French energy company Total said it was sinking $16 billion into oil projects off the coast of Angola. The French major is following the bread crumbs offshore Angola and now the country aims to re-establish itself as a major oil player by courting investors to onshore fields.
Total said it made a final investment decision to develop the deepwater Kaombo project off the coast of Angola. High costs had delayed the decision, though Total now says it could produce as much as 230,000 barrels of oil per day once operations begin in 2017.
"Angola remains a priority country for Total" Yves-Louis Darricarrere, president of upstream operations for the company, said in a statement.
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The French company last week celebrated 60 years of operations in Angola, which was plagued by civil war from 1975 to 2002. Since war ended, Total said it's been the lead oil company in Angola with approximately 600,000 bpd in production.
Angola's first commercial oil discovery coincided with Total's entry into the country. Angola became a member of the Organization of Petroleum Exporting Countries in 2007 and produced an average 1.7 million bpd of crude oil last year.
Most of the country's oil production comes from deepwater deposits, where production has grown exponentially since the end of civil war. In early April, Genel Energy, led by former BP boss Tony Hayward, said it grabbed a stake in oil interests off the coast of Angola, where reserves are expected to be on par with pre-salt discoveries offshore Brazil.
Genel said the Angolan prospects are "low risk" and in the "multi-billion barrel" range. Hayward said the acquisition was a unique opportunity to wade into a region that he said would "add significant shareholder value through the drill bit in Africa."
Oil companies are already feeling bullish about the emerging prospects across the Gulf of Guinea, where the Jubilee field is already producing an estimated 104,000 bpd.
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State-owned Sonangol aims to raise the level of crude oil production to 2 million bpd by next year with the help of deepwater prospects like Total's Kaombo. OPEC, in its market report for April, said crude oil production was down more than 9 percent from February to 1.5 million bpd, however. Like Brazil, complexities involved in offshore production have led to prolonged maintenance and offshore reservoirs have experienced a steep rate of decline.
Now, however, Sonangol said it was ready to launch a tender for 10 onshore blocks May 30. The company said the blocks up for bidding may hold an average 700,000 barrels of oil each, which would offset any production woes offshore. Oil production from Angola accounts for about 45 percent of its gross domestic product and around 90 percent of its exports. Already, it's one of the lead suppliers to the Chinese market. Though the cost of operating in deep waters is escalating, Angola's energy sector could have the right mix for the patient investor.
By Daniel J. Graeber of Oilprice.com