- Angola is set to become the second sub-Saharan country to join the Organisation of the Petroleum Exporting Countries (OPEC) as a full member, thus participating in the club of world economy's major decision-makers. The Luanda government has announced that Angola is to make a formal application to join OPEC already next year.
Angola is sub-Saharan Africa's second biggest oil producer, second only to Nigeria, which is already an OPEC member. Contrasting Nigeria, however, Angola is in the middle of its oil boom, with oil revenues doubling in 2005 and production believed to double by 2009. If trends continue, Angola should become sub-Saharan Africa's biggest oil producer during the next decade.
By joining OPEC, Angola will therefore contribute strongly to the oil cartel's importance and possibilities to regulate oil world prices. With Africa's two leading oil exporters within OPEC's ranks, yet another region is dominated by the exclusive club.
Angolan politicians have plaid with the idea of joining OPEC for a long time, but strategic assessments had hindered an application until now. Yesterday, however, a cabinet meeting headed by President José Eduardo dos Santos took the formal decision to seek membership, according to a government press release.
The release says that Angola is now to apply full OPEC membership and that the government hopes to join the oil cartel already in 2007. There remain negotiations with the body to agree on the terms for Angola's membership, which include the current and future production quota allotted to the country as percentage of OPEC countries' total oil production.
Many reasons had spoken against Angola joining OPEC, in particular its very close and warm ties to Washington - contrasting its ruling MPLA party's hostile relations with the US during the civil war. Washington historically has seen OPEC as a threat to its supply of cheap energy as the cartel is able to set high world market oil prices at its pleasure. The US government therefore always has urged Angola to stay outside OPEC.
Until now, Luanda has been dependent on the US to realise its current oil-based economic boom. Most companies operating in Angola are US-based and more than 40 percent of Angola's oil exports go to the US. In addition, Washington has an outspoken policy of getting less dependent on the OPEC-dominated Middle East for oil imports, focusing on Atlantic Africa. This government focus has made private investments from US oil companies in Angola easier.
By now, however, Angola is freer to follow its own interests as the national oil boom is secured for many years ahead by extensive explorations and production investments by companies from all over the world, including China. Production is also set at such a high scale that Angola can start negotiations with OPEC without fearing too much limitation on its future quotas.
For OPEC, the probable Angola membership is seen as a revival of an organisation that had started losing importance. With Iraq being suspended - and earlier announcing plans to withdraw as the country was under US administration - one major player is currently out of the cartel. The world's major oil producers - Saudi Arabia, the United Arab Emirates, Kuwait and Qatar - have stopped expanding their oil reserves and are thus slowly losing importance. Other giants such as Russia, Norway, Mexico and Azerbaijan have increased the world's non-OPEC oil production over the last years.
Angola's membership would therefore mean that OPEC's part of the world's oil production increased for the first time in over a decade. Angola's bid therefore immediately was joined by two other emerging oil exporters, which now clearer indicate their OPEC aspirations. In South America, Ecuador's new leftist leader has indicated he wants to follow Venezuela into OPEC and in Africa, Sudan's President Omar al-Bashir is now considering to approve a cabinet decision to join OPEC. Sudan is by now sub-Saharan Africa's third biggest oil producer.
Oil companies and the market reacted negatively to Angola's OPEC application. Oil prices immediately climbed to a two-month high near US$ 63 - up 37 cents - as the news was spread today. A strengthened OPEC is seen as a threat by the market, which fears that long-term prices now may be fixed at a higher level. US oil companies expressed fear Angola may now be bound by OPEC quotas to cut its production from time to time.
The International Energy Agency (IEA), which acts as energy policy advisor to 26 rich oil importing countries, today was the most vocal critic of Angola's OPEC plans. An IEA advisor warned that investors may now shy away from Angola's booming oil sector - a view not shared by most analysts.
Not surprisingly, an OPEC spokesman today called Angola's decision to join the club a "welcome development." While no note had been received from the Angolan government so far, he expected membership negotiations to start early 2007, maybe to be finalised during the year. On setting quotas for Angola, the OPEC representatives saw no problems in reaching an agreement.
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