Angola has recently announced its decision to exit the Organization of the Petroleum Exporting Countries (OPEC), effective January 1, 2024. This move follows in the footsteps of Ecuador in 2020 and Qatar in 2019, marking a significant shift in the dynamics of the global oil industry.
Angola’s exit from OPEC will reduce the organization’s membership to 12 countries, impacting its crude oil production – which currently stands at about 27 million barrels per day (bpd) – constituting 27% of the world’s oil market. For Angola, the exit presents newfound challenges and opportunities.
Angola and OPEC: A Historic Relationship
Angola became an OPEC member in 2007, joining the organization’s mission to coordinate and regulate oil production for price stabilization and a steady income for member nations. Over the years, Angola’s oil production has played a vital role in contributing to OPEC’s collective output. With production measuring approximately 1.1 million bpd, Angola has been a significant player, ranking as the second-largest oil producer in Africa after Nigeria.
The choice to withdraw from OPEC in 2024 finds its roots in a prolonged disagreement over production quotas. Over the past few years, Angola has grappled with meeting its OPEC+ output targets due to a decline in investments within the oil sector. Despite being the 17th largest global producer, internal challenges have impeded Angola’s ability to conform to the production agreements set by the organization. At the most recent OPEC+ alliance meeting in November, Angola’s quota for 2024 was reduced from 1.46 million bpd to 1.11 million bpd, falling below its November production of 1.13 million bpd.
A month later, the Minister of Mineral Resources, Oil, and Gas, Diamantino Azevedo, made the decisive move to exit the group, citing the organization’s lack of modernization and the interests of Angola. Minister Azevedo emphasized that “Angola has always fulfilled its obligations and consistently advocated for OPEC’s modernization to benefit its members. We feel that, at present, Angola gains nothing by remaining in the organization and, in defense of its interests, has chosen to leave.”
Changing Market Dynamics
Angola’s departure is poised to exacerbate OPEC’s declining share, which stood at 34% in 2010, highlighting broader challenges for the organization. OPEC has grappled with internal challenges for the past decade, as decisions to cut production and the rise of non-OPEC output – particularly from the United States (U.S.) and Brazil – have further eroded market share. With objectives to protect the interests of both consumers and producers, the organization’s interventions aim to reduce volatility. However, OPEC’s struggle to adapt to global energy changes – compounded by its declining influence in the global market as members such as Angola leave – threatens to diminish its effectiveness in regulating oil markets and stabilizing prices.
For Angola, however, the departure marks a strategic shift in its national oil industry strategy, aligning with global alliances and broader geopolitical interests. The country’s exit from OPEC has seen support from the U.S. and China, underscoring changing dynamics. The immediate praise from the U.S. and a cooperation agreement signed with China – covering solar energy and batteries – indicate growing opportunities for Angola. This move, freeing Angola from OPEC constraints, allows both the U.S. and China to potentially expand their role in the Angolan oil sector, an industry marred by years of underinvestment.
Additionally, while not impacting current oil production, the decision removes uncertainty surrounding OPEC quotas from the investment landscape. Angola’s exit, therefore, signifies a significant development in Africa’s evolving oil dynamics and falls in line with a national strategy to become a regional supplier of petroleum.
What is Next for the African Producer?
To ensure success post-OPEC, Angola can draw insights from the trajectories of countries like Qatar and Ecuador, both of which exited the organization. Qatar’s departure, driven by a focus on natural gas production and investments, showcased an economic emphasis rather than a political motive. As the world’s leading LNG exporter, the country strategically invested in infrastructure and diversified its economy, demonstrating the importance of aligning economic priorities. Ecuador, on the other hand, prioritized market-friendly economic policies, promoting public-private partnerships and reducing public spending.
In the same vein, Angola is well-positioned to prioritize investments in gas in tandem with oil production. With ambitions to develop a gas-fueled economy, Angola can leverage ongoing gas projects – such as the Chevron-led Angola LNG development – to bolster job creation, meet regional demand while growing its economy. Gas, seen as Africa’s transitional energy, aligns with global environmental trends while serving as an industrial and power generation solution.
Alongside this resource, Angola can develop renewable energy sources and foster ties with non-OPEC nations. Collaborations, like the country’s green hydrogen project spearheaded by Gauff and Conjuncta, signify the country’s potential in renewable energy while upstream investments, cross-border infrastructure projects and downstream developments signal new opportunities for crude market growth. By seizing these opportunities, Angola can navigate an independent path, capitalizing on its unique resources and contributing to global sustainability goals.
The Angola Oil & Gas 2024 Conference & Exhibition will return to Luanda this year for its fifth edition. Learn more about the event on https://angolaoilandgas.com/aog-2024-inquire-form/
