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psas and low hanging fruit

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    Making Concessions

    At present, Sonangol mainly enters into production sharing agreements, although most previous agreements were joint-ventures.

    Oil Minister Jose Botelho Vasconcelos explains why Sonangol has now changed its policy when striking deals with foreign oil companies, "We are a Third World economy, and have difficulty obtaining capital. We therefore prefer production sharing agreements because government investment is only required once a discovery has been declared economically viable."

    Sonangol is particularly keen to award concessions for its deep-water sites which require massive investment, despite the existence of large tracts of open shallow water acreage. "This is because all the fields in shallow waters are being depleted," notes Sonangol's Manuel Vicente.

    Declining production is also being reported in some of Cabinda's onshore blocks. The volume of oil discovered recently in the Lower Congo and Kwanza Basins, however, far outweighs the declining resources in some of Angola's onshore and shallow water fields.

    Angola's oil sector is currently enjoying increased attention from Western countries, especially the U.S., which is anxious to become less dependent on oil from the potentially volatile Arabian Gulf. As a result, the U.S. and its allies are boosting investment in African oil and gas. America's Assistant Secretary of State for African Affairs, Walter Kansteiner, says every fifth gallon in U.S. gas tanks will come from Africa by 2005. Angola's crude oil exports to the U.S. currently amount to about 350,000 bpd, but export volumes are likely to increase together with production capacity.

    Forbidden to Flare

    A potentially lucrative by-product of oil production is natural gas. At present, about 85 percent of natural gas is flared. The government is currently implementing strategies to reduce this, and aims to end all gas flaring by 2010. It plans to commercialize natural gas by exporting it to the U.S., South America and Europe, and also by converting it locally for domestic consumption.

    Sonangol's Manuel Vicente says, "Together with Texaco, we are planning to build a liquefied natural gas plant in Luanda. From now on, we will not authorize anyone to flare gas."

    The government also plans to build a pipeline, which would bring the natural gas produced offshore to Luanda and beyond. "Not only do we hope to build a gas plant to supply the capital city, but we also want to open a supply line to Windhoek in Namibia, linked to the South African network," says Oil Minister Jose Botelho Vasconcelos.

    Although the grand visions for the commercialization of natural gas are still very much in the planning stage, the very real discoveries of the giant offshore oil fields such as Girassol and Dahlia will propel Angola forward as a leading oil nation, not only in Africa but as an influential player in the world as a whole.
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