This is a best prospect industry sector for this country. Includes a market overview and trade data.

Overview

Angola is the second largest oil producing country in sub-Saharan Africa and an OPEC member with output of approximately 1.37 million barrels of oil per day (bpd) and an estimated 17,904.5 million cubic feet of natural gas production.  Due to a significant drop in oil prices and limited foreign currencies in the Angolan market, very limited investment in either new or mature exploration and production fields has occurred 2014 to 2018.  The limited investment in turn has led to the current daily lifts of 1.37 million barrels of oil per day (bpd), far below capacity. However, announcements of investments and discoveries over the last year are expected to boost production starting in 2020 and 2021.  Further, the country holds 9 billion barrels of proven oil resources and 11 trillion cubic feet of proven natural gas reserves, which represent great potential for further economic development and significant business opportunities.  Further, the country has begun to implement reforms, which has led to announcements of new investment and expect to increase production in the medium to long-term.
 
The oil industry in Angola is dominated by the upstream sector – exploration and production of offshore crude oil and natural gas.  Almost 75 percent of the oil production comes from off-shore fields. Angola produces light sweet crude oil containing low volumes of sulphur, suited for processing light refined petroleum products.  The oil rich continental shelf off the Angolan coast is divided into 50 blocks but the number of blocks is expected to double with the auctioning of new blocks from 2019 to 2025. 
 
Although the country is a leading oil producer in the region, it currently imports 80 percent of its demand for refined petroleum products, including gasoline, diesel, aviation fuel, Jet B for gas turbines, oil fuel, asphalt and lubricants.  Only 20 percent of refined products is sourced locally.  The refining of crude oil and distribution of refined oil remains well below domestic demand. To reduce the country’s dependence on imported refined petroleum, the Government of Angola has plans for the construction of national refineries.
 
The increasingly competitive global market and lower oil price environment particularly challenge Angola’s high production costs which average USD 40 per barrel.  Industry players emphasize the need for a more competitive business environment with reduced production costs and increased efficiencies.  Industry analysts (Wood Mackenzie) project that without needed new investment in mature fields that dominant in Angola, production is estimated to decline significantly by 2020.  Increased pressure to reduce production costs coupled with ongoing restrictions on foreign exchange access have led to significant downsizing of petroleum service companies, contractors, and operators, with some businesses closing operations.
 
Since 2012, petroleum companies operating in Angola have been required to process payments through local banks and in local currency (kwanza). “Consortium contracts” between international and Angolan-based service providers and “tripartite agreements” through commercial banks are mechanisms that can provide oil operators with some flexibility in foreign exchange payment but require the National Concessionaire, Angolan Petroleum, Gas and Biofuels Agency (ANPG) and Central Bank approvals.
 
In 2018 the Government of Angola introduced legal reforms, began restructuring the state oil company Sonangol and created the National Concessionaire, ANPG in response to stalled investments in 2014 as oil prices dropped significantly and foreign currencies remained limited.  These reforms were the result of a Presidential Task Force in 2017 and which led to the enactment of two new laws and three amended presidential decrees. 
 
Following is a summary of these reforms:

Concessions Award and Management Process:  Presidential Decree No. 86/18 of April 2, 2018 simplifies the control mechanism for petroleum industry operations related to public tenders and procurement. The tender process to award concessions and licenses will be public and will no longer require “pre-qualification” from bidders. The process for approval of contracts with third parties to carry out petroleum operations is simplified:

  • Operators may award contracts for up to USD 1 Million without public tender or approval by National Concessionaire ANPG (previous threshold was USD 250,000);
  • Contracts between USD 1 Million and USD 5 Million are subject to public tender but do not need approval by National Concessionaire;
  • Contracts exceeding USD 5 Million are subject to both public tender and National Concessionaire approval (previous threshold was USD 750,000);
  • Direct award (without public tender) is always permitted in the following cases: in case of an operational emergency, and in case the supply/service can only be sourced from one specific supplier;
  • Bids must be submitted in the Portuguese language. If presented in a foreign language, a Portuguese translation must be provided; 
  • Bids must be opened in the premises of the National Concessionaire;
  • The National Concessionaire must expressly decide on the award recommendation made by the operator (for contracts > USD 5 M). The operator recommendation is deemed tacitly accepted if no express response is forthcoming;
  • Several time periods were extended or reduced (including for bid evaluation, National Concessionaire approval)
Source: (VIEIRA DE ALMEIDA Law Firm, 2018)

Fiscal Incentive regulation for marginal field development:  Presidential Decree No. 6/18 passed on May 18, 2018 establishes a new fiscal regime for marginal field development- less than 300 million barrels of reserves - or fields not economically viable because of lack of infrastructure.  It cuts petroleum tax to 10 percent from 20 percent, while reducing petroleum income tax on marginal fields to 25 percent from 50 percent.
 
Field abandonment process:  Presidential Decree No. 91/18 passed on April 10, 2018, provides a pathway for dismantling abandoned wells and decommissioning of oil and gas facilities, in accordance with Quality Health Safety and Environment (QHSE) industry best practices. This Presidential Decree addresses mature well abandonment that requires oil field operators to furnish an approved abandonment plan to the Ministry of Mineral Resources and Petroleum to review.  It also provides a framework for safeguarding funds for final dismantling operations at the end of an oil well’s economic life.
 
Natural Gas Law:  Presidential Decree No. 7/18 of May 18, 2018 is the first law enacted to regulate natural gas exploration, production, monetization and commercialization.  More attractive tax rates are one of the benefits this new gas law will provide.  Gas production tax is 5 percent (compared to 10 percent for oil).  Gas income tax is 25 percent (same as for oil) for associated gas and 15 percent for non-associated gas when proven reserves are lower than 2 trillion cubic feet.  Associated gas fields operators can reinject gas to maximize oil recovery or transfer the surplus to Angola LNG plant if they do not sell it in domestic or international markets.
 
Marginal Projects:  Many oil and gas activities in development areas were suspended when deemed not economically viable. The Government’s intent is to encourage the reactivation of these activities within development areas. Legislation will enhance the oil and gas business environment, providing new guidance on oil and gas operations and processes that include streamlining of work programs. The Government also plans to implement contract and fiscal incentives that will promote operational efficiency in mature and marginal fields.
 
Legal Business Framework: The government regulatory and oversight body responsible for regulating the oil and gas sector in Angola is the Ministry of Mineral Resources and Petroleum. According to Presidential Decree N. 49/19 of February 6, 2019, the national grantor of concessions is the National Agency for Petroleum, Gas and Biofuels (ANPG), which is the holder of the concession rights and has authority to conduct, execute and ensure oil and gas operations in Angola.  Upstream operations can only be exercised under a license awarded by ANPG.  International oil exploration companies in Angola are required to operate through partnership with ANPG, and such association may take the form of a corporation, consortium, production sharing agreements, or risk services agreements.  The most common type of arrangement international companies enter into with the national grantor of concessions is the production sharing agreement. Several sanctions and penalties may apply for a breach of the contractual agreements. 
 
Below is a description of some of the principle laws and presidential decrees governing the oil and gas sector.
  • Petroleum Activity Law No. 10/04 of November 12, 2004 is the main legal instrument covering the rules to access and conduct petroleum activities in Angola.
  • Presidential Decree 5/18 of May 18, 2018 establishes the legal regime for additional research activities in the development areas of petroleum concessions, revoking the previous Presidential Decree 211/15.  
  • Presidential Decree 91/18, of April 10, 2018 establishes the rules and procedures for the abandonment of wells and the decommissioning of oil and gas facilities.
  • Petroleum Customs Law No. 11/04 of November 12, 2004 is the legal instrument covering the customs regime and incentives specifically applicable to the sector.
  • Petroleum Taxation Law No. 13/04 of December 24, 2004 provides the taxation framework applicable to petroleum activities (taxes, rates, deductions).
  • Angolan Oil and Gas Foreign Exchange Law for the Oil Industry No. 2/2012 of January 13, 2012 determines a specific foreign exchange regime applicable to the payment of goods, services and capital operations related to the petroleum sector.
  • Ministry of Petroleum Order No. 127/03 of November 25, 2003 on Local Content Regulations covers the rules applicable to the supply and provision of petroleum related goods and services.
  • Presidential Decree 190/12 of August 24, 2012 establishes a waste management policy that requires oil companies to ensure environmental protection in their operations by meeting zero operational discharge levels.
  • Decree 38/09 of August 14, 2009 establishes the rules and procedures to be followed in oil operations (including upstream oil prospecting, research, evaluation, development and production activities), in accordance with the principles of safety, hygiene and health, based on Angolan laws, as well as the commonly accepted practices within the oil industry.
 Upstream Procurement and Tenders
Major procurements are generally secured through a public tendering regime or direct negotiation, with technical and financial reviews by ANPG.  The licensing bid round for blocks are governed by Presidential Decree No. 52/19 of February 18, 2019.  The ANPG has more than 50 new blocks of oil and gas in offshore and onshore basins to auction during the period spanning 2019-2025. 
 
Market players:
 
Upstream Activities
Major international oil exploration and production companies active in Angola include Total, with 41 percent market share (800 bpd), Chevron with 26 percent market share (510 bpd), Exxon Mobil with 19 percent market share (375 bpd), and BP with 13 percent market share (252 bpd).  Other international players include ENI and Equinor.  Sonangol also operates through its subsidiary Sonangol E&P. 
 
Ultra-deep-water projects are being pursued by Total in Block 32 (USD 16 billion Kaombo project expected to peak at 230,000 bpd), and BP's "Pluton, Saturn, Venus and Mars" (PSVM) project in Block 31 (USD14 billion). U.S. company MODEC supplied an accommodation vessel to support the hook-up operations on BP’s PSVM project.
 
Onshore activities are very limited.  SOMOIL, a privately-owned company, was planning to produce around 5,000 bpd in Soyo, in northern Angola, but operations have been delayed.  Onshore blocks in the Kwanza basin were offered in late 2015, but final awards were cancelled, and the blocks should be re-bid in 2019.
 
U.S. contractors active in the Angolan upstream market include Halliburton, Baker Hughes a GE Company, FMC Technologies, Oceaneering, Weatherford, and Schlumberger, just to name a few.  Other countries supplying technology and providing services and investing in Angola include the UK, Norway, France, Italy, Korea and China. Korean exports to Angola concentrate on vessels and offshore platforms. While Chinese exports focus on low cost equipment and commodity inputs such as pipes.
 
Midstream and downstream activities
The LNG plant in Soyo, in the north of Angola, is structured as a consortium with Sonangol owning 22.8 percent, Chevron owning 36.4 percent, and Total, BP and ENI each with 13.6 percent.  U.S. companies Bechtel and ConocoPhillips provided engineering and construction services respectively for the Soyo LNG facility.  The plant started production in 2013 with 5.2 million tons per year capacity and an investment of over USD 10 billion.  Operations were temporarily shut down due to technical difficulties in 2015 and 2016, but then restarted in early 2017.  Export shipments go to Brazil, China, South Korea and France.  The U.S. was a target market, but it has not materialized due to increased U.S. domestic production.
 
To date, the downstream sector – refinery of crude oil and distribution of products derived from crude oil – remains well below domestic demand.  The single oil refinery in Luanda with installed capacity of 65,000 barrels per day (bpd) is being operated by Italian oil company ENI, under a joint venture agreement with state-owned company Sonangol.  The joint-venture was formed to modernize and increase installed capacity and current output levels of 45,000 barrels per day (bpd).  ENI promoted an international public tender and awarded a contract to Italian company KT - Kinetics Technology to construct another refinery unit for gasoline, to quadruple gasoline output within two years, producing 1,200 tons by the end of 2021, compared to a current production of 300 tons.  This USD 200 million project is expected to reduce the market deficit by 20 percent by 2021.
 
A topping facility in Cabinda is managed by Chevron and has 16,000 barrels per day (bpd) of capacity production.  In June 2019, a contract for the expansion of the Cabinda refinery was awarded to United Shine consortium, a joint venture between United Shine (90%) and Sonangol (10%) and is expected to increase output levels to 60,000 barrels per day (bpd) by 2021.  This high conversion refinery will be designed by the American company KBL and will process jet A1, gasoline, diesel and fuel oil.
 
In August 2016, Sonangol put on hold a second national refinery project that had been in development in the Angolan city of Lobito. U.S. company Kellog Brown Root was awarded the engineering contract.  In November 2017, Sonangol announced that the Angolan state-owned company was in the process of identifying and qualifying potential partners for the construction of a national petroleum refinery in Angola, including the Lobito refinery.  Several proposals include the continuity of the USD 8 billion Lobito petroleum refinery in Benguela province with a production capacity of 200,000 barrels per day of light and high-quality petroleum products.
Sonangol is giving up its monopoly of the distribution of refined hydrocarbons, to allow entry of new players like TOTAL, and expand the network of gas stations throughout the country.  TOTAL’s CEO announced that TOTAL will invest USD 100 million to construct 50 fuel stations across Angola.
 
Sonangol is the sole company which owns a blending unit in Angola to produce motor oil lubricants and greases.  Apart from its own brand NGOL Lubrificantes, Sonangol is blending automotive lubricant oils for Toyota Motors TGMO in addition to Wodex and Lubmarine. Other competitors in the lubricant market include Galp, Puma, Castrol, Total and Caltex.
 
  
 2016201720182019 estimated
Total Local Production0000
Total Exports0000
Total Imports859.7802.1577.7580
Imports from the US781.5729.2525.2527
Total Market Size859.7802.1577.7580
Exchange Rates166166245340
 
(total market size = (total local production + imports) - exports)
Units: USD millions
Source: https://www.census.gov/foreign-trade/balance/c7620.html 

Leading Sub-Sectors

US exports to Angola concentrate in the oil and gas sector, dominated by petroleum industry parts and equipment. Much of these equipment falls into Harmonized Tariff Schedule (HTS) Category 84 – Nuclear Reactors, Boilers, Machinery and Mechanical Appliances.
 
U.S. Domestic Exports to Angola (USD million) - Selected Categories related to the Petroleum Industry
 
 
HTSDescription2016201720182017 - 2018 Change (%)
84Nuclear Reactors, Boilers, Machinery and Mechanical Appliances316143168.418%
843143Parts for Boring or Sinking Machinery652434.745%
842129Filtering or Purifying Machinery24.82.83.111%
848180Taps, cocks, valves and similar appliances for pipes, vats etc24.67.98.69%
848140Safety or Relief Valves22.63.99.7149%
848190Parts for Taps, cocks, valves and similar appliances for pipes, vats etc19.35.47.539%
841182Gas Turbines18.624.428.316%
73Articles of Iron or Steel44.911.78.9-24%
90Optical, Measuring, Precision, etc Instruments/Apparatus29.411.38.8-22%
902620Instruments/Apparatus for Measuring/Checking Pressure of Liquids or Gas51.10.6-45%
903010Instruments for Measuring or Detecting Ionizing Radiation4.214.80.2-99%
Source: US export data - https://dataweb.usitc.gov/scripts/cy_m3_run.asp    
 
Oil and gas equipment
  • High quality, cost-saving and operations’ optimization technology solutions (e.g. to lower costs in mature fields)
  • Exploration and production equipment and services (e.g. deep and ultra-deep technologies, namely drill ships, floating vessels)
  • Environmental protection and monitoring technologies (e.g. sea pollution remediation products)
  • Lubricant oils and grease
Oil and gas services
  • Seismic data reporting and releasing
  • Operations risk insurance

U.S. companies seeking Angolan partners can request U.S. Commercial Service Angola for assistance in identifying and qualifying Angolan distributor partners.

Opportunities

The Government of Angola seeks to engage more U.S. firms to compete for multi-billion U.S. dollar projects including exploration and development of oil and gas fields, transportation and storage of petroleum products, refinery construction and associated infrastructure.
 
Gas Exploration and Production:
The natural gas industry requires significant investment to capture its full economic potential.  The 2018 gas law will provide an enabling framework to maximize the value of Angolan gas, given Angola’s considerable proven natural gas reserves.  Most of the country’s natural gas production is associated with oil.  When not flared or reinjected into wells, the natural gas feeds the Angola LNG plant located in Soyo.
 
The LNG plant is a storage and gas processing facility, which is projected to receive 1 billion cubic feet per day of natural gas.  However, it is reportedly producing well below its capacity of 5.2 million tons per year due to lower levels of gas sourcing from offshore oil fields through pipelines built under the Congo River.  The plant will require continued supply of natural gas to maximize and monetize its full installation capacity.  According to estimates from industry experts, the plant can supply approximately 5.2 million tons of LNG per year for over 20 years.  The plant has a capacity of 360,000 cubic meters (cm) of full containment for LNG, LPG, and condensate storage. 
 
The project is expected to facilitate continued offshore oil development while reducing gas flaring and greenhouse gas emissions in Angola, as well as supplying the domestic market with up to 125 million standard cubic feet per day, and service the regional and international markets.  The Ministry of Energy and Water announced Angolan government targets for natural gas to supply 21 percent of Angola’s energy needs by 2025.
 
Oil Exploration and Production:
There is a large potential of untapped oil reserves in the Congo basin and in the Kwanza basin, mostly at deep and ultra-deep waters. The ANPG, which oversees auctions and licenses, announced the auctioning of more than 50 new blocks of oil and gas in offshore and onshore basins during the period spanning 2019-2025. 
 
The first round of bids is planned for October 2019 and will include 10 blocks:  9 from the Namibe basin and 1 from the Benguela basin.  The blocks (11, 12, 13, 27, 28, 29, 41, 42 and 43) located in the Namibe basin hold post and pre-salt potentials, while block 10 in the Benguela basin is in shallow waters.   Alongside these blocks will also be auctioned exploration data comprised of high definition magnetic data, 2D and 3D seismic data.
 
In 2020, the ANPG plans to auction 9 onshore blocks, followed by a licensing round of 8 blocks in offshore shelf and deep water in 2021.  In 2023, the agency will grant licenses in onshore and in interior basins to 12 blocks: Etosha, Okavango and Kassange.  Finally, in 2025 more than 11 blocks will be auctioned in pre-salt fields.
 
Midstream: Refining
The Government of Angola has stated that increasing its refinery capacity is a top priority for the economy as refinery of crude oil and distribution of hydrocarbon remain well below domestic demand.  Angola currently imports 80 percent of its demand for refined petroleum and 20 percent is produced locally.  To reduce the country’s dependence on imported refined petroleum the Government of Angola announced plans for the construction and expansion of national refinery plants. 
 
In June 2019, the Italian company KT - Kinetics Technology was awarded a contract to construct another refinery unit for gasoline at the Luanda refinery.  This expansion will quadruple gasoline output within two years, producing 1,200 tons by the end of 2021, compared to a current production of 300 tons.  Similarly, a contract for the expansion of the Cabinda refinery was awarded to United Shine consortium, a joint venture between United Shine (90%) and Sonangol (10%) and is expected to increase output levels to 60,000 barrels per day (bpd) by 2021. In addition, the construction of a previously conceived USD 6-8 billion Lobito petroleum refinery in Benguela province with a 200,000 barrels per day production capacity is now being taken under consideration.
 
These additional refining capacities are estimated to reduce imports of refined petroleum by USD 2.7 billion per year, thus generating substantial savings while diversifying the economy.  Consequently, it is anticipated that these industry development projects will provide new opportunities for U.S. exports of services and technologies. 
 
Downstream
The downstream sector, which include the marketing and distribution of petroleum derivatives, accounts very little on the overall oil and gas industry.   However, TOTAL’s USD 100 million investment to construct 50 service stations across Angola, will create additional business opportunities for U.S. companies. 
 
Angola’s single blending unit is owned and operated by Sonangol and supplies the market with mineral and synthetic lubricant oils and greases well below market demand.  Base oils and additives are imported from overseas suppliers, which continues to represent export opportunities for U.S. companies.  

Web Resources

African law and Business / ALC Advogados
https://www.africanlawbusiness.com/publications/oil-and-gas-regulation/oil-and-gas-regulation-2018/angola/q-and-a
FTL Advogados
https://gettingthedealthrough.com/area/24/jurisdiction/151/oil-regulation-angola
 
VdA Legal Partners
https://www.vda.pt/xms/files/v1/Newsletters/2018/Flash_VdA_Legal_Partners_-_Angola_-New_Rules_for_oil_industry_Public_Tenders_and_Procurement_of_Supplies-Services.pdf
 
U.S. Census Bureau
https://www.census.gov/foreign-trade/balance/c7620.html
 
For more Information Contact:
Clemência Nogueira
Commercial Specialist
U.S. Commercial Service Angola
Email: Clemencia.Nogueira@trade.gov
Phone: (+244) 222 641 076 | (+244) 932 572 822

 

 

 

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