Angola is planning to maintain oil production above 1 million barrels daily, which is why it left OPEC, the natural resources minister of the West African country has revealed.
The second-largest OPEC producer on the continent quit the cartel at the end of last year, surprising many observers of OPEC policies.
"This organization no longer aligns with Angola's values and interests," Diamantino Azevedo, minister of natural resources, said this week, as quoted by Bloomberg. He added that OPEC had assigned "production quotas challenging our actual capabilities and needs, we made the formal decision to withdraw our country."
In fact, per an OPEC breakdown of the individual production quotas for members, Angola is supposed to be producing above 1 million barrels daily this year: its quota was last set at 1.11 million bpd, per the latest OPEC agreement. However, it is a palpable reduction from a previous quota, agreed in November, which saw the country's production rate at 1.28 million bpd for this year.
That reduction of 170,000 bpd clearly went against the grain in Luanda, which has ambitions in oil production growth after a decade of continual decline due to depletion and underinvestment in new exploration. Related: Germany Slashed Natural Gas Imports by 33% in 2023
Ten years ago, Angola was pumping some 1.8 million bpd. Last year, its output dipped below 1 million bpd before rebounding around the 1.0-million-bpd mark. The latest data shows a rate of production of 1.14 million bpd for October and 1.08 million bpd for November.
Meanwhile, Equinor announced the purchase of stakes in two exploration blocks in the West African oil producer. The Norwegian major is already a big investor in Angolan oil and is now deepening this commitment.
"To continue our mission to create sustainable value and meet the future's energy needs, we believe that new exploration is still needed," a senior Equinor executive said on LinkedIn in comments on the deal. The blocks will be operated by a joint venture with two other oil majors: BP and Eni.
Angola's exit from OPEC came amid reports about disagreements about the new 2024 quotas. The sources of the disagreements: Angola and Nigeria. Both countries were reported to be unhappy with their new quotas because they wanted to boost production rather than keep it at current levels or even reduce it.
At the time, some commentators suggested the disagreements might lead to a breakup within OPEC, and they turned out to be right. Even earlier in the year, in June, when Angola was once again in opposition to quotas, nobody seemed to expect it to leave. It appears they should have.
"The seeds of this exit were laid in June," RBC Capital Markets' Helima Croft told the FT in December after Angola announced its exit. At the June meeting, OPEC decided to have a third party establish a baseline for oil production to be used to set the quotas. Angola was not a fan of the idea.
"In addition, Angola has been one of the moodier members, having staged multiple meeting walkouts in recent years at the secretariat," Croft also said at the time.
In other words, Angola's exit from OPEC should have been expected, and for a while now. It is not the first time a member leaves, and it probably won't be the last. It has happened before when a member finds its own energy policy goes against OPEC's, just like Angola has now.
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The country needs greater oil revenues to fill its empty coffers. To do that, it would need higher production. But to do that, Angola would need a major increase in oil investments. According to some, these investments would most logically come from the international supermajors, although others have noted that it may open a wider window for Chinese investments in the West African oil producer.
By Charles Kennedy for Oilprice.com
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