ANGOLA - E&P Regime.

Sonangol grants the rights to oil and gas E&P in Angola on land and offshore. The areas to be explored are delimited in blocks of about 5,000 sq km and each concession is granted for a period of 20 years. When deciding to which of the bidders the concession is to be granted, Sonangol takes these factors into consideration: crude oil price uncertainties, estimation of the hydrocarbon reserves to be recovered, environmental impact, prospective basins, tributary legislation, knowledge of a basin's geology, access to the blocks, the types of operating conditions, and the level of technology being used.

Sonangol says in its website: "There has been a recent tendency to invest in challenging geological environments such as the reserves in deep-water and ultra-deep waters. This further increases the number of uncertainties...when negotiating an oil concession. Therefore because it is difficult to put a price tag on an oil concession, the contracts are based on an agreement to sell or buy the [crude] oil and/or gas explored at the price established at the time the contract is signed. In Angola's case, oil concession contracts are made so that the crude oil sold by the government goes in favour of international credit lines...[which] enable imports of goods which are not produced in Angola".

In 1996 when the reserves of Girassol were discovered by Total of France in deep-water Block 17, Angola went from being an average oil producing country to a hotspot in the global search for major oil reserves. When Girassol came on stream in late 2001, the line on Angola's oil production graph moved upwards exponentially. It is a trend set to continue as more offshore fields are brought into production.

Total oil production in Angola in 2001 was below 1m b/d. By end-2005 production surpassed 1.3m b/d and reached over 1.4m b/d in 2006. It will reach 2m b/d in late 2007 or early 2008.

With the fast-paced advance of drilling technology and the success of Block 15 operated by ExxonMobil and Block 17 operated by Total, there are great expectations for results of ultra-deep water (i.e. drilling at depths greater than 2,000 metres) exploration off Angola's coast. Angolan ultra-deep water blocks are numbered 31 to 34.

The petroleum industry in Angola began in 1955 when oil was discovered in the onshore Kwanza Valley by Petrofina of Belgium which, together with the Angolan government, established a jointly-owned Fina Petroleos de Angola (Petrangol) and built a refinery at Luanda to process the crude oil. The plant's capacity now is 39,000 b/d. Petrofina has been taken over by Total.

The main expansion of the country's upstream oil industry came in the late 1960s when the Cabinda Gulf Oil Co. (CABGOC - now part of Chevron) found oil offshore the coastal enclave of Cabinda. In 1973 oil became Angola's main export and numerous subsequent discoveries made in Cabinda and in other parts of the Angolan offshore have ensured Angola will play a major role in Africa's oil industry.

Onshore production is centred in Kwanza near Luanda and in the Congo Basin near Soyo. Onshore facilities have been severely hit by a 27-year civil war which ended in 2002, especially those in the region of Soyo. Billions of dollars of post-war rehabilitation programmes have been instituted. In the late 1970s, the government launched a programme to attract foreign oil companies. The Angolan coast, excluding Cabinda, was divided into 13 exploration blocks, which were leased to foreign companies under production sharing agreements (PSAs).

In 1978, the government authorised Sonangol to acquire 51% in all oil companies operating in Angola, although the management of operations remained under the control of foreign companies. By the beginning of 2000, there were 29 offshore and onshore blocks under licence. Thirty companies held licences in Angola and of these 14 were operators. Since 1990 over 200 exploration and appraisal wells have been drilled.