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Angola: alarm-bells ring in Cabinda

The recent murderous attack on a foreign football team has allowed the Cabindan separatist movement to take the world stage – and it raises security concerns for about a quarter of Angola's oil production, Martin Quinlan writes

THE ANGOLAN government thought it had dealt with the threat from the movement seeking independence for Cabinda, the country's separate oil-producing enclave to the north. In 2006, a peace agreement was signed with the Front for the Liberation of the Enclave of Cabinda (Flec) – but Flec split and, fuelled by Cabinda's poverty and oppression from the Angolan military, several new militant groups have emerged.

In January, three people were killed when the coach carrying the Togo football team was attacked just after it crossed the border into Cabinda from Democratic Republic of Congo – the country whose 40 km seaboard separates Angola from its enclave. For some years there have been attacks on seismic crews operating in Cabinda, with deaths resulting, and staff have been taken hostage.

The government in Luanda has down played the problem, claiming the terrorists are few in number. Independent estimates range from a few hundred to no more than 2,000, and they are judged to be no match for Angola's experienced and relatively well-armed military. However, as oil companies operating in southern Nigeria have learned, terrorists with even basic weapons can cause great disruption.

The Cabindan separatists' case is that the country, originally known as Portuguese Congo, was not part of Angola when Angola was a Portuguese colony, but was a separate Portuguese colony in its own right. When Angola won independence in 1975, Cabinda was included in the agreement – and was immediately overrun by Angola's MPLA troops, which went on to defeat the Unita opposition in the Angolan civil war.

To pursue its case, Flec has set up a government-in-exile, and there is a non-active state-owned oil company, Cabinda National Petroleum. Last month, Brimstone, a Washington, US, law firm acting for "the Republic of Cabinda" and Flec, said it is pursuing international legal action against Angola over the rights to resources in Cabinda. "The oil resources of Cabinda belong to the Cabindan people [and] there should be no oil extraction or exploration onshore until the self-determination issue is settled," the firm commented.

According to Brimstone, the attack on the football team "was a provocation staged by elements of the FAA [Angolan army]". The team's transport arrangements were known only by the FAA and not by Flec, the firm says. Following the attack there has been "massive new repression in Cabinda by the FAA".

Seismic stops

The football-team attack has had immediate consequences for exploration of the Cabindan onshore, where work had made a tentative start in 2005 when it seemed that the risks had diminished. After the shooting, the UK's Soco, a participant in the Cabinda North licence, said "the seismic acquisition programme is suspended".

State-owned Sonangol, operator for Cabinda North, had commissioned 2-D and 3-D surveys and there had been plans for a well this year, but Soco said: "There have been multiple security incidents in the region [and] no drilling is anticipated in Cabinda in 2010." Sonangol had been forced to suspend work in the same block in early 2008, after a member of a seismic crew was killed in an attack.

Onshore exploration is most advanced in the Cabinda South block, where Argentina's Pluspetrol took over from Roc as operator after a farm-in last year. A well, Castanha-1, was spudded in November – the eighth exploration well to be drilled in the block in recent times. The operator did not reply to questions last month, but Roc said the well was still drilling at the end of the year.

Initial results from the Cabinda South drilling programme are encouraging. The first well, Massambala-1, drilled near the coast, found a shallow deposit of heavy crude into which two appraisal wells were drilled. The next two exploration wells gave "good", but non-commercial flows.

The operator then targeted pre-salt structures, finding a "thick world-class source rock" with Milho-1 and testing 26°API crude and gas with Coco-1. The following two wells were disappointing. The Coco-1 well, lying inland from Massambala, was re-entered for an extended formation test in November, with work continuing in late-January. Roc says planning continues for a 3-D seismic acquisition programme in 2010.

For the explorers, onshore Cabinda – with security – would be a dream province. Until work re-started, there had been no exploration since 1972 – therefore, no exploration based on 3-D seismic or computer-processed 2-D. Yet wells drilled in the past by Gulf, now part of Chevron, have established the presence of oil and gas onshore.

More-solid evidence comes from the Cabindan offshore, with which the onshore area is said to be on-trend. Chevron has 22 producing fields in its two shallow-water areas, designated Blocks 0/A and 0/B, and infill drilling and seismic continue. The firm's most recent discovery was made in August, when a well in 121 metres of water extended the known trend of gas and condensate in the undeveloped Greater Vanza Longui area. An extensive ocean-bottom cable seismic survey was being implemented in the two areas last year.

Malongo risks

The problem is that much of Chevron's offshore production is landed by pipelines to the onshore terminal at Malongo – a vast and heavily defended site in the centre of the Cabindan coast, which is potentially at risk from terrorists. Chevron will not say how much crude is landed to Malongo, but it is understood to be about 410,000 barrels a day (b/d) and rising, made up of 270,000 b/d of 33°API Cabinda blend and 140,000 b/d of 39°API Nemba.

But Malongo is also the supply and operational base for Chevron's other, offshore-loading, fields in the Cabinda deep-water licence, Block 14. Consequently, much larger volumes of production would be at risk if Malongo were threatened.

Chevron says production from Block 0/A in 2008 was 193,000 b/d, including 2,000 b/d of liquefied petroleum gas (LPG), while Block 0/B yielded 151,000 b/d including 19,000 b/d of LPG, giving a total of 344,000 b/d. Production from Block 14 ran at 168,000 b/d in 2008. Offshore Cabinda production in that year, therefore, amounted to 0.512m b/d, or about 27% of Angola's total output. (Other accounts give higher figures – 50% or more – for the Cabinda share of Angola's total, but they do not allow for the production-growth in recent years from deep-water fields off the mainland.)

Chevron's Cabinda production is understood to have stayed at about the 2008 level until the latter part of last year, when it started to rise as the result of two recent start-ups. The deep-water Tombua-Landana field came on stream in September and is due to plateau at 100,000 b/d at the turn of 2011-12; and the shallow-water Mafumeira Norte field started-up in July with a plateau of 30,000 b/d expected in 2011.

A company executive was quoted as saying production will reach 0.580m b/d this year, and about 0.640m b/d is indicated for 2011-12 when the new fields reach full output. (In addition to its operated production off Cabinda, Chevron has 22,000 b/d from its interests in two Sonangol-operated licences off the mainland.)

Rapidly rising production – remarkably, output expanded by almost 1.0m b/d over the four years to 2008 – has given Angola a high profile internationally, with the government being courted by the US and then China. But rising production is now a problem: Angola joined Opec in 2007 and was taken into the quota system in January the following year. Since January 2009 the country's production quota has been 1.517m b/d, this figure having been rolled-over for 2010 at the December Opec meeting in Luanda.

Production has been exceeding the quota by a substantial margin, having averaged about 1.90m b/d last year, as in 2008. Petroleum minister José Maria Botelho de Vasconcelos acknowledges that the country is not complying with "expected" levels and has been pressing for an increase in the quota, arguing the need for revenues to reconstruct war-damaged infrastructure.

Angola's capacity is yet higher, at about 2.1m b/d according to Petroleum Economist's field-by-field estimates. The two large deep-water developments at the construction stage, Total's Pazflor and BP's PSVM, together with Chevron's growth off Cabinda, will raise capacity to about 2.5m b/d in 2012 or soon after, with some allowance for the decline of older and smaller fields.

How this expanding capacity will be accommodated in the country's production planning is unclear. When Angola joined Opec, the country's big operators – Chevron, Total, ExxonMobil and BP account for approaching 95% of production – were concerned that their costly new fields would not be allowed to ramp up as planned. So far, their fears have not been justified. Controls have not been imposed, the difference between output and capacity being accounted for largely by maintenance work and some production problems.

Luanda still spending

Meanwhile, despite Angola's social and infrastructure needs, the government still has a taste for high-profile oil investments. In January, Sonangol paid $1.3bn to close its purchase of an additional 20% interest in the Total-operated Block 32, an ultra-deep-water area with 12 discoveries, but no production.

Last year, Marathon had agreed the sale of the interest to a 50:50 venture between China's Sinopec and China National Offshore Oil Corporation, but Sonangol – which already held 20% – stepped in with its right of first refusal. In addition to the sum paid, Sonangol will now be responsible for 40% of the cost of the planned multi-field development in the eastern part of the block, for which studies are under way.

Sonangol already has a substantial spending commitment in the neighbouring BP-operated Block 31, where it holds 20%. BP is to bring the first development, PSVM, in 2,000 metres of water, on stream in 2011 using 48 subsea wells linked to 15 manifolds, with oil flowing into a floating production, storage and offloading (FPSO) vessel. Sonangol's spending commitments on exploration are also high – particularly in the deep-water 15/06, 17/06 and 18/06 licences (see Figure 4), in each of which the Sonangol-Sinopec venture has an interest in addition to Sonangol's carried interest.

Sonangol is also facing heavy spending downstream. The company's 100%-owned project for a new 200,000 b/d refinery, Sonaref, should be moving into the hardware stage soon, although in December the petroleum minister said start-up would be put back to 2014-15, from the earlier 2013 target. KBR is carrying out the front-end engineering and design work, and has started preparing the site, at Lobito.

Sonangol's justification for such a substantial investment is that Angola's crudes include heavy and acidic streams, for which there is limited refining capacity worldwide. Such streams sell at a discount to normal grades so processing them in a purpose-designed refinery should be profitable, the company says.

The firm tried for years to interest private-sector refiners in joining the project – and Sinopec was involved for a while before pulling out – but an Indian partner is now being courted. India's oil minister visited Angola in January, when state-owned Indian Oil Corporation offered to participate in Sonaref as part of an agreement under which ONGC Videsh, another Indian national oil company, will form an exploration venture with Sonangol. The venture will bid for licences in Angola's next round – long delayed, but there are plans to open it this year – and overseas.

Meanwhile, there are plans to increase the capacity of the country's existing refinery – a 39,000 b/d facility at Luanda, formerly operated by Total, but now run by Sonangol. The Luanda unit is to shut down this summer for maintenance and an expansion project, although not the expansion to 100,000 b/d that Sonangol has been envisaging. Sonangol is also interested in increasing the capacity of the topping unit (simple refinery) at the Malongo terminal, which produces about 9,000 b/d, mainly for Chevron's use.

Angola LNG ahead of schedule

Angola's liquefied natural gas (LNG) complex is another heavy spending commitment for Sonangol. Bechtel, with the engineering, procurement and construction contract for the onshore facilities, says the whole project – including extensive pipelaying, LNG vessels, FPSOs, facilities for LPG and condensate, and landing gas for industrial use – will cost about $8bn. Sonangol has 22.8% of Angola LNG, with Chevron holding 36.4% and BP, Eni and Total each having 13.6%.

The 5.2m tonnes a year single-train facility, at Kwanda island, near Soyo, is due to start producing in 2012. Angola LNG says engineering is nearly complete and construction is ahead of schedule, so start-up is being targeted for the first quarter of that year.

 

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