Analysts have cast doubt on Angola’s adherence to OPEC export quotas, just months after Africa’s latest oil player joined the cartel. Emerging Markets has learnt that leading oil companies are standing by their investments in the country, on the assumption that a production target of 2.5 million barrels per day (bpd), originally set before OPEC membership, will not be capped at a lower level.
A spokesman for a leading international oil company active in the country told Emerging Markets: “from all our discussions and everything we have seen, OPEC will not damage the country’s growth by enforcing a cap. We expect they will show flexibility in negotiating as well applying the rules, and they should be especially accommodating given the fact Angola is their first new member in 30 years.”
Angola’s oil minister Desiderio Costa said in March 2007 that the country will not have to comply with any production quotas until its output reaches two million bpd, expected by the end of the year. However, Emerging Markets understands that OPEC has not yet agreed to this arrangement and negotiations concerning a precise quota and a timetable for compliance are still continuing. This is likely to be a contentious issue when OPEC formally meets again in September this year.
ExxonMobil, Total of France and BP of the UK all originally committed substantial investments to the country because it was not an OPEC member, and so had no limits on exports. Robert Wine, a spokesman for BP, told Emerging Markets that despite the fraught negotiations over the quotas, the company’s investment strategy would not be affected.
“This will not affect our operations, we are absolutely committed to the investment we have put in, and have made numerous discoveries,” said Wine, on the day that BP announced that its new Plutonio oil field is set to load its first crude shipment in September 2007.
Arend Kapteyn, chief EMEA economist at Deutsche Bank, supported this view, suggesting that Angola would follow the precedent set by Nigeria in exceeding quotas at times of high economic growth.
“Angola will be probably maintain its target of producing 2.5 million barrels by 2012, because the economy depends on oil and the government will not do anything to endanger the country’s growth,” Kapteyn told Emerging Markets. The IMF estimates that petroleum accounted for about half of 2006 economic output, which surged by 18.6%, and Deutsche forecasts that Angola could become one of Africa’s wealthiest nations.
However, this optimism is contested by Lawrence Eagles, head of the oil markets division at the International Energy Agency, the OECD’s energy watchdog. He told Emerging Markets that Angola’s decision to join OPEC was surprising and could disincentivise oil companies to invest further in the country.
“It is highly unusual for a country that has rapidly expanding production to join OPEC, because entry usually makes sense for countries that reach a production plateau. International oil companies will understandably be cautious now, since they don’t know the production arrangements,” warned Eagles.