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The OPEC bulletin and focus on Angola

A magazine that regularly falls into ASPO’s letterbox is “OPEC Bulletin”. According to their advertising a yearly subscription costs $70, but the fact that it comes to ASPO without a subscription shows that OPEC has prioritized ASPO in its address list. The latest issue, number 9 for 2009, has focused on Angola. But before I address Angola I want to mention a few of the other articles. Like it or not, oil exports from OPEC will be completely decisive for the future of the OECD nations.

When reading the OPEC Bulletin ones sees a different angle of approach than one is used to. The latest issue discusses the OPEC meeting that, (when the issue was published), was yet to be held on 22 December in Luanda. The date of the meeting was chosen so that they could discuss the anticipated decisions on climate change from the conference in Copenhagen. They were also waiting for the weather prognoses for the northern hemisphere since a cold winter would contribute to a higher oil price. Of course, OPEC hopes for cold weather since it means more money in the till.

One article is about OPEC’s new head office in Vienna that is described as “state-of-the-art”. Another article describes how OPEC collects data for its analyses. Naturally, that is something my research group is very interested in. OPEC has a system where each member nation should report every month – something they call DC (“direct communications”) and they note that reporting could be improved. Very often they need to use SS-data, (from “secondary sources”), i.e. indirect calculations from export volumes, shipping activity, domestic consumption etc. What they are saying is that, in some cases, OPEC has the same data that we have when making estimates of future production. If one considers that we at Global Energy Systems (Uppsala University) have developed new calculation methods then it can even be true that we can make better prognoses than OPEC.

Another interesting article in the OPEC Bulletin is about the collaboration that is now developing between Iran and Venezuela – nations that the USA describes as “hustle countries”. They have created a joint investment fund that will invest in agriculture and industrial development in Venezuela. Since the cooperation between the two nations began five years ago they have signed hundreds of contracts in total worth billions of dollars. They have even established a joint bank. I assume that the bank does not do business in US dollars.

Before Iran’s president Mahmoud Ahmadinejad visited Venezuela he visited Bolivia where he met president Evo Morales. They both signed a treaty that means that Iran can engage as financier for mining research in the salt desert at the border with Chile. They consider that approximately half of the world’s lithium exists in that area and as modern battery technology requires lithium this can be very important for the future. If this is a “hustle action” remains to be seen. It can be added that Japanese and Korean companies are participating in making offers where the reward can be 100 million tonnes of lithium.

Now it is time to focus on Angola. Five of the ten articles in the OPEC Bulletin are on Angola that became a member of OPEC on 1 January 2007. The 115th OPEC meeting that was held in Luanda on 22 December 2009 was the first conference that the new OPEC-nation had hosted. High up on the agenda was, naturally, the future oil price and the recovery of the world economy.

At the moment it seems like everyone wants a piece of Angola. The queue of prominent visitors is long with the USA’s Secretary of State Hillary Clinton at its head. Where it smells of oil one can also find China and they mention that China is thought to have contributed $5 billion in loans to develop Angola’s infrastructure. The investment is necessary after 25 years of civil war. The repayment will, presumably, be made in the form of oil.

The first oil was found in 1955 in the Kwanza valley but it was when they found oil offshore at the end of the 1960s that it became important for Angola. In 1973, crude oil was Angola’s most important export, and today it is 90%. (Their second largest export is diamonds.) The really large oil finds were first made when they began to explore in deep water. OPEC reports that Angola has reserves of 9.5 billion barrels but the nation’s own news sources assert that reserves are 13.1 billion barrels and there are estimates where they believe that there can exist as much as 19 billion barrels in the ocean outside Angola. From a global perspective where we consume 30 billion barrels per year, Angola’s reserves are not so large and are less than what remains in Norway.

In 2008 Angola’s export income was $67 billion and $60 billion of this came from oil. This large income means that Angola’s currency reserves are growing. They now plan to create an oil fund similar to Norway’s. They must save for a future after Peak Oil. The international oil companies are trying to maximize oil flows from Angola’s deep water fields where production is very expensive. This means that production from these fields will lie on a plateau for some years before the usual very rapid decline begins. If we look into the future this will mean that Angola will reach Peak Oil before 2030. According to Colin Campbell they will reach peak production in about 10 years. We have just begun a study of deep water oil production and it remains to be seen what our estimate will be.

In recent years production has been around 1.9 million barrels per day (Mb/d) of which they have exported 1.8 Mb/d. The projects that are planned can increase production by 1.2 Mb/d which would raise Angola’s production to about 3 Mb/d. This is the same level that Norway had as their Peak Oil production. If one considers that Angola’s reserves are clearly smaller than Norway’s you can understand how aggressive the oil production that the international oil companies are conducting is. One can justifiably say that this is plunder of Africa’s oil and, once again, Africa is being exploited. Angola and Africa would have fared much better if they had had a different oil production profile.

In Angola there is a real “Jurassic Park”. There are large areas with large amounts of fossil remains. The largest find was made in 2005 when they found five bones from the foreleg of a sauropod dinosaur. They are now performing excavations in collaboration with universities from the USA and the EU and they hope that this research will inspire their youth to study science. What Peak Oil will bring to these young people remains to be seen.

Finally there was an article on the African Championship of Nations football tournament that has just concluded. A terrorist attack during the tournament’s start spoiled the positive picture described in the OPEC Bulletin. Despite this I believe that sports activities like this are important for Africa’s future.

(A comment to the article can be given on the blog, Aleklett’s Energy Mix:

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