4th quarter of 2006 at 240,000 bpd. Daewoo and Samsung have built the hull and deck respectively with support services from an alliance of Technip, Saipem and Stolt. Total's investment in Dalia is expected to reach $3.9 billion and the subsea scheme is expected to extend to 70 wells.

Production from the Cravo discovery is expected to start in 2010 and is another possible satellite for Girassol as it holds similar quality oil.

Pazflor is the 3rd development in the Block and consists of 4 fields. Total is considering a new build FPSO with the aim that the development comes on stream in the 3rd quarter 2010, and concentrating on the Acacia, Perpetua, Zinia and Hortencia discoveries.

Total is also apparently considering a 4th development focussing on the on the Hortensia and Violeta discoveries.

Block 18 BP's Greater Plutonio development lies in water depths ranging from 1200-1500 metres and consists of the Plutonio, Cobalto, Galio, Cromio and Paladio fields. Hyundai will supply the FPSO at a cost estimated at up to $ 650 million. Stolt has been appointed for the $ 250 million URF (Umbilicals, Risers and Flowlines). The $200 million subsea production system has been won by FMC. Halliburton KBR, the incumbent FEED contractor is also going to handle the EPCM contract. First oil from Greater Plutonio is expected 2008 reaching 250,000 bpd. A projected total investment of between $2-3 billion in Greater Plutonio has been reported.

The Platina field (in the west of the Block) was originally due to be tied back to the Plutonio FPSO but is now believed to be developed with Cesio and Chumba with these 3 fields holding up to 300 million barrels of recoverable oil between them. This field is due to come on stream between 2008-10 dependent on Sonangol's wishes.

BP's new partner is Sonangol Sinopec International Ltd, a joint venture between the Chinese and the Angolan State oil companies, which has bought out Shell's interest.

Ultra deep water (Blocks 31 and 32)

Block 31 BP has started pre-front end engineering and design work while continuing exploration. In May 2006 a tenth oil discovery was announced. The Urano discovery lies in the north-east of the block close to the Plutao, Saturno, Marte and Venus discoveries. The other five discoveries are Astraea, Ceres, Palas, Juno and Hebe and are located in the south-east of the block.

BP plans to develop the south-east block first. It is understood BP is considering a double FPSO scheme and expects oil to be produced late 2009 with exact timings dependent on Sonangol's wishes but it is not expected to be on the scale of Greater Plutonio in Block 18.

Block 32 Mostarda was the 5th discovery in this Block following the ones at Canela, Cola, Gengibre and Gindungo. Studies are being carried to assess the Mostarda discovery and its development potential with the other Block discoveries. The Cola discovery may need another well drilled to establish commerciality. First oil is not expected before 2010.

Liquefied Natural Gas

Angola is planning a 5 million tonne per year LNG project in Soyo, Northern Angola with Sonangol hoping production could begin in late 2010 but 2011 is more likely given the challenges of the project.

The partners in the project are Chevron (36.4%), Sonangol (22.8%) BP, ExxonMobil and Total (13.6% each). The project is likely to involve 450 kilometres of pipeline taking gas from Blocks 0, 14, 15, 17 and 18, which between them contain 10 trillion cubic feet of associated gas. Sonangol owns all the gas in Angola while the Block partners will own the offshore pipelines.

At the April 2005 signing ceremony in Luanda FEED contracts were awarded to Bechtel and a joint consortium of Kellogg Brown & Root, JGC and Technip. The programme of work, expected to last 15 months has begun and once FEED is completed and a final investment decision is made one of the competing groups will be selected to perform engineering, procurement construction and commissioning activities. More detailed information on the LNG project is available from the Angola LNG Project website www.angolalng.com

Construction on the project began early in 2007. The project is expected to require up to 7 LNG carriers between 150, 000 cbm and 210,000 cbm. The specified delivery date is 2010 with Chevron reported to be acting as shipping advisor on the project.

A new organisation, Sonangol Natural Gas, was recently established and is working on plans to further exploit gas reserves. A second train is being considered utilising 4 gas finds in Blocks 1 and 2.

Chevron's Sanha gas condensate project, offshore Cabinda, expected to cost US$1.9 billion and is aimed at reducing the burning of gas in Blocks 0 and 14.

Downstream sector

The downstream sector is underdeveloped with the Fina Petroleos de Angola refinery in Luanda the only one currently operating in Angola. This refinery is old, in need of an upgrade and has a capacity of only 39,000 bpd. Sonangol has signed a partnership agreement with Sinopec to build a second refinery (Sonaref) in Lobito costing $ 3.5 billion, with a capacity of 200,000 barrels per day. It is understood that a joint venture called Sonangol Sinopec International is to be established with Sinopec financing 70% of the project.

Originally scheduled to be inaugurated in 2006 plans have fallen behind schedule and it is now likely to only begin operations in 2010. Recently it was indicated that Sonaref would be built by Samsung under a deal signed back in 2000. It is anticipated that approximately half the production will be for the domestic market to satisfy local demand with the remainder for export.