EXTRACTIVE INDUSTRIES

Angola is the second-largest oil producer in sub-Saharan Africa and one of the biggest suppliers in the world to both the United States and China. Oil dominates the Angolan economy, constituting an estimated 58% of GDP and 80% of government revenue.  Production has steadily increased since 2003, and is expected to remain high for several years.  In 2007, Angola produced 1.7 million barrels of oil per day.

The oil sector is governed by two different sets of contractual regimes. The fields that were developed in the early stages of the Angolan oil industry—most of them onshore or in shallow water off of the northern province of Cabinda—are governed by tax and royalty systems in which private international oil companies work in joint ventures with the Angolan national oil company, Sonangol. ChevronTexaco is the most prominent international player operating in the joint venture fields.

In more recently developed fields—including the new deepwater blocks that have spurred the production boom—production is governed by production sharing contracts in which private and public companies split the oil produced for separate sales. Large international companies such as BP, ChevronTexaco, ExxonMobil, Total and Petrobras are among the operators of production sharing blocks.

Sonangol plays a dominant role in the Angolan oil economy as both concessionaire and regulator, overseeing all of the operators' major financial and technical decisions and directing a web of subsidiaries that carry out sub-contracts for services ranging from shipping to platform manufacturing to insurance. Sonangol owns the largest equity stake in each of the joint venture blocks and markets a major share of the crude produced in the production sharing agreement blocks. The Angolan fiscal regime is widely believed to direct a very substantial share of revenues to the government, but international companies continue to invest heavily in new developments because the country's geological endowment is so favorable and the petroleum sector is seen as relatively stable.

Chinese oil companies have shown a keen interest in getting involved in the Angolan oil sector in recent years. A Sinopec-Sonangol joint venture has purchased large stakes in major deepwater fields, and the Chinese government has provided multi-billion dollar lines of credit, backed by oil, to the Angolan government.

Angola has not yet begun producing significant revenue from its large natural gas deposits, but the government has announced plans to build a liquefication plant to take advantage of the large amounts of gas associated with offshore oil production. The partners in the Angola Liquefied Natural Gas (LNG) project include Sonangol's subsidiary Sonagas, Chevron, Eni, Total, and BP.

Besides its petroleum resources, Angola remains a major world supplier of diamonds, producing the fifth-largest official total (by value) in the world in 2007. The diamond industry represents a significantly smaller share of national GDP than the petroleum sector—at 3% to oil’s 58%—but it still generates more than one billion dollars annually and has a dominant economic and social impact in the interior provinces that house most mineral deposits. In 2007, the Angolan government reported tax revenues of $118.8 million from the diamond sector.

The diamond industry is controlled by the state company, Endiama, which is responsible for negotiating concessions and which holds the largest stake in each of the joint ventures that operates Angola's mines. Among the private partners in these joint ventures are some of the largest mineral companies in the world, such as De Beers, Odebrecht, BHP Billiton, Alrosa, and Petra Diamonds, Ltd. Most of the joint ventures also grant minority participation to private Angolan companies, many of which lack high-level technical capabilities.