Angolan joy: as the country passes Nigeria
Angola tops Africa output table
Angola has overtaken Nigeria as Africa's biggest oil producer as militant attacks have crippled production in the Niger Delta oil patch, with analysts claiming Angola could become an even more important producer in future.
Nigerian output has been hit by dozens of attacks on oil production facilities, which have increased in intensity this year and removed at least 300,000 barrels per day of crude oil capacity since January.
Angola, increasingly politically stable, safer and more attractive to foreign oil companies, has slowly increased its output and has the potential for much greater production over the next few years, consolidating its dominance, a Reuters report said.
"If nothing improves in Nigeria, Angola will almost certainly overtake it. Nigerian production is going down and down and they are failing to bring their internal difficulties under control," Peter Odell, professor emeritus of international energy studies at Erasmus University, Rotterdam, told the news agency.
Nigerian oil output has plummeted from 2.4 million bpd just before the militant attacks started four years ago and over the last year has averaged around 1.83 million bpd, compared with a little under 1.8 million bpd for Angola, Reuters surveys show.
The gap between the two Opec members narrowed this year and Angola edged ahead of its West African rival last month.
Last month Angola pumped 1.82 million bpd, Reuters figures show, compared to 1.73 million bpd from Nigeria, 1.53 million bpd from Libya and 1.24 million bpd from Algeria, the continent's other major producers.
Angola's oil industry has the potential for more growth in the next year and analysts expect fierce competition for new ventures when new licensing rounds take place, likely in 2010.
"The last licensing rounds in 2006 I think saw world record bids and Angola is an area oil companies are ... very interested in. When they do hold a new licensing round there will be huge interest," Tom Pearmain, African energy analyst, at IHS Global Insight, told Reuters.
As oil companies take a view on future opportunities, traders buying West African crude are growing more attracted to Angolan grades as an alternative to less reliable Nigerian oil.
"With Angolan oil, you know when you are going to load. With Nigerian, you are never sure," said a senior crude trader for one Swiss-based house.
"People are prepared to pay for certainty and that is something you aren't getting with Nigerian."
Angola's oil industry has also been supported by robust buying from Asia of the heavier, higher sulphur grades that it produces. Demand for these grades has also risen as Middle Eastern supplies have tightened with Opec's output curbs.
At the same time, demand for Nigeria's light, lower sulphur crude, which tends to be gasoline-rich, has slumped as buying from the US has waned due to its deep recession.
Despite Angola's meteoric rise as an oil producer following nearly three decades of civil war, experts said it cannot compete with Nigeria's naturally superior oil reserves.
Pearmain believes Nigeria has the potential to produce around 4 million bpd by 2012, while a realistic target for Angola would probably be closer to 3 million bpd.
"It depends on the security situation in Nigeria because they have the greater potential and most of the opportunities going forward are offshore and the main risks for militant attacks are onshore," he said.
Alex Vines, Angolan specialist at London-based thinktank Chatham House, agreed: "If Angola is to be a larger oil exporter it will be down to how the unrest is dealt with in Nigeria."
Analysts also told Reuters Nigeria will only be able to reclaim its place as Africa's biggest producer after a long period of stability and with huge investment, maybe as much as $100 billion over the next five years, half of which must come from the government.
"The Nigerian government cannot afford it, so it has to raise funds from somewhere else. But lending money to Nigeria is a difficult thing for banks to do," said Stewart Williams, principal analyst for sub-Saharan Africa at consultancy Wood Mackenzie in Edinburgh.
"Angolan oil production will be ahead of Nigeria in the short-term simply because of Nigeria's problems. Certainly for the rest of this year unless things substantially improve in Nigeria I would expect Angola to be producing more on a monthly basis," Williams added.
"Until we start seeing a lot more substantial development in Nigeria in the next three or four years, Angola is going to be there or thereabouts as Africa's largest producer."