The Foundation Underpinning Angola’s Oil and Gas Investment Frenzy

In many ways, though, Angola is the standard bearer. The country, under the leadership of President João Lourenço and the Minister of Mineral Resources, Oil, and Gas, Diamantino Azevedo, has built a nearly peerless agenda for making the most of its massive oil and gas reserves (9 billion barrels of oil and 11 trillion cubic feet of natural gas confirmed). Angola also has earned a reputation for making it easy for international companies to do business there. Not only is it doing things right, Angola is serving as a model for other African nations who want to do things even better.

Surging Investor Interest

Combining resource wealth and an enabling environment with a post-COVID uptick in oil prices has set off what can best be described as an investment frenzy in Angolan exploration and production. In May, Germany’s Deutsche Bank, which is financing the EN230 road project that will improve access to the port of Luanda and the Luanda Railway, said new oil and gas discoveries were accelerating the already brisk pace of foreign capital flows into Angola. The bank also credited Angola’s status as an oil exporter with helping to support currency appreciation and to reduce inflationary pressure amid global recession fears.

One of the most notable new financing deals is the seven-year USD2.5 billion third-party funding arrangement that helped create Angola’s largest independent equity producer of oil and gas, Azule Energy. The company is a 50/50 joint venture between the Angolan operations of multinationals BP and Eni. Azule Energy has a stake in 16 licenses, including six exploration blocks. It also participates in the Angola Liquefied Natural Gas (LNG) operation, a USD12 billion project that is the world’s first LNG plant supplied with associated gas, and has invested USD7 billion in the 36-well Agogo Integrated West Hub project.

While Azule Energy is making headlines, it’s not the only Angolan development attracting significant capital flows. It also points to Eni’s Quiluma/Maboqueiro gas project, which includes two offshore wellhead platforms, an onshore gas processing plant, and a connection to the Angola LNG plant; the Sanha Lean Gas project, an offshore subsea gas pipeline system developed by Chevron’s Angolan subsidiary, Cabinda Gulf Oil Company (CABGOC); and TotalEnergies’ CLOV Phase 3 project. In 2022, the French energy major and its partners made a final investment decision of USD850 million on CLOV 3, which will add production by extending its subsea network and connecting it to the CLOV floating production storage and offloading vessel (FPSO). The project is part of TotalEnergies’ decision to invest USD3 billion in Angolan oil exploration.

Exploration campaigns resulting from Angola’s eight-block 2021/22 licensing round to lead to additional investment in the country’s hydrocarbons.

Angola’s Success is No Accident

Unlike Uganda, Mozambique, and Namibia — all promising newcomers in the African oil and gas landscape — Angola has considerable experience under its belt, meaning its current successes can’t really be considered a surprise. Over the past three decades, Angola’s oil and gas ministry has worked hard to position the republic as the “main destination for large-scale investments in the oil and gas sector” — an effort that has resulted in the country becoming sub-Saharan Africa’s largest oil producer. The country pumps out nearly 2 billion barrels of oil and about 17.9 billion cubic feet of natural gas per day. National oil company (NOC) Sonangol has been around since 1976 and employs 12,000 people.

But it’s clear that Angola isn’t content to rest on its laurels. The government is as tenacious when it comes to keeping its top producer status as it was about getting there. Diversification, infrastructure development, and fiscal policy improvements are how Angola is working to create an even more attractive investment environment for oil and gas production, infrastructure, and monetization.

For example, to reverse declining output, in 2019, the government’s regulatory body, the National Agency of Petroleum, Gas, and Biofuels (ANPG) — which replaced Sonangol as the agency responsible for energy concessions — introduced a six-year licensing round that will cover 50 blocks in the Namibe and Benguela basins by 2025.

Although that kind of competitive bidding process typically results in production-sharing agreements that define how much oil or gas the host country and producer will receive, in 2020, Angola introduced a risk-reducing alternative. The country’s Petroleum Activities Law allows Angola to award risk service contracts when the public bid process is unlikely to succeed (or has already failed). Global law…