Since the end of its civil war in 2002, Angola has emerged as a major crude oil exporter, joining OPEC in 2007 and currently rivalling Nigeria as Africa’s largest producer. So, how has this rise manifested itself, and what has its impact been on shipping?

Looking Up in Luanda

In recent years, Angola established itself as Africa’s second largest crude producer. In 2012, Angolan crude production reached 89mt, compared to Nigerian output of 105mt. Angolan output increased by an average of 1.4% p.a. between 2007 and 2012, while Nigerian production declined 0.3% in the same period. Though Angolan exports have been fairly volatile, as shown on the Graph of the Month, infrastructure investment is projected to increase Angolan exports by 5% y-o-y in 2013. Angola currently has a number of deepwater offshore development projects, which are expected to add up to 80mtpa in production in the 2013-18 period.


Tilting Eastwards

The graph shows the changing patterns of Angolan crude exports. In 2007, just under 60mt of crude oil was transported from Angola to the US, China, India and Taiwan, the largest importers of Angolan crude. China and the US imported 25mt each in 2007. However, China imported 45tmt in 2012, a 10% average increase p.a., while the US imported only 11mt, a 15% average decline in the same period. These patterns reflect the shift in the crude trade from West to East, as seaborne crude imports to China increased from 149mt in 2007 to 246mt in 2012, while Indian imports increased 8.2% p.a. in the same period. This has been driven by a surge in refinery capacity in the East, while declining demand and growing domestic crude output has reduced US demand for seaborne crude imports.
VLCCs Capitalise

What has this meant for shipping? The destination of Angolan exports has shifted from the US to China, and this has reallocated tanker demand from Suezmaxes to VLCCs. Total volumes on the WAF-N.America route, a traditional Suezmax route, have declined 13% since 2007, and are projected to decline 12% to 40mt in 2013. Meanwhile, trade on the WAF-East route, on which VLCCs transport the largest share, is projected to increase 25% to 100mt in 2013. Crucially, China has imported very little from Nigeria historically, with only 11mt being imported in 2012. Further, the longer distance between Angola and China, compared to the US, as well that from the Middle East Gulf to China, has helped to augment VLCC demand, and increasing Angolan exports eastbound are likely to continue to absorb tonnage in the medium term.

While Angolan crude production growth been relatively volatile in recent years, output is projected to increase to around 115mt per annum by 2015, up from a forecast 95mt in 2013. Nigeria is projected to remain Africa’s leading crude oil producer (125mt in 2015), but the domestic tensions in the country are likely to remain, and could disrupt exports. Further, it is expected that the share of Angolan exports destined for the Far East will continue to increase, boosting VLCC demand and helping to absorb some of the built-up capacity that has developed in the fleet since the start of the recession.
Source: Clarksons