Angola: perils of the pre-salt

Angola and Brazil have a lot in common: the Portuguese tongue, a delightful stretch of Atlantic coast and a reputation for beautiful people cavorting in beach-side bars. Brazil is Latin America’s powerhouse; Angola likes to think of itself, with some justification, as Africa’s emerging equivalent.

To oilmen and investors, however, the most intriguing thing the two nations share is a piece of geology that dates from the age of the dinosaurs, before the tectonic shifts that rent the landmass in which they were once conjoined.

Under their respective patches of Atlantic seabed lie corresponding “pre-salt” formations. Brazil’s has been found to hold very large amounts of oil. Angola’s is looking equally promising. Brazil’s recent auction for one of its pre-salt fields – Libra – may have attracted only one bidder but that had more to do with the tax terms on offer than any doubt about the find’s potential. Across the ocean, Cobalt International Energy of Houston has led the way in demonstrating that there are plenty of hydrocarbons on the Angolan side.

Already a rival to Nigeria for the crown of Africa’s top oil producer and a rival to Saudi Arabia as China’s biggest supplier of crude, Angola plans to auction more pre-salt acreage over the coming months. Many of the western majors, as well as oil groups from China and other emerging markets, already have Angolan assets. But they and any new entrants wanting to snap up pre-salt assets face a dilemma.

As the FT reports on Wednesday, Cobalt International Energy remains under investigation by US authorities probing whether its Angolan operations broke anti-corruption laws. Cobalt denies wrongdoing, insisting that it knew nothing of the concealed stakes that three of the authoritarian regime’s most senior officials held in the US group’s local partner. The government, headed by President José Eduardo dos Santos since 1979, has said it will oblige more foreign oil investors, including those bidding in the forthcoming auction, to take local partners.

Investors can expect to enjoy a merry night or two in Luanda’s swish waterside bars (set well aside from slums that house three-quarters of the capital’s inhabitants). But if their assigned local partners are, like Cobalt’s, little-known outfits with connections to the regime, no amount of caipirinhas will allay investors’ concerns that the graft-busters might one day come knocking.

Related reading:
Cobalt’s returns from Angolan venture raise wider concerns
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African oil towns: getting very pricey
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African oil: new producers, new data
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