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Saturday, December 10, 2005

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Saturday Feature
 
Angola aims to redistribute its oil wealth
Carola Hoyos
12/10/2005
 

          Big international energy companies are being forced to loosen their grip on one of the world's most important oil provinces as Angola relaunches bidding for several of its most promising potential oil fields.
Senior officials of Sonangol, the west African country's state oil company, late last month travelled to London to drum up interest for exploration in areas that until recently were key assets in the portfolios of companies such as Total of France, BP of the UK and ExxonMobil of the US.
"We want to have a mixture of companies in Angola. Big majors, independents, but also small companies," Carlos Saturnino, director of negotiations, said in an interview, giving one explanation for why Angola chose not to extend contracts with oil majors when they expired in 2002 and 2003.
Major oil companies from the US and Europe control 72.5 per cent of the $40bn (euro34bn, 23bn) worth of Angola's oil assets that are already under development, according to Catriona O'Rourke, analyst at Wood Mackenzie, the consulting group.
"For the Angolans it would be healthier to have more competition," she said, adding that the big international oil companies on the other hand would be unhappy to lose territory in Angola. "Angola is probably in the top five of their most important places to invest."
The redistribution of what could prove to be as many as 10bn barrels of yet undiscovered oil is not only a blow to major international energy groups struggling to compete against Chinese and Indian national oil companies and independent western companies. It is also a potential setback to Washington's drive to develop West Africa as an alternative supplier to the Middle East.
Angola, West Africa's second largest oil producer after Nigeria, already provides 4.0 per cent of US oil imports, and aims almost to double its production to 2.0m barrels a day.
High oil prices and a lack of alternatives make Angola all the more attractive to companies and consuming countries -- especially the US and China -- seeking new reserves.
Mr Saturnino said: "The Chinese are fighting to have access to different sources of energy. All the major Chinese oil companies are competing in Angola." He added that the Chinese brought other benefits, such as financial support, even though they might not have the technical expertise of the big international oil companies.
Companies from India, Thailand, South Korea, Brazil and a host of independent and smaller players are also interested. Some will compete with the big companies, while others will bid for smaller fields that are of less interest to the larger players.
People close to Sonangol said signing bonuses payable to Angola for each block could exceed $100m. Sonangol has also been able to make other demands. The company has drummed up more than enough interest from foreigners in its otherwise unattractive refining business by linking it to the bidding for the exploration blocks, said Syanga Abilio, vice-president at Sonangol.
Angola's ability to call the shots today starkly contrasts with the early-to-mid-1990s when it was entrenched in war and most of the negotiating power rested with major international oil companies. It was then that Exxon, BP and Total signed their original contracts for blocks. But the unexplored areas of those blocks are now being reoffered.
Angola's relationship with the major oil companies had become increasingly strained, oil executives said, offering a second potential explanation. Many analysts attribute Total's loss of its block to the row between Luanda and Paris over the extradition of Pierre Falcone, a French businessman who was given Angolan diplomatic immunity while being investigated by the French authorities for illegal arms trafficking to Angola.
But despite the strains, international oil companies, some of which may also take part in the bidding, are likely to remain important players in the country.
Both sides still need each other, even if the balance of power is swinging towards Luanda. Just what that means for international oil companies' fortunes will become apparent in mid-February when the bid envelopes are opened.

 

 
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