Angola Oil and Gas Report Q3 2009

Abstract

The latest Angola Oil & Gas Report from BMI forecasts that the country will account for 3.83% of
African regional oil demand by 2013, while providing 19.53% of supply. African regional oil use of
2.98mn barrels per day (b/d) in 2001 rose to an estimated 3.65mn b/d in 2008. It should average 3.69mn
b/d in 2009 and then rise to around 4.08mn b/d by 2013. Regional oil production was 7.84mn b/d in 2001,
and in 2008 averaged an estimated 10.20mn b/d. It is set to rise to 11.78mn b/d by 2013. Oil exports are
growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region
was exporting an average 4.86mn b/d. This total had risen to an estimated 6.54mn b/d in 2008 and is
forecast to reach 7.70mn b/d by 2013. Angola has the greatest production growth potential, with Nigerian
exports set to soar if it can resolve recent quasi-political issues.
With regard to natural gas, the region in 2008 consumed an estimated 107bn cubic metres (bcm), with
demand of 177bcm targeted for 2013. Production of an estimated 211bcm in 2008 should reach 356bcm
in 2013, which implies net exports rising from an estimated 104bcm in 2008 to 179bcm by the end of the
period. Angola in 2008 consumed an estimated 3.26% of the region' s gas, while producing just 1.66%.
By 2013, we expect its share of consumption to be 4.54%, with a 4.21% contribution to regional gas
production.
In terms of the OPEC basket of crudes, the average price in Q109 was an estimated US$45.78 per barrel
(bbl), down 13% from the US$52.51/bbl recorded during the previous three months. During the second
quarter, there has been little change to our view of oil market developments. BMI is forecasting an
average OPEC basket price of US$51.30/bbl, with the March gains being retained in April, before further
recovery to a possible US$57.00 by June. For 2009, we are still assuming an average OPEC basket price
of US$52.00/bbl (-45% year-on-year). The BMI full year forecast implies Brent crude at US$53.73, WTI
averaging US$54.90/bbl and Urals at US$52.66 for 2009.
For the whole of 2009, the BMI assumption for gasoline is an average US$56.89/bbl, with the price
peaking at a forecast monthly average of US$64.75 in December 2009. The overall y-o-y fall in 2009
gasoline prices is put at 44.1%. For gasoil in 2009, the BMI forecast is for an average price of
US$69.35/bbl, assuming a monthly high of US$94.48/bbl in December. The full-year outturn represents a
42.8% fall from the 2008 level. The monthly average jet fuel price is forecast to range from US$53.75 in
February to US$96.76/bbl in December, proving an annual level of US$71.78/bbl. This compares with
US$124.95/bbl in 2008.
Angolan real GDP is now forecast by BMI to decline by 0.8% in 2009, following growth of 15.2% in
2008. We are assuming 6.9% growth in 2010, 6.0% in 2011, 3.9% in 2012, followed by 5.1% in 2013.
Healthy economic growth is exceeded by spectacular oil demand growth, albeit from a low base.
Consumption is set to rise from an estimated 81,000b/d in 2008 to 156,000b/d by 2013. State oil company
Sonangol operates in partnership with various international oil companies (IOCs) and now accounts for
less than 40% of the country' s oil output. Thanks largely to IOC investment, oil output is forecast to
increase from an estimated 1.85mn b/d in 2008 to 2.30mn b/d in 2013, with exports heading towards
2.14mn b/d. Project slippage, brought about by lower oil prices, has weakened the volume growth trend -
with Angola' s new-found OPEC membership also posing problems in terms of production quotas. Gas
production of an estimated 3.5bcm in 2008 should reach 15.0bcm by 2013. Consumption is expected to
rise to 8.1bcm by the end of the forecast period, providing export potential of around 7.0bcm.
Between 2008 and 2018, we are forecasting an increase in Angolan oil and gas liquids production of
21.6%, with volumes peaking at 2.55mn b/d in 2015, before slipping steadily to 2.25mn b/d by the end of
the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by 342.8%, with
growth slowing to an assumed 15.0% per annum towards the end of the period and the country using
357,000b/d by 2018. Gas production is expected to rise to 33bcm by the end of the period. With demand
rising by 362.6% between 2008 and 2018, there should be export potential increasing to 17bcm, in the
form of LNG. Details of BMI' s 10-year forecasts can be found in the appendix to this report.
Angola occupies fifth place in BMI' s updated Upstream Business Environment rating, although just two
points behind Gabon and therefore capable of a move higher. The country' s score benefits from an
excellent oil and gas output growth outlook, respectable proven reserves, a large number of non state
companies active in the upstream sector and decent licensing terms. There is little threat from Algeria two
points below it. The country is near the bottom of the league table in BMI' s updated Downstream
Business Environment rating, with few high scores and progress further up the rankings unlikely over the
near term. It is now ranked ninth, ahead only of Equatorial Guinea thanks to low scores for refining
capacity, oil and gas consumption, and private company competition in the downstream segment.