HardAssetsInvestor

Written by Julian Murdoch  |

October 01, 2009

Oil Spotlight: Angola And Nigeria

Details

Both African countries are sitting on lots of oil—and China wants some.

• Angola
• Nigeria
• China looking for oil deals

 

When it comes to crude oil, Nigeria and Angola aren't exactly household names like, say, Saudi Arabia. Yet these two West African countries are currently the fifth and sixth top exporters of crude oil to the U.S., exporting 668,000 bpd and 504,000 bpd, respectively.

But Americans aren't the only ones buying up African crude. Guess who else wants to poach our sources?

China, of course.

China's thirst for oil is on the rise; the International Energy Agency forecasts Chinese crude oil demand to grow to 8.3 million bpd for this year, only to increase to 8.6 million bpd in 2010. With domestic production basically flat, China must import almost two-thirds of the oil it needs, even as demand just keeps going up. Thus, the emerging giant has turned its eye toward Africa.

Although Chinese demand for West African crude is projected to fall slightly in October due to higher domestic inventories, that doesn't mean China has lost interest. Far from it.

 

Angola: Small Country, Growing Role

 

 

 

Since its civil war ended in 2002, Angola has intensified its crude oil production, almost doubling it in the past few years. It became a member of OPEC in 2007, and now has a production quota somewhere between 1.52 million bpd (according to OPEC internal documents) and 1.656 million bpd (according to country sources).

Either way, Angola is currently producing above its quota, with August numbers coming in at 1.835 million bpd. Surprise!

But Angola is a poor country, and has therefore needed a lot of foreign investment to develop its oil fields. Current investors include all the biggies: Exxon Mobil, Chevron, Marathon Oil and BP. Chevron especially has invested heavily in the country, funding several projects both on- and offshore.

"Looking forward, Chevron has more than a dozen other significant capital projects in various phases of completion in Angola," said company spokesman Scott Walker in an article in Forbes. That includes the newly-launched Tombua-Landana deepwater project, which is expected to produce 100,000 bpd by 2011.

With all the foreign investment and new discoveries taking place, Angola may soon snag the title of Africa's largest oil-producing country away from Nigeria—if it hasn't already. As of August, the countries are still neck and neck by the stats: Angola produced 1.835 million bpd, Nigeria produced 1.870 million bpd.

 

Angola's Exports

Angola exports its crude across the globe, but is a particularly big supplier to China; in the first five months of 2009, 12% of Chinese crude imports came from the small sub-Saharan country. Last year, Angola was the second-largest source of crude for China, right behind crude giant Saudi Arabia.

With the big dogs of energy consumption at their table, Angola's in a particularly plum position, especially given falling output from other countries—such as its rival, Nigeria.