Angola’s exports to the U.S. market alone last year accounted for $16.9 billion. Exploration is expected to reap further rewards

Angola came out of its decades-long civil war with its infrastructure battered, but with its people united and ready to tap their natural resources, particularly diamonds, hydroelectricity, natural gas, and oil. Since the historic peace accord was signed five years ago, enormous riches have been discovered underneath Angola’s mountains and waves, and international investors have seen the country go from a cautious recovery to a full-fledged bonanza. Some of the world’s most important companies have come to recognize that energy and mineral resources are fuelling Angola’s future and propelling the country into the world economy like never before. In the words of General Mário Cirilo de Sá of the Centro de Estudo Estratégicos de Angola, “the greatest contribution of the international community to Angola isn’t donations, but contracts.”

Oil is, overwhelmingly, Angola’s largest export. Ongoing oil and gas exploration are fuelling Angola’s trade with the US, and Angolan exports to the American market rocketed from $4.5 billion in 2004 to $16.9 billion in 2007. Sonangol, Angola’s parastatal oil group, has driven this growth by increasing its own production capacity and partnering with international energy companies. Most of Angola’s oil lies offshore, beyond the country’s 1,000-mile coastline, and Sonangol has developed considerable expertise in offshore exploration and drilling. As rising prices focus more attention on hard-to-reach oil sources, Sonangol is becoming a sought-after participant in projects to prospect and develop offshore oilfields around the world.

Angola’s substantial offshore and onshore reserves have attracted most of the world’s larger oil companies, including British Petroleum, Chevron, ExxonMobil, Royal Dutch Shell, and Total. As these companies and other industry giants bring their projects onstream, oil production has steadily increased. Now, Angola is using this oil wealth to climb up the chain of production and manufacture refined petroleum products at home. In 2006, Sonangol inked an agreement with China’s Sinopec to build a $3.5 billion refinery in the city of Lobito to produce 200,000 barrels of petroleum products per day, quintupling Angola’s refining capacity in a single stroke.

Increased natural gas exploration and production has accompanied the upsurge of oil development projects. New discoveries have led to a marked increase in Angola’s proven natural gas reserves, from 2 trillion cubic feet in 2007 to 9.5 trillion cubic feet in 2008, giving Angola the second-largest proven reserves of natural gas in sub-Saharan Africa. Since 2005, Chevron has operated the Sanha facility located 23 miles off of the northern province of Cabinda, processing natural gas and liquefied petroleum gas along with condensate and crude oil – 100,000 barrels per day in total – from the surrounding oilfields. To add even more capacity and feed the growing global appetite for liquefied natural gas (LNG), a consortium led by Chevron and Sonangol is building a $4 billion LNG plant, which will produce over four million tons per year for export.

With so much fuel close at hand, it may surprise some that this arid African country generates most of its electricity with water. Two-thirds of Angola’s electricity comes from hydroelectric projects, operated by the state-owned Empresa Nacional de Electricidade (ENE). Russian firm Technopromexport and Brazilian company Odebrecht are working to finish work on the Capanda hydro dam on the Kwanza River. When complete, the four-turbine, 520-megawatt facility will double Angola’s electrical generation capacity. ENE is planning to connect Angola’s three electricity systems into a true national grid, and link its ample hydroelectric resources with the region’s growing power needs through the South Africa Power Pool project.

Angola has an estimated 70 million carats of diamonds in its 700 kimberlite pipes – the diamond-rich geological formations that are scattered across southern Africa – and at least 40 million more in alluvial deposits in the country’s riverbeds. In recent years, annual production has doubled to reach 9.5 million carats. Government-owned Empresa Nacional de Diamantes (Endiama) is a partner in all of Angola’s diamond ventures, and has individual subsidiaries that handle marketing and prospecting. The country’s first diamond cutting factory opened in 2005, allowing the Angolan diamond sector to move from extraction to refining and providing hundreds of jobs for disabled veterans.

Analyses predict output of 2 billion bpd by end of 2008

Angola’s oil industry has reached levels of success that were unimaginable only five years ago. This April, in an historic step, Angola became Africa’s top oil producer, pumping an average of 1.87 million barrels per day to Nigeria’s 1.81 million barrels. Edging out Africa’s oil titan is a proud moment for Angola, a milestone of its recovery and a testament to the concrete economic advantages conferred by the country’s political stability.

From 1.4 million barrels per day in 2006, U.S. analysts project that Angola will produce 2 million barrels per day by the end 2008, and 2.6 million barrels per day by 2011 – and that is only from the current proven reserves of 12.5 billion barrels. Indeed, hydrocarbons form the backbone of the Angolan economy, making up over 50 percent of the country’s GDP and over 95 percent of its exports.

Sonangol, the country’s partially state-owned oil group, is the leader in the Angolan petroleum industry and the partner of choice for international oil firms coming into southern Africa’s most dynamic energy market. To keep the oil flowing, Sonangol is planning to invest $100 billion in the next five years and drill 100 wells per year over the next decade.