Crude Oil Trade: Interest for new projects in Angola, while exports recover

The Angolan government, led by President Joao Lourenco, have made significant steps to support the future crude production of the country, which has suffered severe losses during the last three years. Up to 50 marginal fields will be tendered to foreign oil companies by 2025, which could drive the crude output to revive yet again. Earlier this week, details of a new licensing round were announced, referring to a total of ten blocks. Nine of them in the Namibe basin and one in the Benguela basin. Current production stands at 1.42 million b/d, with oil still accounting for 95% of the country's exports. Losses in the past couple of years have reached 300 thousand b/d.

Among energy companies with activity in Angola, Total is considered the country's top foreign operator, as it is expected to operate around 40% of the local production in the next couple of years. Under-investment in new projects has brought the country's production to the lowest level in more than a decade. Total produced an average of 275 thousand b/d last year, out of 1.48 million b/d of the entire production of Angola. But the company's output could surpass 600 thousand b/d once all new projects become operational. Last month, we've seen the first cargo of Mostarda grade getting loaded from Kaombo Sul. This project has an estimated production capacity of 230 thousand b/d, according to Total. Other oil majors including Eni, BP, and Exxon Mobil have openly expressed interest to increase their exposure to Angolan output.

Earlier this month, Eni revealed its fifth oil discovery deep offshore Angola in Block 15/06, through the Agidigbo-1 NFW well, with post drill analysis indicating between 300 and 400 million barrels of light oil in place. Four more discoveries, Kalimba, Afoxe, Agogo, and Ndungu, were announced in May. Altogether, they refer to 1.8 billion barrels of light oil in place.

Angolan crude oil liftings so far in 2019 (Jan-May) by destination, in thousand b/d

Source: IHS Markit's Commodities at Sea

Focusing on seaborne exports of crude oil, based on data by IHS Markit's Commodities at Sea, China seems to have absorbed most of the Angolan output, with on average 880 thousand b/d loaded between January and May 2019 with destination China. May's volumes have been the highest levels observed so far this year, having reached 974 thousand b/d. This was driven by the end of US sanction waivers on Iranian barrels, which pressured several Chinese companies to quickly find other alternatives.

Angola seems to have been preferable for other importers at a similar situation. Liftings to India reached around 200 thousand b/d during the last couple of months, much higher than the average volumes loaded so far this year, which only stand at 116 thousand b/d. Other importers across SE Asia have increased their volumes as well, while there has been a decline observed in flows to European destinations, such as Spain. Overall, Angolan exports have been recovering since March, when they reached the lowest at least since late 2016. Liftings surpassed 1.5 million b/d for the first time since November 2018.

Posted 12 June 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade