If energy bulls are correct about the long-term challenges the industry faces in producing enough oil to meet demand, then Angola will become one of the most important countries the industry must explore and develop if there is any chance at all. (For a primer on the oil industry, refer to our Oil and Gas Industry Primer.)

IN PICTURES: 8 Ways To Survive A Market Downturn

In the last few years, Angola has emerged as an important source of new supply for energy consumers. It has seen its production increase from about 700,000 barrels per day to 1.9 million at its peak in mid-2008. The country has since ratcheted back production due to lower demand.

Angola And OPEC
Angola joined the Organization of Petroleum Exporting Countries (OPEC) in January 2007 and the world community has recognized its importance to oil production.

Recently, Angola has had a difficult time complying with the quota OPEC established for the country. In April 2009, the country produced 1.69 million barrels per day, above its 1.52 million barrel per day quota. This makes the country only 29% compliant with its quota, the second worst rate of compliance after Iran.

Proved reserves for Angola were estimated at 9.0 billion barrels as of January 2008, but this almost assuredly understates the country's potential, as virtually every major international oil company is exploring offshore Angola.

Discoveries On Block 31
The latest discovery was for a well, operated by (NYSE:BP), which located oil on block 31 - the eighteenth discovery on this block, which is located more than 200 miles offshore. In addition, Exxon Mobil (NYSE:XOM), Marathon Oil (NYSE:MRO) and Total (NYSE:TOT) are part owners on block 31.

In October 2008, Marathon Oil made its own discovery on block 31, at an area called the Dione prospect.

Although both these prospects were oil, Angola also has substantial reserves of natural gas, estimated at 9.5 Tcf as of January 2008. Since there is little demand in the area for natural gas, Angola and its partners must build a liquefied natural gas (LNG) facility to export the gas to where it is needed. (Take a look at our article How Does Crude Oil Affect Gas Prices? to learn about their relationship.)

Chevron (NYSE:CVX) is one of the companies involved in this project and recently estimated that it would cost $10 billion to construct the LNG facility. The first part of the facility, if it is built, would be able to handle 5.2 million tons per year.

While this higher cost is not great news for Angola, it is certainly great news for the capital equipment companies that supply subsea equipment and other infrastructure.

FMC Technologies (NYSE:FTI) has received several contracts for work related to offshore projects near Angola. Recently, the company signed two contracts totaling approximately $220 million to supply BP with equipment, including subsea trees, control systems and wellheads.

Bottom Line
Angola has emerged as a major player in world oil markets as increased exploration by the major integrated oil companies has more than doubled production over the last ten years. Even more growth will be needed if the most bullish scenarios on world oil demand come true.

Related Articles
  1. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  2. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  3. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  4. Investing

    The Quinoa Quandary for Bolivian Farmers

    Growing global demand for quinoa has impacted Bolivian farmers' way of life. Should the American consumer be wary of buying this product?
  5. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  6. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  7. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  8. Investing

    A Look at 6 Leading Female Value Investors

    In an industry still largely predominated by men, we look at 6 leading female value investors working today.
  9. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  10. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!