Angola has scored Africa’s first liquefied natural gas terminal.
In May Angolan state oil company Sonangol announced that the LNG tanker Sambizanga had arrived to test gas loading and connection facilities at Soyo, Angola’s port at the mouth of the Congo River.
Soyo in northern Zaire province is where Sonangol and Chevron have established a $4 billion, 5.2 million ton per annum LNG plant. Surprisingly, its intended market is not East Asia, where LNG use has been growing by leaps and bounds each year, but rather the U.S., with the first LNG being sent from the Soyo facility to the Gulf LNG Mississippi regasification terminal, under construction near Pascagoula, Mississippi for U.S. sales. The Soyo LNG plant will come online shortly.
The future seems sunny, as Angola is the second-largest oil producer in sub-Saharan Africa after Nigeria and one of the world’s fastest-growing economies due to an on-going hydrocarbon expansion that led to Angola’s decision in 2007 to join OPEC. While Angolan initial LNG output from Soyo is destined for the U.S., the biggest customer for seaborne LNG is Japan, with annual imports of about 80 million tons, followed by South Korea and China, while Indian imports are also on the rise.
As the Angola LNG website, notes, “An estimated 50 significant new deep-water discoveries in Blocks 14, 15, 17 and 18 are expected to come on stream in the next five to ten years. These four Blocks are estimated to contain more than 10 billion barrels of recoverable oil. Most oil production comes with associated gas that is currently being flared.” The Soyo facility consists of a single LNG train with an annual production capacity of 5.2 million tons, utilizing around one billion cubic feet BCF of natural gas per day, with the Soyo complex having a projected lifespan of 30 years.
But local grumbling has already started over the state’s potential share of the largesse. The Angola Soyo LNG project has estimated natural gas reserves of 297 billion cubic meters, but the state is a minority player in the development. Sonangol Natural Gas Ltd. has a mere 22.8 percent of the project, Cabinda Gulf Oil Company Limited 36.4 percent, BP Exploration Angola Limited 13.6 percent, ENI Angola Production BV 13.6 percent and Total Angola LNG Limited 13.6 percent.
And the Americans are there as well. Bechtel, a privately owned company headquartered in San Francisco, with a global presence, and 2010 income of $27.9 billion, announced on its website, “Bechtel is performing engineering, procurement, and construction on the onshore portion of a broad $8 billion gas program that also includes floating production storage and operations vessels, pipelines to the LNG plant, and LNG tankers. In addition to LNG, the project will produce liquefied petroleum gas such as propane and butane; condensate; and domestic pipeline gas.”
Despite the reality of Angola being a minority shareholder in the development of its resources, the Soyo LNG facility deal is being portrayed to the Angolan people as a positive development. Angolan Oil minister Jose Maria Botelho de Vasconcelos, speaking at the opening of the International Conference on Oil and Gas in Luanda, stated that the Soyo LNG project will have a positive impact on the country's economic growth, as, quite aside from the export revenues, it will also provide butane gas for domestic use, making the country self-sufficient.
But Angola will have competition as it is the second big LNG export project to come on stream since March, after Australia’s Woodside Petroleum’s Pluto facility , which first dispatched its first LNG exports to Asian customers.
Furthermore, the value of the U.S. as an export market may well shortly decline precipitously. In 2011 the International Energy Agency predicted the world was about to enter a “golden age of gas,” as the United States and Canada expanded their use hydraulic fracturing to expand production in their extensive shale oil and gas fields, while other countries from China to Bulgaria consider utilizing the contentious technology.
That said, a factor in Angola’s favour is the fact that long lead times are needed to construct large LNG train processing facilities, which means that in fact it will be the early 2020s for major competition to emerge, so the revenue ought to roll in for the next decade or so.
In the meantime, Luanda only has to convince its electorate why owning 22.8 percent of the country’s natural gas is a good deal, while also addressing issues of rampant corruption.
Oh, and those two in three Angolans who still live on $2 or less a day, according to analysts for Catholic University of Angola's research centre.
By. John C.K Daly of Oilprice.com