Angola is playing host to its first OPEC meeting on Tuesday, and it appears to be pulling out all the stops: new convention centre, posh villas for visiting ministers.
But given how Angola breaks OPEC production quotas more than any other country — in order to deal with its crushing poverty levels the country claims — that show of wealth may backfire, notes the Financial Times:
Angola, the group newest member, wrote a letter earlier this year to the Opec secretariat asking for exemption from current quotas on the ground that the African nation is grappling with the impact of a 30-year civil war which only ended in 2002.
The International Energy Agency, the western countries’ oil watchdog, estimates that Angola pumped last month about 1.9m barrels a day, almost 400,000 b/d above the country’s official Opec quota of 1.52m b/d.
Luanda defends its higher production on the grounds that it needs the revenues to rebuild the country. The US Department of Energy estimates that Angola’s oil revenues topped $67bn and analyst estimate the country will make $40bn this year.
Among the Opec’s nations subject to quotas – Iraq is excluded – the African nation is the biggest cheater, having not reduced a single barrel of output since the group started its aggressive round of production cuts in late 2008. In total, the cartel reduced its official production level by about 4.2m b/d, although the group has only delivered about half of the decrease. So far, other Opec countries – namely Saudi Arabia and United Arab Emirates – have shouldered the bulk of the production cuts and no one has complained, at least publicly, about Angola’s lack of regard to the official limits.
The patience could, nonetheless, disappear altogether if Opec – or, as now, Saudi Arabia and other leading Gulf countries – have to reduce further its production in early 2010 to keep oil prices around $80 a barrel, as some consultants suggest.
PFC Energy, the Washington-based consultancy which in the past has accurately predicted Opec’s policy, says the cartel will need “to agree to substantial cuts, of 1m b/d more from actual production, in early 2010 in order to bring inventories down.”
The challenge could be made worse by an expected increase in Iraq production over the next few years. Baghdad has invited foreign oil companies back into the country to develop its vast oil reserves, potentially the world’s second largest.
The auction promises to bring Iraq’s oil production from 2.5m barrels a day to as much as 12m barrels a day within a decade, an increase equal to Saudi Arabia’s current output. A significant portion of the oil will arrive far sooner, analysts say.
PFC Energy estimates that Iraq could see a 100,000-150,000 b/d production increase as soon as 2010 from the BP-CNPC consortium’s project in Rumaila oil field, near Basra.
For the moment, Opec could take relief that Angola’s oil production potential, after years of strong growth, will plateau during the 2010-2012 period at around 2.05m b/d, according to the International Energy Agency. But that will merely buy time before the country’s oil output capacity rise substantially in 2013, to 2.25m b/d, and again in 2014, to more than 2.5m b/d.