WHILE ACCOUNTING FOR OVER 40% OF THE COUNTRY’S GDP, ANGOLA’S VAST OIL RESERVES REMAIN MASSIVELY UNDEREXPLOITED. WITH OUTSIDE INVESTMENT, 2008 TARGETS CAN BE MET

Oil represents 90% of the Angolan economy and comes mostly from offshore fields.

With proven reserves of 5.4 billion barrels and something like four trillion cubic feet of natural gas, Angola ranks as the second-biggest sub-Saharan crude oil producer after Nigeria and can draw on some of the world's most prolifically yielding deep-water fields.
The natural gas is mostly being flared at present but some operators have started to investigate ways of seriously exploiting this resource and a development pact has been signed with state oil firm Sonangol.
Oil production has increased four-fold since 1980, and a lucky thing too with world prices in a slump for much of that time. Another reason for seeing growth opportunities in Angolan petroleum is the increasing awareness in the West that it is time to think about diversifying its oil sources.

Angola ships about half its output of high-quality low sulphur petroleum to the U.S., making it the ninth-largest supplier to U.S. refineries. All it would take is the strategic resolve and quite a lot of upfront money to keep on ratcheting up exploration, investment and development until Angola's current daily output of 750,000 barrels rises to two million, a technically feasible target for the year 2008, and a figure that would put it right up there with Nigeria and Kuwait.
When the Girassol field comes on stream in a few months’ time, production is expected to get a 200,000 bpd boost that will leave the total figure just shy of one million. Bearing all that in mind, the question is: what exactly is holding things up in Angola?

Oil production has increased four-fold since 1980

First is the nagging conflict with rebels. Nevertheless, being largely an offshore operation, the oil industry has been insulated from 26 years of fighting with UNITA rebels. But the emergence of a separatist group in the enclave of Cabinda, demanding a greater share of the revenues pumped from its offshore properties, has not eased misgivings.
Most of Angola's oil is pumped from undersea fields lying off the Cabinda coast and slightly to the south. It is accessible from the continental shelf at maximum depths of around of 400 feet. But test borings suggest the real jackpot seems to lie further out to sea though somebody may have to go down to 3,600 feet to get at it. Even so, factoring oil price variation forecasts into the equation along with a potential recoverable yield of four to eight billion barrels, it still looks very much like an expensive option.

The fact is there are cost recovery, political and technical problems holding up plans to bring on stream the 14 huge offshore fields being eyed by Angola's big four foreign oil companies–ChevronTexaco, BP, Exxon, and TotalFinaElf of France and Statoil of Norway. Not only does deep-water drilling cost money, but getting offshore infrastructure into place is both expensive and a slow and complicated process.
Some viability studies figure an investment of roughly US$3 billion per field would be needed to bring the first wells on stream. In an era when world oil prices are falling, it's no wonder the industry has adopted a wait-and-see approach to Angola.
Meanwhile, Petroleum Minister José Botelho de Vasconcelos has warned that if oil prices fall below US$18 per barrel, the drop in revenues would effectively put a chokehold on further development in Angola's oil sector. For that reason, though not an OPEC member, Angola supports OPEC's efforts to maintain price levels by reducing output in concert with the cartel's own cutbacks.