Extractive Industries

Angola is endowed with a variety of minerals and a huge amount of hydrocarbons. The true potential of the country will be revealed by 2017 when the Angola government completes its ambitious National Geological Plan (“Planageo”) started in 2014, intended to map out the geological potential of Angola in terms minerals  and petroleum.

Since its independence in 1975, petroleum resources and diamonds have dominated Angola’s extractive industry.

Petroleum

a. Oil 

Angola is global player in the oil industry with enormous petroleum endowments, being currently the second largest oil producer in Sub-Saharan Africa. The country’s proven reserves are estimated to be more than 9 billion of barrels of oil (BBLS), whereas the current and average oil production is 1.8 MMBPD.

Angola is aiming at increasing its production to 2 MMBOPD , while also aiming at fostering domestic oil companies into the sector.  On account of that, the country has been driving an extensive exploration program both offshore and onshore. As in December 2015, Angola completed and an onshore licensing round and allocated 8 onshore blocks to domestic oil companies, in Congo and Kwanza basins.

Meanwhile, as with many other developing countries, the multinationals in Angola have been operating under a concession system, with Sonangol being the concessionaire, while the companies are the operators.

Sonangol (Sociedade Nacional de Combustiveis de Angola) is the national oil company and  has been responsible for the management of the exploration bidding rounds for oil. Itwas established in 1976 and it participates in the large majority of upstream petroleum projects in Angola .  The participation of international oil companies in Angolan petroleum projects occurs through acceptance of the terms of production sharing contracts (see  PSC attached on the right).

Meanwhile, as in November 2015, the Angolan Government announced that it will re-structure its national oil company (Sonangol) so that the licensing and regulatory functions it has been  holding since its establishment, are entrusted to a National Agency that will report to the Government. The re-structuring is expected to be completed in by March 2016.

Angola has been a member of the Organization of the Petroleum Exporting Countries (OPEC) since 2007.

b. Gas 

Just like oil, Angola is also endowed with huge natural gas reserves. They are estimated to be 9.7 TCF. Traditionally, gas has been flared or injected into producing wells so as to enhance recover as the country has been lagging in terms of infrastructure to monetise its gas resources.  To reverse this trend, Angola has built a LNG plant at Soyo (Zaire Provice) so as to commercialise its natural gas. The first LNG cargo was delivered to Brazil in June 2013. Currently the Angolan LNG plant has stopped operating due to technical problems but expected to resume late 2015 or 2016.

 

Mining

The below text reports on diamonds and other minerals.

Diamonds

Angola is an important African, and global, producer of diamonds. In addition to the currently worked alluvial and eluvial diamond deposits, about 700 kimberlite pipes containing reserves of about 50 Mct are known to exist in the country, extending in a well-defined line running diagonally across the middle of the country from NE-SW. 

Diamond is the second most important commodity after oil as it accounts for more than 6% of GDP. In fact, diamond production has increased tremendously over the past 3 years. According to Geology and Minister, Mr Francisco Queiroz, diamonds have yielded total revenue of 1.3 billion US dollars, in 2014 In 2015, despite the downturn of the diamond price in the international market, diamond revenue has reached 1.1 billion dollars whereas the overall production amounted to 8.8 billion carats.

The Angolan government intends to double its production in the next coming years when Luachi project, located in Lunda Sul Province, is scheduled to commence in 2017.

Apart from the country’s commitment to increasing its production, Angola as has also shown some commitment to abiding by the international diamond trading initiative, namely the Kimberley Process Certification Scheme; established in 2003, this was one of the very first initiatives to use transparency requirements to track so-called ‘blood diamonds’ (rough diamonds used by rebel movements to finance wars against legitimate governments) and restricting their import from states where they were used to support conflict. Under this scheme, member states can certify their diamonds as conflict-free before entering the international market. Aside from Angola, this initiative was developed from UN resolutions aimed at limiting conflicts and atrocities linked to diamonds in states such as: GuineaZimbabweCote d’IvoireSierra Leone; and the Democratic Republic of Congo (DRC).

Other Minerals

Angola in addition has significant undeveloped resources of copper, gold, gypsum, phosphate rock, iron ore, manganese and other base metals, granite, marble, uranium, quartz, lead, zinc, wolfram, tin, fluorite, sulphur, feldspar, kaolin, mica, asphalt, and gypsum. The mining of iron ore was historically significant in Angola, consistently exceeding 5 million tonnes p.a. of production in the first half of the 1970s.  Some 90% of the gold produced in Angola is alluvial related to Archaen greenstones, in particular from Cabinda province.

Further to independence, the Government of Angola established Ferrangol-EP as Angola's national resource company (NRC) for extracting, processing and marketing of iron ore.  NRCs were also established to extract other minerals, for example granite and marble.

Technical, transport and the extreme insecurity caused by a civil war that commenced on the country's independence in November 1975 and lasted, not quite incessantly, until 2002.  In 2012 the government announced that its aim to start up iron ore mining through a partnership between Ferrangol-EP and private operators, albeit with no significant production expected prior to 2016 at the earliest.  The following year, 2013, saw changes made to Angola's legal framework for the minerals sector, including reductions in applicable taxation and improved stability safeguards for investors; moreover, Angola's geology and mining minister, Francisco Queiroz announced investments in the extraction of phosphates, manganese and iron ore.  However, in April 2015, Queiroz announced that Angola's new iron ore mining projects would not even be in development (as opposed to production) until 2017, implying further slippage in timescales.