HOUSTON – Angola, the second largest oil producer in Africa, is heavily dependent on the oil sector, making it vulnerable to oil price fluctuations. Additionally, with drilling costs offshore Angola being very high, Douglas Westwood forecasts a resultant drop in deepwater completions in Angola in 2016.
Despite this set-back, Angola’s deep and ultra-deepwater projects are key to driving offshore production during a period of reduced spending and retrenchment, according to the analysts.
“We do not expect to see projects that are past the final investment decision being canceled and many projects have been under construction for a number of years and will start up in the coming three years. The recent start-up of Eni’s West Hub and Total’s CLOV projects form the basis of our positive short-term forecast: DW expects Angola to meet its 2015 target production of 2 MMb/d.”
As cuts to expenditure are announced, operators like BP and Total are looking to core assets in Angola as a focal point for spending over the next three years. Importantly, Total launched the development of the Kaombo ultra-deepwater project in April 2014, bringing online a potential 230,000 b/d following start-up in two years’ time. Chevron, ExxonMobil, and Eni also have major deepwater oil projects in Angola, collectively adding a peak capacity of nearly 1 MMb/d. These are all due to start production before 2018.
The company forecasts a dip of 2.3% in offshore oil production in 2016, before recovering to 2.2 MMb/d in 2021.
The downturn offers exploration opportunities for larger oil companies, with potential for expansion in Angola as smaller companies apply for farm-in partners and Sonangol aims to sustain investment.
“Eni have staked their claim, securing a three-year extension for exploration work near their Angolan assets. Repsol has also displaced an exploratory vessel from the Canary Islands for a venture offshore Angola. A focus on core assets, and even the expansion of assets in Angola has been the message from several major oil companies at the start of 2015, safeguarding Angola through a period of oil price turbulence.”