AS THE MAIN player in Angola's most important commodity, oil, Sonangol holds the key to the future of the nation's economic success and development. In an exclusive inter-view, Sonangol chairman and CEO Manuel Vicente discusses that role and the company's ambitious expansion plans.

Q: As head of Angola's national oil company, what is your opinion about the current high price of oil in the world markets and the effect it has on disgruntled consumer nations?

A: First of all, if the consumers are not happy, we are not happy, but these are the rules of doing business. Our position is that producers need a stable situation and prices should remain between US$22 and US$28 per barrel. With the high cost of financing and of the technology we are using to extract the oil, US$14 per barrel nowadays does not make sense and it would not be good for the sector, neither for producers nor consumers.

Q: What impact has the current situation had on Sonangol?

A: As a producer it means more income, which is good because it improves the company's cashflow. But as a leader in the sector you have to think about tomorrow, and that's our concern. Some people say that the Angolan population is not reaping the benefits of this revenue increase; perhaps in the short term they are right. But when you look at the overall results for the company, it means that the government will have money earlier than expected and will be able to inject funds into the economy sooner.

Q: Besides Sonangol, foreign companies operating here have played an important role in the development of the sector. How important has their contribution been, and how has Sonangol nur-tured its relationship with these foreign operators?

A: The secret is to work together through consensus. First, you have to create conditions in which foreigners trust and believe in you. Second, it is important that Sonangol, foreign companies and government agencies work together as a team to find a common approach to problems. Third, you have to project this confidence to the international community. There is one point we have to stress: all the foreign companies who came here years ago and stayed, and those who came later, have had faith in the future of Angola. They trust the government and they trust Sonangol, and we have not disappointed them.

Q: Top U.S. oil executives in Angola have said they are eager to participate in Sonangol's expansion projects and the overall growth of the sector. Where does Sonangol want to go from here?

A: In July 2000 we defined our corporate strategy for the years 2000-04. As you know, Sonangol plays the role of both concessionaire and national oil company, but for the past five years we have operated mostly as a concessionaire. Now we want to reinforce the power of our subsidiaries to drive national operations. Our main goal is to become a real operating company. We have set a deadline to develop refinery activity and have entered into a consortium with a foreign company to build a US$2 billion refinery with a capacity of 200,000 bbl/d, which will be used to develop the retail market in Southern African Development Community countries. The refinery, to be built in Lobito, will meet international specifications in order to be competitive worldwide. This is an ongoing project, we are in the phase of engineering studies and as soon as we finish we will start building the refinery. We have also set a deadline to exploit gas products. Two years ago we began working with Texaco on a US$3 billion liquefied natural gas project. When the market is completely guaranteed we will launch the project. Currently, we have issued a standing invitation to other companies operating in Angola to join the project. We want to redirect Sonangol and concentrate on our core business. When Sonangol was formed there was no market for the oil industry to supply. So that is why the company created aviation activities, set up hotels and entered the telecommunications sector and other areas.

Q: What do you see in the future for Sonangol subsidiaries such as Mercury (telecommunications), the airline Sonair, Sonangol Distribution, the Houston-based Sonangol USA and the oil and gas exploration and production company Pesquisa & Produção?

A: Pesquisa & Produção is the key to Sonangol's objective to become a real operating company. For the other subsidiaries, I foresee Sonangol's role as one of a lesser sharing partner. Pesquisa & Produção will have many important roles including production, refining, commercialization and distribution. It will also serve as a financial house.

Q: What about environmental issues?

A: Nowadays, the environment is an important consideration. Our company, the government and all the oil companies are operating under rules that protect the environment. Our production sharing agreements include very specific clauses on the environment. For example, if Texaco closes down operations during the production phase, they have to create a fund to abandon their fields in an environmentally safe fashion. Today, the environment is really the top priority and was clearly defined in our corporate strategy.