Angola set to expand for more business after quitting OPEC

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Angola’s decision to leave the Organisation of the Petroleum Exporting Countries could open the way for Beijing to increase investment in the country’s oil and other sectors, as part of a deepening of decades-old ties.

Angola said last Thursday it was leaving OPEC, effective from January 1, following a row with the producer group over the size of its output quota. The decision also follows an agreement signed between China and Angola this month on enhanced cooperation.

“China stands out as a pivotal and proven partner,” Angola’s Foreign Minister Tete Antonio said during a visit to Beijing when the deal was signed.

Angola is seeking to diversify its economy, but it also needs revenue.

Antonio said Angola acknowledged the importance of technology, a skilled workforce and strategic partnerships that could help the country move on from oil, and called for more Chinese investment particularly in the country’s coffee, batteries, and solar energy sectors.

Angola had been seeking a higher OPEC output quota. The group’s quotas are designed to support global oil prices but can limit a producer’s ability to attract oil investment in new capacity because they can cap earnings.

Freedom from OPEC output constraints could therefore allow China to increase its role in the oil sector, which has struggled from years of underinvestment.

“If they feel there is scope for them to find new investment from China to grow oil production, then perhaps that’s the source of motivation to re-engage with the Chinese,” Yvette Babb, portfolio manager at William Blair, said.

“Because while they need to diversify away from oil as a driver of growth, they do not have sufficient non-oil sources of revenue to sufficiently finance that diversification.” – Reuters