This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 11/1/2018

Overview
Angola is the second largest oil producing country in sub-Saharan Africa and an OPEC member with output of approximately 1.55 million barrels of oil per day (bpd) and an estimated 17,904.5 million cubic feet of natural gas production. Due a significant drop in oil prices and limited foreign currencies in the Angolan market, very limited investment in either new or mature exploration and production fields has occurred since 2014. The limited investment in turn has led to the current daily lifts of 1.55 million barrels of oil per day (bpd), a thousand barrels below capacity. Nonetheless, the country holds 9 billion barrels of proven oil resources and 11 trillion cubic feet of proven natural gas reserves, which represent great potential for further economic development and significant business opportunities.
The oil industry in Angola is dominated by the upstream sector – exploration and production of offshore crude oil and natural gas. Almost 75 percent of the oil production comes from off-shore fields. Angola produces light sweet crude oil containing low volumes of sulphur, suited for processing light refined petroleum products. The oil rich continental shelf off the Angolan coast is divided into 50 blocks.

Angola’s production levels are expected to increase by 2020 as the country is undergoing industry restructuring, including the “regeneration” (reorganization) of the state oil company Sonangol in addition to the revision of legislation related to oil and gas. The Government of Angola’s intent is to spur growth in the sector, encouraging exploration in development areas, improving operation efficiencies, reducing taxes, empowering the private sector, and attracting investors.
A technical task force composed of key stakeholders including major international oil companies was created by Presidential Order 290/17 of October 13, 2017 to address critical issues impeding competitiveness in the oil and gas sector. This Presidential task force reviewed, developed and reformed the concessions’ award and management process, marginal field development, the field abandonment process, the natural gas law, and projects in development areas. The result was the enactment of two new laws and three amended Presidential Decrees.

Also, a new regulatory structure for a Petroleum Agency is being developed to assume the concessionaire functions - contrary to current format whereby it is performed by Sonangol – and which would report directly to the Minister of Mineral Resources and Petroleum.
Concessions Award and Management Process: The recently passed Presidential Decree No. 86/18 of April 2, 2018 simplifies the control mechanism for petroleum industry operations related to public tenders and procurement. The tender process to award concessions and licenses will be public and will no longer require “pre-qualification” from bidders. Sonangol’ s process for approval of contracts with third parties to carry out petroleum operations was also simplified:
-- Operators may award contracts for up to USD 1 million without public tender or approval by National Concessionaire Sonangol (previous threshold was USD 250,000);
-- Contracts between USD 1 million and USD 5 million are subject to public tender but do not need approval by the National Concessionaire (Sonangol EP);
-- Contracts exceeding USD 5 million are subject to both public tender and National Concessionaire approval (previous threshold was USD 750,000);
-- Direct award (without public tender) is always permitted in the following cases: in case of an operational emergency, and in case the supply/service can only be sourced from one specific supplier;
-- Bids must be submitted in Portuguese language. If presented in a foreign language, a Portuguese translation must be provided; 
-- Bids must be opened in the premises of the National Concessionaire;
-- The National Concessionaire must expressly decide on the award recommendation made by the operator (for contracts > USD 5 million). The operator recommendation is deemed tacitly accepted if no express response is forthcoming;
-- Several time periods were extended or reduced (including for bid evaluation, National Concessionaire approval).
Source: VIEIRA DE ALMEIDA Law Firm, 2018
Fiscal Incentive regulation for marginal field development: Discoveries which have not been exploited due to being too small a reserve - less than 300 million barrels  - or not being economically viable because of lack of infrastructure, fall under a new fiscal regime that cuts the petroleum tax to 10 percent from 20 percent, while reducing petroleum income tax on marginal fields to 25 percent from 50 percent.

Field abandonment process: Presidential Decree No. 91/18 passed on April 10, 2018 provides a pathway for dismantling abandoned wells and decommissioning of oil and gas facilities, in accordance with Quality Health Safety and Environment (QHSE) industry best practices. This Presidential Decree addresses mature well abandonment that requires oil field operators to furnish an approved abandonment plan to Sonangol and the Ministry of Mineral Resources and Petroleum to review. It also provides a framework for safeguarding funds for final dismantling operations at the end of an oil well’s economic life.

Natural Gas Law: Presidential Decree No. 7/18 of May 18, 2018 is the first law enacted to regulate natural gas exploration, production, monetization, and commercialization.  More attractive tax rates are one of the benefits the new gas law. Gas production tax is 5 percent (compared to 10 percent for oil). Gas income tax is 25 percent (same as for oil) for associated gas and 15 percent for non-associated gas when proven reserves are lower than 2 trillion cubic feet.  In associated gas fields operators can reinject gas to maximize oil recovery or transfer the surplus to Angola LNG plant if they do not sell it in domestic or international markets.

Marginal Projects: Many oil and gas activities in development areas were suspended when it was concluded they were not economically viable.  The Government’s intent is to encourage the reactivation of these activities within development areas.  Recent legislation will enhance the oil and gas business environment, providing new guidance on oil and gas operations and processes that include streamlining of work programs. The Government also plans to implement contract and fiscal incentives that will promote operational efficiency in mature and marginal fields.
Legal Business Framework:
Exploration and production activities related to petroleum activities are governed by the following laws and Presidential Decrees:
-- Petroleum Activity Law No. 10/04 of November 12, 2004 and Presidential Decree 211/15 of 2 December 2015. is the main legal instrument covering the rules to access and conduct petroleum activities in Angola
-- Petroleum Taxation Law No. 13/04 of December 24, 2004 provides the taxation framework applicable to petroleum activities (taxes, rates, deductions)
-- Petroleum Customs Law No. 11/04 of November 12, 2004 is the legal instrument covering the customs regime and incentives specifically applicable to the sector
-- Angolan Oil and Gas Foreign Exchange Law for the Oil Industry No. 2/2012 of January 13, 2012 determines a specific foreign exchange regime applicable to the payment of goods, services and capital operations related to the petroleum sector;
-- Presidential Decree 211/15 of December 2, 2015 establishes the framework for the activities involved in the exploration of Development Areas.
-- Ministry of Petroleum Order No. 127/03 of November 25, 2003 on Local Content Regulations covers the rules applicable to the supply and provision of petroleum related goods and services
-- Presidential Decree 190/12 of August 24, 2012 establishes a waste management policy that requires oil companies to ensure environmental protection in their operations by meeting zero operational discharge levels.
-- Decree 38/09 of August 14, 2009 establishes the rules and procedures to be followed in oil operations (including upstream oil prospecting, research, evaluation, development, and production activities), in accordance with the principles of safety, hygiene and health, based on Angolan laws, as well as the commonly accepted practices within the oil industry.
 
The government regulatory and oversight body responsible for regulating oil exploration and production activities is the Ministry of Mineral Resources and Petroleum. The National Concessionaire is Sonangol EP, which is the holder of the concession rights and has the competence to execute oil operations in Angola.  Several sanctions and penalties may apply for a breach of the contractual agreements.

International oil exploration companies in Angola are required to operate through partnership with Sonangol, and such association may take the form of a Corporation, Consortium, Production Sharing Agreements, or Risk Services Agreements. The most common type of arrangement international companies enter into with the national concessionaire Sonangol is the Production Sharing Agreement. Major procurements are generally secured through a public tendering regime or direct negotiation, with technical and financial reviews by Sonangol EP.

According to the Angolan Petroleum Operations Regulation Decree 1/09 of January 27, 2009 petroleum operations (prospecting, exploration, appraisal, development, and production of crude oil and natural gas) can only be exercised under a prospecting license issued by the Ministry of Mineral Resources and Petroleum, or pursuant to an oil concession awarded by Sonangol EP.
As for the prospecting license, any domestic or foreign company with the necessary technical and financial capacity may apply to the Ministry of Mineral Resources and Petroleum for the issuance of a three-year prospecting license (exceptionally extendable at the request of the licensee) to determine the petroleum potential of a given area. The prospecting license includes geological, geochemical and geophysical research, and the processing, analysis and interpretation of the acquired data, as well as regional studies and mapping, for locating oil and natural gas fields.

The Angolan government increasingly requires oil exploration companies to engage Angola-based companies in their operations.  Guided by Executive Order 127/03 of November 25, 2003 oil companies must use Angolan suppliers for services and equipment of low and medium technical levels. While legally required for over a decade, the Angolan Government has increased enforcement of this localization requirement to encourage development of Angolan company participation as distributors and value-added service providers. The government does not currently require local content manufacturing, though several companies have initiated limited local manufacturing.
 
Ministry of Petroleum Executive Order 127/03 establishes the following categories of company ownership for petroleum industry contracting of goods and services:
-- Exclusive Regime for Angolan Companies – activities not requiring heavy capital investment and with non-specialized know-how (for example: supply of technical materials, pressure testing, and general equipment maintenance).

-- Semi-Competitive Regime – activities with a reasonable level of capital investment and higher level of know-how, though not specialized. In this case foreign companies would be permitted through association with an Angolan company (for example: geographic survey and data processing, production testing, laboratory analysis, specialized consulting, drilling production materials and equipment, well cleaning, and maintenance).
-- Competitive Regime – activities with heavy capital investment and a higher level of specialized know-how may be considered for foreign participation without Angolan company partnership, though local partnership is not excluded.
Government revenues from oil and gas
According to Petroleum Taxation Law No. 13/04 of December 24, 2004 petroleum operations are subject to the payment of the following taxes:
                  -- Petroleum Production Tax.
                  -- Petroleum Revenue Tax.
                  -- Petroleum Transaction Tax.
                  -- Surface Area Charge.
                  -- Contribution towards the training of Angolan staff.
As a part of all Production Sharing Agreements currently in force in Angola, Sonangol EP is contractually entitled to receive part of the profits made under the terms and conditions established in each Production Sharing Agreement.  Production Sharing Agreements are not subject to Petroleum Production Taxes.
Waste management policy for oil and gas
There are some relevant regulations that statutes on waste management, water pollution control, liability for environmental damage and environmental protection forthcoming from oil activities. Environment Framework Law No. 5/98, of June 19, 2015 provides the framework for all environmental legislation and regulations in Angola.  It gives the definitions of relevant concepts, such as the protection, preservation and conservation of the environment, the promotion of quality of life, and the use of natural resources.
Decree 39/00 of October 10, 2000 on Environmental Protection from Oil Activities Regulation, all projects to be developed within the scope of the oil and gas sector require the presentation of several reports and studies. The most important report is an Environmental Impact Assessment. Angola has ratified the following international treaties related to safety and environmental protection for oil and gas activities:
--  International Convention on Civil Liability for Oil Pollution Damage.
-- International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution Casualties.
--  International Convention on Oil Pollution Preparedness, Response and Co-operation.
Presidential Decree 190/12 of August 24, 2012 regulates the management of residues from petroleum activities.  The regulation establishes general rules related to residue disposal, including: production, storage in the ground and under the soil, residues disposal into water discharges or in the atmosphere, treatment, collection, storage and transport of any residue, with exception of those of radioactive nature or subject to specific regulation, to prevent or minimize its negative impacts on human health and the environment.  It also establishes categories of residues and management of residues, and prescribes sanctions to be paid by illegal activity.

Executive Decree 97/14 of December 10, 2014 was issued to protect the environment from operational discharges resulting from petroleum activities performed both offshore and onshore. This waste management policy requires oil companies to ensure environmental protection in their operations by meeting zero operational discharge levels.
Oil field operators are subject to strict rules regarding health and safety (HSE) measures to be taken to ensure the quality of life of their employees.  Angola is a member state of the United Nations Convention on the Law of the Sea 1982 (UNCLOS).

Angola has also recently adhered to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, which entered into force in Angola on June 4, 2017.  Dispute resolution is conducted at the International Arbitration Court in Paris, France.

Market players:
Major international oil exploration and production companies active in Angola include Total, with 41 percent market share (800 bpd), Chevron with 26 percent market share (510 bpd), Exxon Mobil with 19 percent market share (375 bpd), and BP with 13 percent market share (252 bpd).  Other international players with smaller operations include ENI and Equinor.  Sonangol also operates through its subsidiary Sonangol E&P.

While U.S. companies Chevron and ExxonMobil together account for one-third of national production, other major U.S. contractors active in Angola include Halliburton, Baker Hughes a GE Company, FMC Technologies, Oceaneering, Weatherford, and Schlumberger, just to name a few.  Due to limited results, Vaalco departed the market in late 2016 and ConocoPhillips is phasing down its presence.  Cobalt’s major discoveries and assets in Blocks 20 and 21 were recently sold to Sonangol, at the price of U.S. $500 million.  These two blocks are now available for investment.  The Government of Angola seeks to engage more U.S. firms to compete for multi-billion U.S. dollar projects, including exploration and development of oil and gas fields, transportation and storage of petroleum products, refinery construction, and associated infrastructure.

Ultra-deep-water projects are being pursued by Total in Block 32 (USD 16 billion Kaombo project expected to peak at 230,000 bpd),  and BP's "Pluton, Saturn, Venus and Mars" (PSVM) project in Block 31 (USD14 billion). U.S. company MODEC supplied an accommodation vessel to support the hook-up operations on BP’s PSVM project.

Onshore activities are very limited.  SOMOIL, a privately-owned company, was planning to produce around 5,000 bpd in Soyo, in northern Angola, but operations have been delayed.  Onshore blocks in the Kwanza basin were offered in late 2015, but final awards were cancelled, and the blocks should be re-bid in 2019.

The LNG plant in Soyo, in the north of Angola, is structured as a consortium with Sonangol owning 22.8 percent, Chevron owning 36.4 percent, and Total, BP and ENI each with 13.6 percent.  U.S. companies Bechtel and ConocoPhillips provided engineering and construction services respectively for the Soyo LNG facility.  The plant started production in 2013 with 5.2 million tons per year capacity and an investment of over U.S. $10 billion, but operations were temporarily shut down due to technical difficulties in 2015 and 2016, but then restarted in early 2017.  Export shipments went to Brazil, China, South Korea and France.  The U.S. was a target market, but it did not materialize due to increased U.S. domestic production.

To date, the downstream sector – refinery of crude oil and distribution of products derived from crude oil – remains well below domestic demand.  The single oil refinery in Luanda has a capacity of 65,000 barrels per day (bpd) and is being operated by ENI to increase current output levels.  A topping facility in Cabinda is managed by Chevron and has 16,000 barrels per day (bpd) of capacity production.
In August 2016, as part of an overall restructuring, Sonangol put on hold a second national refinery project that had been in development in the Angolan city of Lobito.  U.S. company Kellogg Brown & Root (KBR) was awarded the engineering contract.  In March 2017, Angola reportedly signed a deal with a Russian consortium to construct a 400,000 barrels per day (bpd) petrochemical refinery with rail in the southern Angolan city of Namibe.

In November 2017, another change in leadership at Sonangol initiated a major “regeneration” or reorganization effort to increase efficiencies, reduce costs, and concentrate on core oil and gas business activities.  The reorganizaton effort has resulted in Sonangol announcing its intention to sell non-core assets and seek investors and partners for new oil field production projects.  As the company implements its new corporate and business strategy, industry players cite delays in major decision making for industry-proposed investment plans, and the renegotiating of supply contracts.
The increasingly competitive global market and lower oil price environment particularly challenge Angola’s high production costs, which average $40 per barrel. Industry players emphasize the need for a more competitive business environment with reduced production costs and increased efficiencies.  Industry analysts (Wood Mackenzie) project that without needed new investment in mature fields that are dominant in Angola, production is estimated to decline significantly by 2020.  Increased pressure to reduce production costs coupled with ongoing restrictions on foreign exchange access have led to significant downsizing of petroleum service companies, contractors, and operators, with some businesses closing operations.

Since 2012, petroleum companies operating in Angola have been required to process payments through local banks and in local currency (kwanza). “Consortium contracts” between international and Angolan-based service providers and “tripartite agreements” through commercial banks are mechanisms that can provide oil operators with some flexibility in foreign exchange payment, but require Sonangol and Central Bank approvals.
 

 Oil and Gas Technologies and Equipment2015201620172018 estimated
Total Local Production0000
Total Exports0000
Total Imports556.8859.69802.12143.1
Imports from the US506.1781.5729.2130.1
Total Market Size556.8859.7802.1143.1
Exchange Rates135166166245
 
(total market size = (total local production + imports) - exports)
Units: $ millions
Source:

Leading Sub-Sectors:
 
U.S. exports to Angola are concentrated in the oil and gas sector, dominated by petroleum industry parts and equipment.  Much of these equipment falls into Harmonized Tariff Schedule (HTS) Category 84 – Nuclear Reactors, Boilers, Machinery and Mechanical Appliances, which faced the same level of decline in 2016 as did total Angolan imports.
 
U.S. Domestic Exports to Angola (US$ million) - Selected Categories related to the Petroleum Industry
 
HTSDescription20142015201620172016 - 2017 Change (%)
84Nuclear Reactors, Boilers, Machinery and Mechanical Appliances692.3463.5316143-55%
843143Parts for Boring or Sinking Machinery254133.86524-63%
842129Filtering or Purifying Machinery11.521.724.82.8-89%
848180Taps, cocks, valves and similar appliances for pipes, vats etc29.836.524.67.9-68%
848140Safety or Relief Valves16.121.422.63.9-83%
848190Parts for Taps, cocks, valves and similar appliances for pipes, vats etc33.930.419.35.4-72%
841182Gas Turbines30.925.418.624.431%
73Articles of Iron or Steel158.3146.444.911.7-74%
90Optical, Measuring, Precision, etc Instruments/Apparatus6439.829.411.3-62%
902620Instruments/Apparatus for Measuring/Checking Pressure of Liquids or Gas8.92.351.1-78%
903010Instruments for Measuring or Detecting Ionizing Radiation1.21.44.214.8252%
 
Source: US export data - https://dataweb.usitc.gov/scripts/cy_m3_run.asp    
 
Oil and gas equipment
  • High quality, cost-saving and operations’ optimization technology solutions (e.g. to lower costs in mature fields)
  • Exploration and production equipment and services (e.g. deep and ultra-deep technologies, namely drill ships, floating vessels)
  • Environmental protection and monitoring technologies (e.g. sea pollution remediation products)
  • Lubricant oils and grease
Oil and gas services
  • Seismic data reporting and releasing

Operations risk insurance
U.S. companies seeking Angolan partners can request U.S. Commercial Service Angola for assistance in identifying and qualifying Angolan distributor partners.
 
Opportunities:
Since 2015, Angola has faced a severe economic setback attributed largely to the significant drop in oil prices. Resulting national budget cuts, currency devaluation and high inflation levels – 27 percent in 2017 - have slowed import levels and hindered economic growth.  A recovery is projected with the potential for oil and gas exploration, development, and production in the Congo and Kwanda basins in offshore and in onshore fields. The projected recovery is expected to compensate for the anticipated decline of outputs by 2020.
Gas Exploration and Production: The natural gas industry requires significant investment to capture its full economic potential.  The new gas law will provide an enabling framework to maximize the value of Angolan gas, given Angola’s considerable proven natural gas reserves.  Most of the country’s natural gas production is associated with oil.  When not flared or re injected into wells, the natural gas feeds the Angola LNG plant located in Soyo.

The LNG plant is a storage and gas processing facility, which is projected to receive 1 billion cubic feet per day of natural gas.  However, it is reportedly producing well below its capacity of 5.2 million tons per year due to lower levels of gas sourcing from offshore oil fields through pipelines built under the Congo River.  The plant will require continued supply of natural gas to maximize and monetize its full installation capacity.  According to estimates from industry experts, the plant can supply approximately 5.2 million tons of LNG per year for over 20 years.  The plant has a capacity of 360,000 cubic meters (cm) of full containment for LNG, LPG, and condensate storage.  
The project is expected to facilitate continued offshore oil development while reducing gas flaring and greenhouse gas emissions in Angola, as well as supplying the domestic market with up to 125 million standard cubic feet per day, and service the regional and international markets. The Ministry of Energy and Water announced Angolan government targets for natural gas to supply 21 percent of Angola’s energy needs by 2025.

Oil Exploration and Production: There is a large potential of untapped oil reserves in the Congo basin and in the Kwanza basin, mostly at deep and ultra-deep waters. Sonangol recently announced a round of bids for exploration of five onshore blocks, Block CON4 in onshore Congo basin, and Blocks KON2, KON4, KON11 and KON12 in onshore Kwanza basin. Development of these blocks should drive continued demand for investment, oil equipment, and services.
Refining: The refinery of crude oil and distribution of hydrocarbon remain well below domestic demand.  Angola currently imports 80 percent of its demand for refined petroleum and 20 percent is produced locally.  To reduce the country’s dependence on imported refined petroleum the Government of Angola has proposed the construction of national refinery plants.  Several proposals for conventional refinery projects include a previously conceived USD 6-8 billion Lobito petroleum refinery in Benguela province with a 200,000 barrels per day production capacity; the  USD 12 billion greenfield petrochemical refinery in Namibe province with a 400,000 barrels per day production capacity; the revamping of the Malongo Refinery in Cabinda with a projected improved capacity of 40,000 barrels per day; and, upgrading the existing Luanda Refinery.  Modular refinery projects are also viable options for U.S. companies seeking to enter the Angolan market.
 
Web Resources
African law and Business / ALC Advogados
https://www.africanlawbusiness.com/publications/oil-and-gas-regulation/oil-and-gas-regulation-2018/angola/q-and-a
FTL Advogados
https://gettingthedealthrough.com/area/24/jurisdiction/151/oil-regulation-angola
 
VdA Legal Partners
https://www.vda.pt/xms/files/v1/Newsletters/2018/Flash_VdA_Legal_Partners_-_Angola_-_New_Rules_for_oil_industry_Public_Tenders_and_Procurement_of_Supplies-Services.pdf
BP Angola
http://www.seatrucksgroup.com/Documents/STG_PSVM_Datasheet_2pag.pdf
 
SONANGOL POWERPOINT
 
Food and Agriculture Organization of the United Nations (FAO)
http://www.fao.org/faolex/results/details/en/c/LEX-FAOC116925/
 
REAL WORLD
http://www.dlapiperrealworld.com/law/index.html?c=AO&t=construction&s=legal-framework&q=environmental-assessment-and-sustainability
 
SADC Environmental Legislation Handbook 2012
http://saiea.com/dbsa_handbook_update2012/pdf/chapter03.pdf
                 
ECOLEX -  The gateway to environmental law
https://www.ecolex.org/result/?q=&type=legislation&xcountry=Angola&xregion=Africa&xdate_min=&xdate_max
 
Office of the U.S. Trade Representative
https://ustr.gov/countries-regions/africa/southern-africa/angola
 
U.S. Census Bureau
https://www.census.gov/foreign-trade/balance/c7620.html
 
For more Information Contact:
Clemência Nogueira
Commercial Specialist
U.S. Commercial Service Angola
Email: Clemencia.Nogueira@trade.gov
Phone: (+244) 222 641 076 | (+244) 932 572 822

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Angola Oil and Gas Trade Development and Promotion