OPEC’s view is that market fundamentals indicate a more than ample crude supply, high stock levels and increasing spare capacity. Although the global economy is forecast to continue to grow, economic growth is expected to slow down in 2007. Moreover, while world oil demand is estimated to increase by 1.3 million bpd in 2007, the Conference observed that this is likely to be more than offset by a projected increase of 1.8 million bpd in non-OPEC supply, its highest rise since 1984.

With an ongoing oil boom, Angola’s economy has grown rapidly over the last few years. Approximately 90 percent of government revenues come from the sale of oil. In 2005, Angola’s real gross domestic product (GDP) growth rate was 14.4 percent, and the forecast GDP growth rate for 2006 is 14.6 percent, according to the US Energy Information Administration (EIA). Although economic growth is strong, Angola remains one of the poorest countries on the African continent.

Proven oil reserves in Angola have tripled in the last seven years. The majority of Angolan oil is medium to light crude (30° – 40° API) with a low sulfur content (0.12% - 0.14%)—valued for the production of gasoline.

Angolan oil production and consumption. Click to enlarge. Source; EIA.

Angola’s crude oil production has more than quadrupled over the past two decades. In 1986, crude oil production averaged 280,000 barrels per day (bpd), while production in 2005 averaged 1.25 million bpd, according to the EIA. The entry into operation of new deep-water production sites in 2008 will boost production to 2 million bpd, according to estimates.

China has become quite involved in the Angolan oil sector. Earlier in 2006, the two countries signed 9 cooperation agreements. The agreements primarily include development of Angola’s oil and gas resources, but also cover general infrastructure development and financial aid. Angola is already China’s second largest trading partner in Africa.

In May, Angola’s state-owned oil company Sonangol and China’s Sinopec launched a US$2.2 billion joint bid for deep-water blocks; these new blocks have estimated reserves of 3 billion barrels and 1.5 billion barrels respectively.

Angola presently is China’s largest African supplier of crude oil, and third-largest supplier globally (behind Saudi Arabia and Iran). The new blocks are likely to move Angola from the position of third-largest oil supplier to China to that of number two on a long-term basis.

Resources:

• “China’s African Adventure”; James Traub; NYT Magazine, 19 November 2006