Tako Koning - Angola's oil economy, past, present & future, 2 August 2013
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1. ANGOLA’S OIL ECONOMY: PAST,ANGOLA’S OIL ECONOMY: PAST, PRESENT & FUTUREPRESENT & FUTURE Presentation to Development WorkshopPresentation to Development Workshop Luanda - AngolaLuanda - Angola August 2, 2013August 2, 2013 Tako Koning,Tako Koning, Senior Petroleum GeologistSenior Petroleum Geologist

2. Publications on Angola Oil FieldsPublications on Angola Oil Fields THIS PRESENTATION IS BASED ON PUBLISHED PUBLICTHIS PRESENTATION IS BASED ON PUBLISHED PUBLIC DOMAIN INFORMATION, INCLUDING:DOMAIN INFORMATION, INCLUDING: • Sonangol-Chevron publications on the Soyo LNG ProjectSonangol-Chevron publications on the Soyo LNG Project • Presentation by Earthmoves on Brazil vis-a-vis Angola (Ian Davinson)Presentation by Earthmoves on Brazil vis-a-vis Angola (Ian Davinson) • ““Plutonia Discovery, Angola Block 18”, SEG Leading Edge MagazinePlutonia Discovery, Angola Block 18”, SEG Leading Edge Magazine • Chevron-Sonangol: “Lower Congo Basin” AAPG Memoir 74Chevron-Sonangol: “Lower Congo Basin” AAPG Memoir 74 • Schlumberger: 1983 and 1991 WEC Conference BooksSchlumberger: 1983 and 1991 WEC Conference Books • Total: “Tertiary Turbidte Channels, Angola”, August 2001 AAPG BulletinTotal: “Tertiary Turbidte Channels, Angola”, August 2001 AAPG Bulletin • Van Dyk Energy (Vanco): “West Africa Salt Tectonics”, Oil and Gas Journal, December, 2001Van Dyk Energy (Vanco): “West Africa Salt Tectonics”, Oil and Gas Journal, December, 2001 • Texaco-Sonangol: “Exploraton & Development of the Lombo East Oil Field, Block 2, Angola”,Texaco-Sonangol: “Exploraton & Development of the Lombo East Oil Field, Block 2, Angola”, AAPG Hedberg Research Symposium, AAPG ConventionAAPG Hedberg Research Symposium, AAPG Convention • SADC Energy Sector Seminars, 1986 & 1993, Presentations on Angola’s Oil DevelopmentSADC Energy Sector Seminars, 1986 & 1993, Presentations on Angola’s Oil Development History, Oil Fields, Exploration Play TrendsHistory, Oil Fields, Exploration Play Trends

3. A Brief History of theA Brief History of the Angola EconomyAngola Economy Angola economyAngola economy • 1500’s – 1700’s: Slavery1500’s – 1700’s: Slavery • 1800’s – 1950: Coffee1800’s – 1950: Coffee • 1950 to present: Oil1950 to present: Oil

4. Angola - A Petro-EconomyAngola - A Petro-Economy Next 2 slides will discuss:Next 2 slides will discuss: • AdvantagesAdvantages • DisadvantagesDisadvantages

5. Angola – A Petro-EconomyAngola – A Petro-Economy Advantages:Advantages: • With current oil prices &With current oil prices & current oil production iscurrent oil production is providing a huge flow of cashproviding a huge flow of cash for the government.for the government. • Oil has enabled theOil has enabled the government in rebuilding thegovernment in rebuilding the civil war destroyedcivil war destroyed infrastructureinfrastructure

6. Angola – A Petro-EconomyAngola – A Petro-Economy Disadvantages:Disadvantages: • The huge oil revenueThe huge oil revenue provides little incentive forprovides little incentive for the government to diversifythe government to diversify its economyits economy • Oil revenue is highlyOil revenue is highly inflationary (Angola isinflationary (Angola is expensive….like Norway!!!)expensive….like Norway!!!)

7. Global Oil Exporters – Angola is #7 Exporter

8. Angola Petro-Economy Problem: • An oil company can announce that they are investing $10 billion in an oil project in Angola but 90% of the money is spent outside (drill rigs in Korea, tankers in Japan, drill pipe made in USA, etc etc • For that reason it is very important for the government to foster industries in Angola like rigs fabrication, pipe welding facilities like Angloflex since it employs Angolans and is technology transfer

9. Petro-EconomiesPetro-Economies Examples of Petro-Economies:Examples of Petro-Economies: • Saudi ArabiaSaudi Arabia • Qatar, KuwaitQatar, Kuwait • RussiaRussia • NorwayNorway • NigeriaNigeria • AngolaAngola • Texas, USATexas, USA • Alberta, CanadaAlberta, Canada

10. Petro-EconomiesPetro-Economies

11. Angola Oil ConcessionsAngola Oil Concessions

12. Presentation OutlinePresentation Outline • GeologyGeology • Conventional Oil FieldsConventional Oil Fields • LNG ProjectLNG Project • Pre-Salt Oil PlayPre-Salt Oil Play • GeopoliticsGeopolitics • Angola’s Oil FutureAngola’s Oil Future

14. West Africa Oil Production – CurrentWest Africa Oil Production – Current Production in BOPD (Production in BOPD (Barrels Oil PerBarrels Oil Per Day)Day) NigeriaNigeria 2,200,000 BOPD2,200,000 BOPD AngolaAngola 1,750,0001,750,000 Congo Brazzaville 340,000Congo Brazzaville 340,000 Equatorial GuineaEquatorial Guinea 320,000320,000 GabonGabon 240,000240,000 ChadChad 110,000110,000 GhanaGhana 100,000100,000 CameroonCameroon 75,00075,000 Ivory CoastIvory Coast 30,00030,000 Congo DRCCongo DRC 25,00025,000 MauritaniaMauritania 10,00010,000 Total 5,200,000 BOPDTotal 5,200,000 BOPD From: Oil & Gas Journals, SPE JPT, USA EIAFrom: Oil & Gas Journals, SPE JPT, USA EIA

15. GLOBAL OILGLOBAL OIL PRODUCTIONPRODUCTION QUESTIONS!!!!QUESTIONS!!!! • Which country is the biggest oilWhich country is the biggest oil producer in the world???producer in the world??? • Which country is the 2Which country is the 2ndnd biggest oilbiggest oil producer in the world???producer in the world??? • Which country is the 3Which country is the 3rdrd biggest oilbiggest oil producer in the world???producer in the world???

16. Global Oil Production – TopGlobal Oil Production – Top 2020 1.) Russia 10,500,000 BOPD 2.) Saudi Arabia 9,500,000 3.) USA 7,400,000 4.) China 4,200,000 5.) Canada 2,900,000 6.) Mexico 2,500,000 7.) UAE 2,400,000 8.) Iraq 2,400,000 9.) Kuwait 2,400,000 10.) Nigeria 2,200,000

17. Global Oil Production – TopGlobal Oil Production – Top 2020 11.) Venezuela11.) Venezuela 2,100,000 BOPD2,100,000 BOPD 12.) Brazil12.) Brazil 2,100,0002,100,000 13.) Iran13.) Iran 2,000,0002,000,000 -reduced due to sanctions-reduced due to sanctions 14.) Norway14.) Norway 1,800,0001,800,000 15.)15.) Angola 1,750,000Angola 1,750,000 16.) Algeria16.) Algeria 1,700,0001,700,000 17.) Kazakhstan17.) Kazakhstan 1,600,0001,600,000 18.) Libya18.) Libya 1,300,0001,300,000 19.) UK19.) UK 1,200,0001,200,000 20.) Qatar20.) Qatar 1,200,0001,200,000

18. GEOLOGY –GEOLOGY – WHERE IT ALL STARTSWHERE IT ALL STARTS We begin with anWe begin with an introduction to the basicintroduction to the basic types of oil and gastypes of oil and gas fieldsfields

19. GeologyGeology

20. GeologyGeology

21. GeologyGeology

22. GeologyGeology

23. GeologyGeology

24. GeologyGeology

25. Geology SectionGeology Section • Any questions so far???Any questions so far???

26. Major Oil & Gas FieldsMajor Oil & Gas Fields Continue to be discoveredContinue to be discovered in Angola in Past Threein Angola in Past Three YearsYears• ENI has drilled 8 oil discovery wells on BlockENI has drilled 8 oil discovery wells on Block 15/06 (9 wells, 8 discoveries)15/06 (9 wells, 8 discoveries) • MAERSK has drilled 1 oil discovery on BlockMAERSK has drilled 1 oil discovery on Block 1616 • TOTAL has drilled 3 oil discoveries on BlockTOTAL has drilled 3 oil discoveries on Block 17/06 (3 wells, 3 discoveries)17/06 (3 wells, 3 discoveries) • PETROBRAS has drilled 1 oil discovery onPETROBRAS has drilled 1 oil discovery on Block 18/06Block 18/06 • PLUSPETROL has drilled 1 oil discovery onPLUSPETROL has drilled 1 oil discovery on

27. Major Oil & Gas FieldsMajor Oil & Gas Fields Continue to be discoveredContinue to be discovered in Angolain Angola • As an example, BP drilled its 19As an example, BP drilled its 19thth oiloil discovery, Tebe oil field, in Deep Waterdiscovery, Tebe oil field, in Deep Water Block 31 in the Lower Congo sedimentaryBlock 31 in the Lower Congo sedimentary basinbasin • Tebe-1 drilled in 5700 feet water depth,Tebe-1 drilled in 5700 feet water depth, drill depth of 11,400 feet, flowed >5,000drill depth of 11,400 feet, flowed >5,000 BOPDBOPD • Partners are BP, Sonangol, ExxonMobil,Partners are BP, Sonangol, ExxonMobil, Statoil, Total and MarathonStatoil, Total and Marathon

28. Lower Congo Basin,Lower Congo Basin, AngolaAngola Drilling in the Lower Congo Basin hasDrilling in the Lower Congo Basin has an 85% success rate. Why is it soan 85% success rate. Why is it so successful?successful? 1.) Highly favorable geology1.) Highly favorable geology 2.) Seismic is very effective at2.) Seismic is very effective at highlighting oil and gas deposits sohighlighting oil and gas deposits so there is an expression in the Angolathere is an expression in the Angola oil business which is “oil business which is “ honor yourhonor your geophysicists”geophysicists”

29. The Golden Triangle for DeepwaterThe Golden Triangle for Deepwater Oil & Gas Exploration:Oil & Gas Exploration: The Gulf of Mexico – Brazil & WestThe Gulf of Mexico – Brazil & West AfricaAfrica

33. OIL COMPANIES PRESENT in ANGOLA: OPERATORS of BLOCKS • Chevron American • Esso American • Vaalco American • Cobalt American • ConocoPhilips American • Total French • BP British • ENI Italian • Repsol Spanish • Petrobras Brazilian • Pluspetrol Argentinean • Statoil Norwegian • Maersk Danish • Sonangol P&P Angolan (state oil company)

34. OIL COMPANIES PRESENT IN ANGOLA: NON-OPERATORS • Naftagas Prodoil Initial Oil • Partex SOCO Marathon • Odebrecht Svenska Ajoco • Teikokou Falcon Petrogal • Sonangol Sinopec China Sonangol • ACR Somoil Grupo Gema • Force Interoil Galp Enegia • Partex Etc etc

35. CURRENTCURRENT ANGOLA OILANGOLA OIL PRODUCTION –PRODUCTION – BY OPERATOR in BOPD - barrels oilBY OPERATOR in BOPD - barrels oil per day – Data From MinFin Websiteper day – Data From MinFin Website • TOTALTOTAL 640,000 –640,000 – French companyFrench company • CHEVRONCHEVRON 430,000 –430,000 – USA companyUSA company • ESSOESSO 390,000 –390,000 – USA companyUSA company • BPBP 24O,000 –24O,000 – British companyBritish company • SONANGOL P&P 77,000 -SONANGOL P&P 77,000 - AngolanAngolan companycompany Total Production 1,780,000 BOPDTotal Production 1,780,000 BOPD Note: Aprox 3/4’s of the oil production is from deep water fields, 1/4 of theNote: Aprox 3/4’s of the oil production is from deep water fields, 1/4 of the oil production is from shallow water fields & onshoreoil production is from shallow water fields & onshore

36. SUMMARY OF CURRENT OIL PRODUCTIONSUMMARY OF CURRENT OIL PRODUCTION • Of Angola’s current oil production of 1,780,000Of Angola’s current oil production of 1,780,000 bopd, USA oil companies (Chevron & Esso) producebopd, USA oil companies (Chevron & Esso) produce 820,000 bopd which equals 46% of Angola’s oil820,000 bopd which equals 46% of Angola’s oil productionproduction • Aprox 80% of the oil production is from deep waterAprox 80% of the oil production is from deep water fields (water depths > 500 meters); accordinglyfields (water depths > 500 meters); accordingly Angola is a country typified by deep water oilAngola is a country typified by deep water oil production which involves:production which involves: - high costs – expensive oil!!!- high costs – expensive oil!!! - leading edge technology comparable to deepwater- leading edge technology comparable to deepwater Gulf of MexicoGulf of Mexico - no room for mistakes like BP deep water Macondo- no room for mistakes like BP deep water Macondo blow-outblow-out

40. Review of Angola’s DeepReview of Angola’s Deep Water Oil FieldsWater Oil Fields • Chevron Block 14Chevron Block 14 • Esso Block 15Esso Block 15 • Total Block 17Total Block 17 • BP Block 18BP Block 18

45. CHEVRON Deepwater Block 14 Kuito Oil Field

47. ESSO Deepwater Block 15 Kizomba Field

48. ESSO Deepwater Block 15 Kizomba “A” FPSO

52. TOTAL Deepwater Block 17, Girassol Oil Field

53. TOTAL Deepwater Block 17, Dalia Oil Field

55. BP BLOCK 18 DEEPWATERBP BLOCK 18 DEEPWATER BLOCK:BLOCK: • Block operator is BP (50%); partnerBlock operator is BP (50%); partner is Sonangol Sinopec (50%)is Sonangol Sinopec (50%) • Area of block is 4,900 sq kmArea of block is 4,900 sq km • On production in 2008, hasOn production in 2008, has produced up to 220,000 BOPD,produced up to 220,000 BOPD, currently about 160,000 BOPDcurrently about 160,000 BOPD Information source: GeoLuanda Conference, 2000 & SEG & other publicationsInformation source: GeoLuanda Conference, 2000 & SEG & other publications

56. BP Blk 18, GreaterBP Blk 18, Greater PlutonioPlutonio

57. ANGOLA LNG PROJECTANGOLA LNG PROJECT • $10 billion project being constructed at$10 billion project being constructed at Soyo, northern AngolaSoyo, northern Angola • Purpose is to monetize gas currently beingPurpose is to monetize gas currently being flaredflared • Partners are Sonangol, Chevron, BP,Partners are Sonangol, Chevron, BP, Total and ENITotal and ENI • Commenced production in June 2013, firstCommenced production in June 2013, first shipment to Brazil, producing 5.2 millionshipment to Brazil, producing 5.2 million tons per year LNG mainly for Asiantons per year LNG mainly for Asian markets, also 125 MMSCFG/D formarkets, also 125 MMSCFG/D for industrial development in Soyoindustrial development in Soyo

59. LNG Plant at SoyoLNG Plant at Soyo

60. LNG Plant at SoyoLNG Plant at Soyo

61. ANGOLA LNG PROJECTANGOLA LNG PROJECT • SIGNIFICANT ECONOMIC IMPACT!SIGNIFICANT ECONOMIC IMPACT! • 5.2 MMTonnes/year LNG is energy5.2 MMTonnes/year LNG is energy equivalent to 200,000 barrels of oil perequivalent to 200,000 barrels of oil per dayday • Angola currently producing 1,800,000Angola currently producing 1,800,000 barrels of oil per day but with LNG it willbarrels of oil per day but with LNG it will be total of 2,000,000 barrels of oilbe total of 2,000,000 barrels of oil equivalent per day (BOEPD)equivalent per day (BOEPD)

62. ANGOLA LNG PROJECTANGOLA LNG PROJECT • A “win-win” mega-projectA “win-win” mega-project • Commercializes natural gas whichCommercializes natural gas which previously was flared offpreviously was flared off • Creates significant job opportunitiesCreates significant job opportunities for Angolansfor Angolans • Creates secondary industries in theCreates secondary industries in the Soyo area such as possible fertilizerSoyo area such as possible fertilizer plants, petrochemicalsplants, petrochemicals

63. ANGOLA LNG PROJECTANGOLA LNG PROJECT • Winter of 2009 – Russia shuts of naturalWinter of 2009 – Russia shuts of natural gas supplies to Ukraine and gas is alsogas supplies to Ukraine and gas is also turned off in Bulgaria, Romania, Turkey,turned off in Bulgaria, Romania, Turkey, Austria, Czech Republic & Greece andAustria, Czech Republic & Greece and greatly reduced in other countriesgreatly reduced in other countries • Angola LNG is an opportunity forAngola LNG is an opportunity for diversification of natural gas supplies fordiversification of natural gas supplies for EuropeEurope

65. Impact of Brazil’s Recent Pre-Impact of Brazil’s Recent Pre- Salt Mega- Oil Discoveries onSalt Mega- Oil Discoveries on Angola’s Oil & Gas PotentialAngola’s Oil & Gas Potential • Major world class pre-salt (sub-salt) oil and gasMajor world class pre-salt (sub-salt) oil and gas discoveries have been made since 2007 in thediscoveries have been made since 2007 in the deepwater of Brazildeepwater of Brazil • Petrobras believe the pre-salt fields could bePetrobras believe the pre-salt fields could be producing 2.0 MM BOPD by 2020 thereby doublingproducing 2.0 MM BOPD by 2020 thereby doubling Brazil’s oil production to about 4 MM BOPDBrazil’s oil production to about 4 MM BOPD • Brazil and Angola were contiguous (joined up) inBrazil and Angola were contiguous (joined up) in Cretaceous timeCretaceous time • This play has been minimally evaluated in theThis play has been minimally evaluated in the deepwater of Angoladeepwater of Angola

66. Back to geologyBack to geology •Plate tectonics, continentalPlate tectonics, continental separation, rifting & driftingseparation, rifting & drifting

70. GeologyGeology

71. GeologyGeology

72. CGGVeritas Seismic in Dec 2008 OffshoreCGGVeritas Seismic in Dec 2008 Offshore Engineer magazineEngineer magazine

76. ANGOLA 2011 BID ROUND – AWARD OF PRE-SALT BLOCKS • All blocks are located in the deepwater Kwanza Basin • Bid round was described as “a historic event in Angola’s oil industry” • Operators include BP, ENI, Total, Statoil ConocoPhillips, Cobalt, Repsol, Total

78. ANGOLA 2011 BID ROUND:ANGOLA 2011 BID ROUND: PRE-SALT BLOCKSPRE-SALT BLOCKS • 11 blocks officially awarded in11 blocks officially awarded in December, 2011December, 2011 • Blocks presumably would includeBlocks presumably would include significant social bonus obligationssignificant social bonus obligations • Should be opportunities for NGO’sShould be opportunities for NGO’s like DW to carry out social projects forlike DW to carry out social projects for these oil companiesthese oil companies

79. LATEST PUBLICALLY ANNOUNCEDLATEST PUBLICALLY ANNOUNCED INFO ON PRE-SALT DRILLINGINFO ON PRE-SALT DRILLING • January 14, 2012January 14, 2012 MAERSK OILMAERSK OIL announcedannounced that their first well on deepwater Block 23,that their first well on deepwater Block 23, Azul-1 was “mini-tested” indicting a flowAzul-1 was “mini-tested” indicting a flow capacity of greater than 3,000 BOPD;capacity of greater than 3,000 BOPD; Maersk viewed the results as “encouraging”Maersk viewed the results as “encouraging” • Azul-1 was the first ever deep water wellAzul-1 was the first ever deep water well targeting pre-salt reservoirs in the Kwanzatargeting pre-salt reservoirs in the Kwanza BasinBasin • Drilled in 920 meters water to a depth ofDrilled in 920 meters water to a depth of 5,330 meters5,330 meters

80. LATEST PUBLICALLY ANNOUNCEDLATEST PUBLICALLY ANNOUNCED INFO ON PRE-SALT DRILLINGINFO ON PRE-SALT DRILLING • February 9, 2012February 9, 2012 COBALTCOBALT announced thatannounced that Cameia-1 drilled on Block 21 in 1,680Cameia-1 drilled on Block 21 in 1,680 meters (5,500 feet) of water tested at 5,010meters (5,500 feet) of water tested at 5,010 barrels of oil per day from pre-saltbarrels of oil per day from pre-salt carbonatescarbonates • 360 meters (1,180 feet) of gross pay of360 meters (1,180 feet) of gross pay of which 75% is net paywhich 75% is net pay • No gas/oil or oil/water contacts encounteredNo gas/oil or oil/water contacts encountered • Well has potential to produce at excess ofWell has potential to produce at excess of 20,000 barrels of oil per day20,000 barrels of oil per day

82. ECONOMICS &ECONOMICS & GEOPOLITICSGEOPOLITICS • Will be presented if timeWill be presented if time allows!!!allows!!!

83. THE OIL & GAS BUSINESS –THE OIL & GAS BUSINESS – ECONOMICALLY VOLATILE!!ECONOMICALLY VOLATILE!! • July 11, 2008July 11, 2008:: oil prices peaked atoil prices peaked at $147 per barrel and plummeted down to$147 per barrel and plummeted down to $35 per barrel by December, 2008, now$35 per barrel by December, 2008, now back to about $110 per barrelback to about $110 per barrel

84. Oil Prices – Highly Unpredictable!!!

85. April 20, 2010 BP Macondo DisasterApril 20, 2010 BP Macondo Disaster

86. THE OIL & GASTHE OIL & GAS BUSINESS –SOMETIMESBUSINESS –SOMETIMES DANGEROUS!!DANGEROUS!! • April 20, 2010April 20, 2010: BP’s Macondo well: BP’s Macondo well blows out in 5,000 feet water depth andblows out in 5,000 feet water depth and TransOcean’s Deepwater Horizon rigTransOcean’s Deepwater Horizon rig sinks with the loss of 11 lives andsinks with the loss of 11 lives and results in largest environmental disasterresults in largest environmental disaster ever in USA with 4.9 million barrels oilever in USA with 4.9 million barrels oil spilled into the Gulf of Mexicospilled into the Gulf of Mexico

87. Global Oil Supply &Global Oil Supply & DemandDemand • Oil supply and demand is dangerously closeOil supply and demand is dangerously close in this post-recession erain this post-recession era • March 11, 2011 earthquake, tsunami andMarch 11, 2011 earthquake, tsunami and Fukushima nuclear disasterFukushima nuclear disaster will result inwill result in decreased use of nuclear power anddecreased use of nuclear power and increased usage of fossil fuels especiallyincreased usage of fossil fuels especially natural gas (LNG)natural gas (LNG) • World is excessively dependent on oilWorld is excessively dependent on oil • Situation is non-sustainableSituation is non-sustainable

88. SHALE OIL & SHALE GAS!!!SHALE OIL & SHALE GAS!!! • Recent technology of hydraulic fracturing isRecent technology of hydraulic fracturing is having an enormous impact on the oilhaving an enormous impact on the oil industryindustry • This technology could, for example, make theThis technology could, for example, make the USA independent of oil importsUSA independent of oil imports • Potential for shale gas exists also in Canada,Potential for shale gas exists also in Canada, Argentina, China, Russia, South AfricaArgentina, China, Russia, South Africa • Conceivably it could lead to oil pricesConceivably it could lead to oil prices dropping hugely due to so much oil on thedropping hugely due to so much oil on the marketmarket • Could hurt high cost producers like AngolaCould hurt high cost producers like Angola

89. USA Oil Production & Consumption

90. USA OIL PRODUCTION,USA OIL PRODUCTION, LASTEST ESTIMATES BY USLASTEST ESTIMATES BY US EIAEIA

91. India – Competing for CrudeIndia – Competing for Crude Oil from West AfricaOil from West Africa

92. WORLD POPULATIONWORLD POPULATION TOP 10 COUNTRIESTOP 10 COUNTRIES 1)1) China 1.3 billionChina 1.3 billion 6)6) Pakistan 175 millionPakistan 175 million 2)2) India 1.2 billionIndia 1.2 billion 7)7) Nigeria 160 millionNigeria 160 million 3)3) USA 310 millionUSA 310 million 8)8) Bangladesh 150 millBangladesh 150 mill 4)4) Indonesia 240 millionIndonesia 240 million 9)9) Russia 145 millionRussia 145 million 5)5) Brazil 195 millionBrazil 195 million 10)10) Japan 125 millionJapan 125 million Source: Time magazine, Oct 31, 2011Source: Time magazine, Oct 31, 2011

93. But there will be competitionBut there will be competition for the oil & gas from Westfor the oil & gas from West Africa….Africa…. • CHINA…..the hungry dragonCHINA…..the hungry dragon -World population reached 7.0 billion in 2011,-World population reached 7.0 billion in 2011, China’s population is 1.3 billionChina’s population is 1.3 billion - China’s oil production has plateaued at 4.2 MM- China’s oil production has plateaued at 4.2 MM BOPDBOPD -China’s oil consumption has increased to 9.8 MM-China’s oil consumption has increased to 9.8 MM BOPD making China the world’s second largestBOPD making China the world’s second largest consumer of oil after the USAconsumer of oil after the USA -China imported 5.6 MM BOPD in December, 2012-China imported 5.6 MM BOPD in December, 2012 Source of information: Oil & Gas Journal, May 24, 2010, April , 2011 SPE Journal of Technology,Source of information: Oil & Gas Journal, May 24, 2010, April , 2011 SPE Journal of Technology, updated to December 2012updated to December 2012

95. Economies of China &Economies of China & JapanJapan

96. China’s Crude Oil BalanceChina’s Crude Oil Balance

97. Source of Chinese oil importsSource of Chinese oil imports Top 5 suppliersTop 5 suppliers #1 Supplier : SAUDI ARABIA 1,140,000 BPOD#1 Supplier : SAUDI ARABIA 1,140,000 BPOD #2 Supplier: ANGOLA 660,000 BOPD#2 Supplier: ANGOLA 660,000 BOPD #3 Supplier –RUSSIA?? 320,000 BOPD#3 Supplier –RUSSIA?? 320,000 BOPD #4 Supplier –SUDAN?? 290,000 BOPD#4 Supplier –SUDAN?? 290,000 BOPD #5 Supplier –IRAN?? 270,000 BOPD#5 Supplier –IRAN?? 270,000 BOPD Note: Numbers need to be updated; limited specific data, mostly fromNote: Numbers need to be updated; limited specific data, mostly from Chinaoilweb.com , Hong Kong March 11, 2010, also Journal de Angola articleChinaoilweb.com , Hong Kong March 11, 2010, also Journal de Angola article March 24, 2012March 24, 2012

98. China in AfricaChina in Africa

99. China in AfricaChina in Africa

100. China in AngolaChina in Angola • An important and strategicAn important and strategic relationshiprelationship • Angola provides China with oilAngola provides China with oil and China has helped Angola inand China has helped Angola in rapidly repairing war-damagedrapidly repairing war-damaged roads, railroads, electricalroads, railroads, electrical system as well as new housingsystem as well as new housing developmentsdevelopments

102. The Blessings of Oil for AngolaThe Blessings of Oil for Angola • Current production of 1.8 MMBOPDCurrent production of 1.8 MMBOPD x 365 days/yearx 365 days/year =0.660 billion barrels oil=0.660 billion barrels oil x $100/barrelx $100/barrel =$66 billion=$66 billion x 70% net to the statex 70% net to the state = $46 billion for 15 million people= $46 billion for 15 million people = $3,000/person= $3,000/person = $15,000 for a family of 5= $15,000 for a family of 5

103. The Blessings of Oil for AngolaThe Blessings of Oil for Angola • Previous slide showed oil brings inPrevious slide showed oil brings in $3,000/person/year$3,000/person/year • However, the UN 2011 report indicatesHowever, the UN 2011 report indicates 54% of Angola’s population lives on54% of Angola’s population lives on $1.25/day (= approx $450/year)$1.25/day (= approx $450/year) • So we have a distribution problem,So we have a distribution problem, although in fairness to the government aalthough in fairness to the government a lot of the money is spent on roads,lot of the money is spent on roads, railroads, improving the electricalrailroads, improving the electrical system, building new schools, etc, etcsystem, building new schools, etc, etc

104. But Oil Can Also CreateBut Oil Can Also Create Problems for a Country LikeProblems for a Country Like AngolaAngola • Angola needs to avoid being too focusedAngola needs to avoid being too focused on oil (“petro-economy”) and neglectingon oil (“petro-economy”) and neglecting other parts of the economy includingother parts of the economy including agriculture, fishing, tourism.agriculture, fishing, tourism. • Angola needs to avoid falling into theAngola needs to avoid falling into the trap of the “Dutch disease”, the “curse oftrap of the “Dutch disease”, the “curse of oil”, etc which includes building up of bigoil”, etc which includes building up of big beauracracies and hyperinflationbeauracracies and hyperinflation

105. But Oil Can Also CreateBut Oil Can Also Create Problems for a Country LikeProblems for a Country Like AngolaAngola • Big problem!Big problem!: for example in 2013 Mercer: for example in 2013 Mercer rated Luanda as the most expensive city in therated Luanda as the most expensive city in the world for expatriates due to the effect of Angolaworld for expatriates due to the effect of Angola being a “petro-economy”being a “petro-economy” • Big problem!Big problem!: oil provides 95% of Angola’s: oil provides 95% of Angola’s export revenues but employs less that 1% of theexport revenues but employs less that 1% of the population; hence need for more Angolanizationpopulation; hence need for more Angolanization of jobs including manufacturing of rigs, drill pipe,of jobs including manufacturing of rigs, drill pipe, oil platformsoil platforms

106. The “Angola Advantage” –The “Angola Advantage” – Oil & Gas IndustryOil & Gas Industry • World class geologyWorld class geology • Benign operating environment (no iceBenign operating environment (no ice bergs, hurricanes, high seas)bergs, hurricanes, high seas) • Subsurface drilling is not difficult, e.g. noSubsurface drilling is not difficult, e.g. no major over-pressuring problems, etcmajor over-pressuring problems, etc • Contractual stability due to politicalContractual stability due to political stability (government has been led bystability (government has been led by MPLA since independence in 1975)MPLA since independence in 1975)