28 January 2015, Sweetcrude, Lagos – Angolan and Nigerian energy industries have a lot in common. From the inception of both industries in the 1950’s (Angola; kwanza 1955 and Nigeria; Oloibiri 1956), they have walked a part dotted by striking similarities and differences too. Perhaps, it’s the classical story of resource management in a classical African environment. Their stories, however, differs not much from the stories of many other oil producing nations in the world.
Political Economy: Following the Angolan war of independence (1961-1974) the nation was plunged into a civil war in 1975; a war which lasted until 2002. During this period (despite intense violence) oil exploration and production continued in Angola – principally in the kwanza (Cuanza) field and Cabinda fields (offshore and onshore). The Super-Majors; Chevron, BP (Former British Petroleum) Texaco, Total, PetroFina and Elf (later TotalFinaElf) were actively present in the infant days of the industry (as was the case in Nigeria).
Angola emerged from the war with serious economic devastations. The overall Infrastructure was in a very poor state, due to acts of war and lack of maintenance in some instances.
During the late 90’s, significant finds were made offshore and deep offshore. This time, in the regions away from the lower Cabinda areas; that was now experiencing declining reservoirs (Chevron’s kuito fields, among others). These finds, set Angola on a new path; towards becoming a giant oil producer in Africa – trailing closely behind Nigeria.
In Nigeria’s case, decades of bad military regimes seemed almost like a civil war. Infrastructural decay was also massive due to utter negligence.
Nevertheless, the Oil and Gas industry boomed, albeit providing the funds needed for the wide scale corruption and looting that was rampant in those years. The government of Angola with a mixed record was also accused of using oil revenues to prosecute war against opposition UNITA (União Nacional para a Independência Total de Angola)
In 1976, many years after Nigerian National Oil Corporation (state-owned NNPC) was formed, Angola created Sonangol (Sociedade Nacional de combustiveis de Angola). Like NNPC, Sonangol is a mammoth corporation with 17 subsidiaries and a shareholder in almost all the Oil and Natural Gas blocks in Angola. It is directly controlled by the Ministry of Petroleum and thus accountable to the government, which is a 100% owner (Similar to NNPC). While Sonangol has moved on to become a better and more efficient organization, Nigeria’s NNPC mulls on. Audaciously, Sonangol has ventures outside Angola, with interests in Brazil, Cuba, Iraq, Sao Tome and Principe, Venezuela, and the Gulf of Mexico.
In 2004, in a sincere effort to restructure the industry and to improve the transparency in the management of natural resources, (and also attract foreign investment) Angola amended and passed several laws. The end of the war in Angola in 2002 and the end of military rule in Nigerian in 1999 led to some sobering moves by both governments. Nigeria began to restructure its industry via the Petroleum Industry Bill (PIB), a policy document that began in the early months of President Olusegun Obasanjo’s government. Sadly, the status of that bill cannot be genuinely assessed today. In contrast, Luanda’s industry restructuring efforts ultimately led to the passage of the Petroleum Law of 2004; thus standardizing agreements (Joint Venture Agreements, and Production Sharing Agreements), clarifying roles for all stakeholders, improving efficiency and attracting investment and technical expertise.
In spite of resource endowment, both nations are yet to create inclusive growth. As the third largest economy in Sub-Saharan Africa in terms of GDP, many Angolans (about 36 percent) live below the poverty line according to the UN. The statistics is even worse for Big Sister Nigeria with 70% equivalent and as the largest economy in Africa. Both nations are hugely dependent on Oil and Gas revenues as a principal source of government income (Angola: about 80% and Nigeria about 90%)
Gas Infrastructure: One sister has made more progress in this area and that is Nigeria. Much off the gas in Angolan fields occurs as associated gas (together with Oil) and was flared for many years. The concession regime supervised by Sonangol specifies that all gas resources produced by the IOCs belong to the government (once they are not used in re-injection reservoirs) this deterred the IOCs from creating any gas development strategy or encouraging significant investment. Sonangol on its part had no clear gas infrastructure development plan. Although flaring was prohibited it continued for many years. A new law specified zero-flare for all new facilities from 2010, as the country geared toward developing a gas plan and strategy. In 2004, plans began towards building an LNG facility in Soyo. Angolan LNG was eventually commissioned in 2013, the first LNG shipped on 16 June 2013. A single train facility built by Betchel, with production capacity of 5.2 million tons per year.
Nigeria has had a clearer strategy for gas development for many decades. Good achievements have also been made in notable aspects of the blueprint popularly called the Nigerian Gas Master Plan (NGMP). While flaring is still rampart, a sizable portion of produced gas is captured, feeding the domestic demand for gas in residents, industrial areas, power plants and petrochemicals. Nigeria’s LNG (NLNG) project is a successful one. Incorporated in May 1989 and Located in Bonny Island (in the previously volatile Niger Delta). The first train came into operation in 1999. Currently it operates about 7 trains and 22 million metric tons of LNG per year (10 percent of the world’s LNG consumption).
BIGGER SISTER? In all, Nigeria currently leads Angola in terms of total crude oil production, but this might change in the near term. In Nigeria, the comatose state of the proposed Petroleum Industry Bill (PIB) has been cascaded to many other areas of the industry. Exploration activities are near zero and investments are seriously dwindling due to uncertainties around the success or failure of the bill. IOCs are increasingly moving offshore leaving shallow waters and onshore fields to smaller, indigenous E & P firms that haven’t always lived up to expectations. Productions are likely to dwindle and reserves figures have not improved. Even in the deep offshore areas, fewer new fields are being developed or planned. Notably the Egina field (currently behind schedule and stalled by multiple challenges) Sinopec-owned Addax Petroleum has also made some new finds in the Ofrima and Udele fields in OML 137. Shell’s Bonga South West and a couple of other fields by other operators are also expected on stream soon.
In Angola the outlook is much brighter both in exploration and production. The coming years will see many elephant fields coming on stream. Exxonmobil’s Kizomba satellites phase II in block 15 is scheduled to come on-stream in 2016 and peak at 125,000bbl/day. PSVM field (Plutao, Saturno, Venus, and Marte) operated by BP started producing from Plutao and Saturno in 2012, but Marte is expected to start soon and peak at 150,000 bbl/d. Total’s CLOV (Cravo-Lirio-Orquidea-Voleta) located in deep water block 17 is expected to peak at 160,000 bbl/d in 2015. Eni’s West Hub project is expected to start and peak at 80,000 bbl/d in 2015. Chevron’s Mafumeira Sul will bring on 120, 000 bbl/d in 2015 while Lizani field in a unified offshore zone between Angola and Congo (Brazzaville) will bring 46,000 boe/d. smaller volumes are also expected from the onshore areas, where 10,000 and 5,000 bbl/d volumes are possible. Time will tell, as the saying goes, which if this is a bigger sister!
*Chijoke K. MAMA is a Senior Oil and Gas Analyst in Lagos, Nigeria. Chijioke.email@example.com | 070-6101-3333
US Energy Information Administration (EIA) |OECD: Angola Towards an Energy Strategy | Duncan Clark: Petroleum prospects and political power | Advocate Law practice: Gas Utilization in Nigeria | Dr. E. Egboga: Oil and Gas Reforms in Nigeria: What you should know | Christina Katsouris: Africa’s Oil and Gas Potential | Prior studies.