Wednesday, December 11

Angola’s oil production struggles amid changing dynamics with China

For over a decade, Angola has been a key competitor with Saudi Arabia in supplying oil to China. While it held the title of Africa’s largest oil producer between 2008 and 2010 and was the second-largest supplier to China during that period, its current output is now only half of what it was fifteen years ago. This decline, coupled with China’s increasing relationships with other suppliers, particularly from the Gulf region and Russia, has strained the trade ties between Angola and China.

OPEC reports that Angola aims to maintain its crude oil production around one million barrels per day, seeking more flexibility in both production and export strategies. However, the long-term outlook remains challenging due to declining reserves and restricted production capabilities.

In 2010, Angola ranked as the second-largest oil exporter to China, but by 2023, it had dropped to the eighth position. The historical backdrop of their relationship dates back to the Angolan civil war when China played a significant role in funding the country’s reconstruction efforts. Angola has traditionally relied on its oil exports to service international loans, but the recent downturn in oil prices and increasing competition from other nations have complicated this approach.

The International Energy Agency (IEA) has projected that Angola’s oil production could plummet to 0.35 million barrels per day by 2028. Since 2003, the country has struggled to sustain its production levels above one million barrels daily, managing to do so only during critical periods, such as the height of the COVID-19 pandemic.

The decline in oil production across Africa, including Angola, can be linked to various factors, such as inadequate infrastructure, lack of maintenance, and, in some instances, political instability. As a result, China has strengthened its partnerships with other oil-producing nations like the United Arab Emirates and Russia, further diminishing Angola’s position in the market.

Looking ahead to 2024, while some growth in the oil sector is anticipated, economists caution that production levels will likely remain constrained due to the natural decline of reserves and the urgent need for infrastructure modernization. Angola, which is heavily reliant on oil—accounting for 95% of its export revenues—faces a precarious situation in its economic relationship with China.

As Angola navigates these challenges, the changing landscape of global oil supply and demand, along with geopolitical dynamics, will significantly influence its future production capabilities and economic stability. The interplay between declining domestic output and China’s evolving energy partnerships will be crucial in shaping Angola’s role in the global oil market.

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