Angola, the second largest oil producer in sub-Saharan Africa, recently made waves on the international stage by withdrawing from OPEC (Organization of the Petroleum Exporting Countries). The move came after a month-long dispute over revisions to its production quota, which Angola saw as a brake on essential investment in its upstream sector. The first signs of a production revival appeared in March, with output rebounding from a four-month low to 1.13 million b/d, compared to around 1.11 million b/d in February, according to the ANPG (National Agency for Oil, Gas and Biofuels).
Impact on Asian markets
As the second largest crude supplier to Asia, behind the Middle East, Angola plays a crucial role in the region’s supply strategy. Asian countries, particularly China, India, South Korea and Thailand, are particularly sensitive to fluctuations in Angolan production. China, which receives 80% of Angolan oil production, sees OPEC’s withdrawal as an opportunity to stabilize and potentially increase its imports. In India, African oil imports hit a historic low in 2023, at just 4% of their total import basket, partly due to the increased availability of discounted Russian oil.
Opportunities and challenges
Exiting OPEC should theoretically allow Angola to attract more investment in its upstream sector, essential to reversing the downward trend in production observed since 2010, underlines a London-based analyst.
“Leaving OPEC may help Angola attract upstream investment, but in the short term we are unlikely to see a notable increase in supplies to China, as China already captures 80% of Angola’s production. »
However, there is no shortage of challenges. Aging infrastructure and a lack of exploratory activity have hampered Angola’s ability to maintain, let alone increase, its production levels. Moreover, the departure of international oil companies, mainly from mature basins and fields in West Africa, further complicates the situation.
Regional and global impacts
Angolan oil, mainly of light and sweet grades like Girassol, Cabinda and Dalia, is in high demand in Asia due to its superior quality which fits well with local refinery configurations. Angola’s increased capacity to produce and export without the constraints of OPEC rules could significantly transform the security of oil supplies in Asia. This is particularly relevant for Thai and South Korean refiners who have expressed renewed interest in securing long-term contracts with Angola, given the expected stability of supply.
Angola’s move to withdraw from OPEC marks a potential turning point for oil market dynamics in Asia. By increasing its production and offering more flexibility to its Asian buyers, Angola is not only boosting its local economy but also contributing to greater stability in Asia’s oil supply. However, the long-term impact of this decision will depend on Angola’s ability to overcome its internal challenges and attract the investments needed to maintain an upward production trajectory.
