Team effort

Now that oil has crept above USD 60 per barrel, do you think Angola has reached the bottom and is now on an upturn?
All oil-producing countries are feeling relief as oil crept above USD 60 per barrel. I hope this can be steady. An oil price above USD 50 per barrel is good for Angola, but I hope it is not a result of political tension in the Middle East but a result of reaching a more balanced world supply and demand. Iran is producing 4 million barrels per day. If they go under sanctions again, it would push prices up but not for the right reasons. There is also speculation about North Korea and the Saudi/Qatar problems. All of these have pushed prices up, but it may not be sustainable, as political uncertainty alone cannot sustain high prices for long. The market forces of real supply and demand will determine the oil price in the long run.
Angola should not rely only on oil and gas exports. We believe that the government is strongly committed to developing other business sectors to diversify Angola’s exports and start reducing the over-dependence on imported goods and services. Currently, around 75% of all goods consumed in Angola are imported. This is not sustainable in the long run. We need to boost the national production and I believe AmCham will provide a significant contribution through increased trade and investment between US and Angola as well as the values that AmCham brings to Angola such as free trade, free markets, investment and the rule of law.

Should Angola focus more on exporting refined products in order to gain more value from its exports?
When you export raw materials, which cannot be renewed, such as oil and gas, you must invest in developing other sectors, including the transformation sector, or you risk becoming poorer when eventually the availability of these raw materials decline. Therefore, anything that creates long-term value and develops other sectors should be a good investment. If we are selling oil for less revenue than we could get for selling refined products, then there is an opportunity for Angola to expand its refining capacity to supply the domestic and regional markets. In a country that is producing 1.6 million barrels of oil per day, there should be enough oil to export to international markets and to supply local refineries, which would then supply the domestic and regional markets. There are 80 million people in the DRC, for example, and there are reports of fuel being smuggled from Angola to the Congos. This means that demand is there. Also, when the price of oil is down, the prices on refined products are less volatile and the margins are bigger, which helps to stabilise the economy, particularly in low oil price cycles.
The existing refinery is 60 years old with a capacity of less than 60,000 barrels per day. That is not enough to supply the domestic market, which needs around 120,000 barrels per day. Angola needs to import the difference which is worth around USD 2 billion a year (with the oil price at around USD 50 per barrel). This number will increase if the oil price remains above USD 60 per barrel as the prices of refined products are affected by the crude oil prices. Yet there were factories that had to close because of a lack of fuel, like the cement factory in Kwanza Sul. It is difficult to understand the rationale. I hope the new government can focus on these issues and find the right way to do it. Building refineries is another business opportunity for American companies.

Does Angola need to get the planned refinery in Lobito restarted as soon as possible?
Yes, but only as long as the project is reviewed in order to ensure that it is economic and competitive in the regional and international markets.
The general manager of Eni had an appointment with the Angolan President João Lourenço and I understand they discussed several issues. They discussed the increase of production in Block 15/06 from 150,000 to 200,000 barrels per day. Another point was the LNG plant because they have a problem with gasification. The third point was about gas supply in Block 1. This gasfield could supply LNG. Another point mentioned was refineries. I hope that a company such as Eni, which has deep expertise in refining and is involved in the oil sector in Angola, will actively support and participate in the development of the Lobito refinery. But, let me stress again, it is important that the project is reviewed to ensure that Angola gets a good return for the investment.

What is the future of the upstream sector?
A lot depends on the government’s strategy for the sector. All the oil companies that are already in Angola are interested to keep investing and producing, as long as they can continue generate returns for their shareholders. The Angolan oil industry has over 60 years of success and it can have another 60. The problem is finding the balance point so that these investments can produce positive financial results for the investing companies and for the state. Oil companies often speak about a problem related to the contractual terms in production agreements that can make new investments profitable and economically feasible or not. For example, approximately 4 billion barrels have already been discovered in marginal fields (smaller accumulations) offshore Angola. Oil companies want to develop these marginal fields in order to extract their oil and gas resources, but they can only do it if they have the right contractual terms and related tax rates.
I have no doubt the Angolan upstream market will boom again. Funds are available and the interest is there. The future could be bright for the oil industry in the country, so long as oil stays at least over USD 50 per barrel and an agreement is reached on the contractual and fiscal terms for new projects.

Where should Angola begin in improving its image on the international stage?
The financial sector should be one of the main priorities. Compliance with international requirements on money laundering, transparency and regulatory is the first major step and I am happy to see that the government is starting to respond very well. I believe that the newly appointed Central Bank governor, Jose Massano, is the right person to lead this transition; he is competent and has an excellent reputation in the financial sector. He had already started this process in his previous mandate. He now has some big challenges ahead and to succeed will need to have support from the government but will also need to be able to operate with limited political interference. The appointment of Jose Massano as the governor of the Angolan central bank demonstrates the government’s determination to change the course of the Angolan financial system and international reputation.

How do you distinguish yourself from other organisations such as the US-Angola Chamber of Commerce?
Both organisations promote trade and investment between US and Angola. But the difference is simple. US-Angola Chamber of Commerce is an organisation registered in the US and in Angola. AmCham is registered in Angola and is affiliated with the US Chamber of Commerce, which is the largest and most successful business organisation in the world, with its headquarters in Washington DC and representing the interests of more than 3 million businesses of all sizes, sectors and regions. AmCham Angola is the 18th affiliate in Africa and 116th in the world. The international affairs division of the US Chamber of Commerce has 70 policy experts to advocate and help companies to succeed in US and worldwide. We are part of a very big, resourceful and influential organisation – and we will leverage their support.
The US Chamber of Commerce is based on a set of core values such as free trade, free markets, investment, and the rule of law – and actively sponsors and promotes these goals abroad. The day-to-day operations of AmCham Angola are run by individuals and companies doing business and present in Angola that serve on its board of directors. At the same time AmCham Angola has the support of all the resources, knowledge and experience of the US Chamber of Commerce, which has strong relationships with the US executive and legislative branches at the highest levels.
To give one example, in 2014, some African countries, in particular South Africa and Kenya, which were exporters to the US market, were concerned about the end of the African Growth and Opportunity Act, which was signed into law by President George Bush in 2004. The AmCham organisations around Africa went to the US Chamber of Commerce in Washington, DC. They were able to speak with the US Congress and the White House and were successful in extending the act for an additional 10 years. In my view this could not be done by any other local chambers, as they do not have sufficient resources and influence on the other side of the ocean. The US Chamber of Commerce is a 105-year-old organisation which advocates on behalf of local chambers and industry associations, as well as offers access to the latest resources, information and best practices in advocacy and communications.

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