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Angola, whose economy is highly dependent on the oil industry and crude export revenues, needs a price of oil at around $85 per barrel in order to balance its budget, and persistently much lower oil prices have piled pressure on the African country’s fiscal situation, Neil Ford writes for Platts.
Oil production and its supporting activities account for around 45 percent of Angola’s GDP and more than 95 percent of exports, according to data by OPEC.
OPEC’s production cuts are not expected to lift oil prices to more than $60 per barrel this year. Thus, in order to inject more revenues into government coffers, Angola faces the choice of either maximizing its oil production—currently constrained by its pledge to adhere to the OPEC deal—or lifting the share of revenues, Ford argues.
Angola’s oil production averaged 1.748 million bpd in 2016, and its production capacity is expected to reach 1.9-2.0 million bpd by the end of this year.
Angola reported $950 million in crude oil export revenues for January this year, the highest in 16 months.
But if the OPEC/non-OPEC agreement to collectively curtail output fails to deliver in terms of oil price gains, Angola may be faced with both low oil prices and declining production, according to Platt’s Ford.
In affirming Angola’s B1 ratings and ‘negative’ outlook, Moody’s said earlier this month that the country’s oil and gas production this year is trending towards 1.825 million bpd, up from 1.748 million bpd in 2016. Several offshore projects launched before the oil shock are coming online over the next 18 months, and would add more than 400,000 bpd to Angola’s oil production.
According to the International Monetary Fund (IMF), despite the fact that Angola took some steps to improve non-oil primary fiscal balance, “further policy actions are needed to continue adjusting the economy to the ‘new normal’ in the oil market and to return growth to a level consistent with poverty reduction”. Angola’s real GDP was flat in 2016 and is expected to grow by 1.3 percent this year. (By Tsvetana Paraskova for Oilprice.com)