Angolan President Jose Eduardo dos Santos began a three-day official visit to China on June 8. It is the Angolan president's fourth visit to China since taking power in 1979, though seven years have passed since his last formal trip. Dos Santos' agenda will be driven primarily by Luanda's strained economic position, resulting from the global decline in oil prices. While in Beijing, the Angolan president will likely have three main tasks: First, dos Santos will negotiate lending terms to help Angola manage the challenges to its budget, which is deeply dependent on the price of oil. Second, the president will seek continued Chinese cooperation in Angola's infrastructure projects. And third, he will push for oil and natural gas lines of credit and development agreements with Chinese energy companies.
Chinese involvement in Angola has steadily risen over the past two decades. Beijing is now a leading contributor to the African country's infrastructure development, and Angola is China's second-largest supplier of oil, behind Saudi Arabia. Had it not been for Chinese investment and engineering assistance, a large-scale program to rehabilitate, construct and upgrade the bulk of Angola's rail, port, road and airport infrastructure over the past several years would have been impossible.
In exchange for renewed Chinese infrastructure investment, Angola could offer private concessions on oil and natural gas blocks that have yet to be made publicly available. However, Angola has to walk a fine line when it comes to balancing Chinese interests with those of Western oil companies. Luanda cannot afford to look like it is playing sides and risk alienating potential allies. Angola has been open to Western investment for more than a decade, and to go outside of the regular bidding process could harm the relations it has built, not to mention the credibility that comes with doing business with a Western partner.
The Angolan government wants to expand crude oil production to upward of two million barrels per day, in turn raising government revenues. But reaching that target from the roughly 1.8 million barrels per day currently produced will be difficult.
There are technical challenges inherent to the deep-water production facilities that have received the bulk of recent investment from Western oil majors. Stratfor observers report that Angola is prioritizing onshore concessions and exploratory blocks located in central Angolan waters, as opposed to the waters off the northwestern coast where foreign energy activity has been concentrated. Angola's national oil company, Sonangol, has yet to publish any details about its intentions, but given the extremely close patronage relationship between the Angolan president and the company, it would be quick work for the Chinese and Angolan leaders to reach terms on a new oil and natural gas investment package.
