Figure 8. Oil Exploration and Production Areas, 1986

Source: Based on information from Tony Hodges, Angola to the 1990s, London, 1987, 54.

Oil exploration off the coast of Cabinda
Courtesy United Nations (J.P. Laffont)

Following independence, the new government enacted sweeping changes in the oil industry and claimed sole rights over all of the petroleum deposits in the country. Under the Petroleum Law No. 13/78, enacted on August 26, 1978, the government established Sonangol as the exclusive concessionaire of the state's hydrocarbon resources. The company was divided into several directorates, including one for the development of hydrocarbons and another for the distribution of byproducts on the domestic market. The hydrocarbons directorate was responsible for reaching agreements with private companies for the development of local resources. In 1978 it divided Angola's offshore area (except for Cabinda) into thirteen blocks of approximately 4,000 square kilometers each for development by private companies (see fig. 8). By 1981 exploratory drilling had been conducted on Blocks 1 through 4, and production began in Blocks 2 and 3 in 1985.

Sonangol was empowered to enter into two types of agreements with foreign companies: joint ventures, in which Sonangol and its private partners shared in investments and received petroleum produced in the same proportion (51 percent Sonangol, 49 percent foreign) and production-sharing agreements, in which the foreign company served as a contractor to Sonangol, made the necessary investments, and was compensated by receiving a share of the oil produced. Sonangol also could stipulate a price cap in the production-sharing agreements that would allow windfall profits to accrue to Sonangol and not to the foreign companies. In practice, all of the new areas opened up for exploration and production since independence have been subject to production-sharing agreements, while the areas previously under production--primarily in Cabinda--were joint-venture operations between Sonangol and foreign companies. In addition, Sonangol also participated in joint-venture companies that provided services and supplies to the oil exploration and production companies.

Except for Cabinda, production in the offshore fields started after independence. In offshore Block 1, the first seismic work began in May 1982, and the first drilling commenced in December of that year. Activity in Block 2 began in 1980, and by 1985 two fields were producing (Cuntala and Essungo) a total of 11,700 barrels per day (bpd--see Glossary). In addition, oil was discovered by the end of 1985 in the West Sulele formation in Block 2. Sonangol had started construction in Block 2 of the Kwanda operational base to provide support for operators in Blocks 1, 2, and fe2 d 3. Block 3 also started exploration activity in 1980, and by 1986 at least six wells there were considered commercial. A major development project was being initiated in Block 3 for the Palanca and Pacaca fields and for a sea-loading terminal. The other blocks in exploration were 4, 5, 6, 7, and 9 Blocks 8, 10, 11, and 12 had not been opened by the government as of the end of 1985 (see table 8, Appendix A).

Oil was also produced in onshore fields in the Cuanza and Congo river basins. There were forty-six wells in the Cuanza River Basin, near Luanda, where production began in 1959. In 1986 Sonangol estimated that the field had a life of another five to six years at then-current levels of production. Being an old field, it had very low production costs. The oil fields in the Congo River Basin, however, were far more productive, yielding nearly eight times the amount raised in the Cuanza River Basin. From 1981 to 1985, between 30,700 bpd and 39,900 bpd were produced in the Congo River Basin, but an average of only about 4,200 bpd was produced in the Cuanza River Basin.

In addition to its production agreements, Sonangol has actively invested in the development of production capabilities and in exploration and distribution projects. In 1979 the company compiled the available data on the sedimentary basins and carried out a seismic survey program on the continental platform, upon which the subsequent division of the continental shelf platform was based. Furthermore, the company has made major investments in expanding its ability to distribute petroleum at home and abroad since it assumed direct responsibility in 1977 for marketing Angolan oil (Cabgoc marketed Cabinda oil, which accounted for almost half of Angola's oil production). Some of Sonangol's other major investments included gas injection facilities in Cabinda development of the Takula, Lumueno, Quinfuquena, Quinguila, Essungo, and Cuntala fields and the offshore Cabinda fields construction of the Kwanda oil field service base and construction of the Quinfuquena oil terminal.

New arrangements have also been made for the future development of several production areas. Financing totaling US$350 million has been secured for the development of the Takula fields in Cabinda, owned jointly by Sonangol and Cabgoc, from an international consortium of banks. Cabgoc has also signed three new joint-venture contracts on oil research and exploration in Cabinda. Under the terms of these contracts, Cabgoc was to be responsible for the total cost of the research operations and was to be reimbursed by Sonangol only if commercially viable oil was discovered.

As a result of the many joint-venture and production-sharing agreements reached by the government in the late 1970s, by 1985 US$798 million had been invested in exploration and US$1.2 billion in development. The largest investors were Cabgoc and Sonangol in Cabinda and the French firm Elf Aquitaine and its partners in Block 3. This increased investment has led to higher production. For example, production in Cabinda more than doubled between 1980 and 1985.

Data as of February 1989