Poor Angola has become

an oil-industry darling

(International Herald Tribune

VIENNA — Angola, which shared the limelight with the world's most powerful oil players at its first OPEC meeting Thursday, is an unlikely candidate for a darling role in the global oil industry.

A corrupt, underdeveloped and war- scarred country, Angola, a West African country, is one of the poorest places on earth. But ask any energy executive and another picture emerges: a place of immense riches, solicitous of foreign investors, and among the fastest growing oil exporters in the world.

In Luanda, the capital, hotel rooms rent for more than $200 a night and are booked solid two months in advance by oil companies; oil workers can fly nonstop to Houston three times a week; offshore, dozens of oil fields have been discovered and given such exotic names as Cola and Canela.

Exxon Mobil, Chevron, BP and others have poured billions into Angola in the past decade to unlock petroleum resources in the country's deep waters, and the payoff has finally arrived.

In recent years, Angola has become the fastest growing source of oil supplies to the United States. By 2010, West African producers will account for one of every three new barrels pumped around the world. By 2015, the United States will import a quarter of its oil from Africa, up from 15 percent today.

Angola's promise stems from a string of big discoveries more than 100 miles, or 160 kilometers, from the coast, which have propelled this country's oil production up tenfold since the mid-1970s to 1.5 million barrels a day last year. Angola should reach two million barrels in 2008 and 2.6 million barrels by 2011, the equivalent of Kuwait's output.

But Angola is finding itself at the crossroads of today's geopolitics of energy. It has become the latest set in the global rivalry played out between Western, Russian, and Chinese oil companies. This year, it also joined the Organization of Petroleum Exporting Countries, which has been paring global supplies to keep prices from falling below $50 a barrel.

China has identified Angola as a promising source in its rush for energy resources, bestowing billions in loans and development aid in return for favorable treatment to its oil interests.

The government of Angola understands the significance of this new relationship, which can help offset the demands of Western donors pressing it to improve the accountability of its oil sector. Last year, Angola moved ahead of Saudi Arabia as the largest supplier of oil to China.

The government seems emboldened by its new status as a member of the small club of big oil producers. The country's decision to join OPEC baffled energy analysts because it implied Angola might have to restrain its growth just when it is hitting the oil jackpot. But Angolan officials, who were in Vienna for their first OPEC meeting, had another explanation for joining the group.

"We've been wanting this for a long time," said Angola's oil minister, Desidério Costa, a technocrat who has been involved in his country's energy sector since 1976. Manuel Vicente, the chairman of Sonangol, the national oil company, added, "It means we're a real exporter now."

The entrance in OPEC is a signal Angola wants to be influential in decisions touching global oil supplies. But Western executives say the membership is unlikely to affect their investments.

"They are sending a message that they are now part of a club that is mindful of the market's long-term goals," said Christophe de Margerie, the chief executive of Total, the French oil company. "Angola is in a growth phase. They need to develop. They need the money. I don't see why they would mutilate themselves."

Oil companies have a big stake in the idea that Angola may be one of the last large untapped regions of the world. Eni of Italy bid an astounding $902 million last year to secure the rights to drill offshore, then the highest fee ever paid by an oil company.

"At that time it seemed crazy," Paolo Scaroni, Eni's chief executive. "In reality we feel it was not crazy at all. There are big deposits in Angola. It's an area of Africa where production can only grow and we want to be part of that growth."

Following Eni's bid, Sinopec, a Chinese state-owned company, and Sonangol jointly offered $2.2 billion for two other offshore blocks.

While oil companies talk at length about how welcoming Angola's government is to foreign investors, they are much more circumspect when it comes to the country's lack of transparency or its history of corruption.

The country suffered through a devastating civil war for 27 years, and became a symbol of the Cold War proxy battles opposing Western and Soviet camps in Africa. When it ended in 2002, Africa's longest-lasting civil war had killed an estimated 500,000 people and left the country in ruins.

Today, the government still has a terrible record on corruption and the country ranks on the lowest rungs of nearly all development indicators. Angola earned more than $30 billion last year from its petroleum exports. But according to a recent World Bank report, 70 percent of the population lives on less than $2 a day, the majority lack access to basic health care, and about one in four children die before their fifth birthday.

President Dos Santos has shown little interest in improving the transparency around the oil accounts. Just last month, his government arrested a prominent British transparency campaigner, Sarah Wykes of Global Witness, who was visiting the oil-producing province of Cabinda. Wykes, whose organization has lobbied companies and producers to publish their oil accounts, was jailed for three days and accused of being a spy. She has since been released but is still barred from leaving Angola.

"When you are talking about the gross level of mismanagement and corruption that has plagued Angola for years there is nothing fundamentally different," said Arvind Ganesan, the director of business and human rights at Human Rights Watch. "They haven't made any dramatic reform."

There is no guarantee that West Africa will end up being a more stable supplier than the Middle East has been. Just look at Nigeria, where a quarter of the country's production, or about 600,000 barrels a day, has been cut for nearly two years because of violence in the oil-producing Niger Delta region. The unrest stems from years of neglect, mismanagement and corruption by both the Nigerian authorities and oil companies.

For consumers, relying on such volatile parts of the world where democratic institutions are weak and oversight of oil revenues is limited could spell trouble.

Since the war ended, the Angolan government has made some progress in improving openness. It publishes more details about its oil revenues and production and posts some of that data on the finance ministry's Web site, though the information is often dated.

But Angola still fails to disclose how it spends its money or its budget. It ranks at 142 out of 163 countries in Transparency International's annual corruption perception index.

"Angola has no interest in transparency and there is no source of external leverage on the government right now," said Monica Enfield, an analyst at PFC Energy, an energy consulting firm in Washington. "With all their oil revenue, they don't need the IMF or the World Bank. They can play the Chinese off the Americans."

______