The real reason Angola left OPEC
Angola plans to keep oil production above 1 million barrels a day, which is why it left OPEC, the West African country's natural resources minister has revealed.
The continent's second-largest OPEC producer left the cartel late last year, surprising many observers of OPEC policies.
“This organization is no longer in line with the values and interests of Angola,” Diamantino Azevedo, minister of natural resources, said this week, as reported by Bloomberg. He added that OPEC has assigned “production quotas that defy our real capabilities and needs, we have made the formal decision to withdraw our country.”
According to an OPEC breakdown of individual production quotas for members, Angola is expected to produce more than 1 million barrels per day this year: its quota was last set at 1.11 million bpd, according to l latest OPEC agreement. However, this is a significant reduction from the previous quota, agreed in November, which called for production of 1.28 million bpd this year.
This 170,000 bpd reduction was clearly counterproductive for Luanda, which has ambitions to grow oil production after a decade of continuous decline due to depletion and lack of investment in new exploration.
Ten years ago, Angola pumped about 1.8 million bpd. Last year, its production fell below 1 million bpd before climbing back to around the 1.0 million bpd mark. The latest data shows a production rate of 1.14 million bpd for October and 1.08 million bpd for November.
Meanwhile, Equinor announced the purchase of stakes in two exploration blocks in the West African oil producer. The Norwegian major is already a large investor in Angolan oil and is now deepening this commitment.
“To continue our mission to create sustainable value and meet the energy needs of the future, we believe new exploration is necessary,” an Equinor executive said on LinkedIn, commenting on the deal. The blocks will be managed by a joint venture with two other oil majors: BP and Eni.
Angola's exit from OPEC followed reports of disagreements over the new 2024 quotas. The sources of the disagreements: Angola and Nigeria. Both countries were reportedly unhappy with the new quotas because they wanted to increase production rather than maintain it at current levels or even reduce it.
At the time, some commentators suggested that disagreements could lead to a rift within OPEC, and they turned out to be right. Even at the beginning of the year, in June, when Angola again opposed the quotas, no one seemed to expect it would leave.
“The seeds of this exit were sown in June,” Helima Croft of RBC Capital Markets told the FT in December, after Angola's exit was announced. At its June meeting, OPEC decided to outsource the task of establishing a baseline for oil production to be used to set quotas. Angola was not in favor of the idea.
“Furthermore, Angola has been one of the more moody members, having staged several escapes from the meeting at the secretariat in recent years,” Croft said at the time.
In other words, Angola's exit from OPEC was long overdue. This isn't the first time a member has left and it probably won't be the last. It has already happened in the past that a member found its energy policy at odds with that of OPEC, just as happened to Angola. At the same time, the OPEC+ quota cut aims to support the price, but this policy ultimately comes to be a gift especially for non-OPEC countries which enjoy the high price without cuts to production quotas.
The country needs more oil revenue to fill its empty coffers. To do that, it would need more production. But to do that, Angola would need a sharp increase in oil investment. Some said these investments would logically come from international supermajors, although others noted that a wider window could open for Chinese investment in the West African oil producer.
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The article The Real Reason Why Angola Left OPEC comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-vero-motivo-per-cui-langola-ha-lasciato-lopec/ on Sun, 07 Jan 2024 13:00:12 +0000.