Angola, one of Africa’s largest oil producers, has announced its departure from the Organization of the Petroleum Exporting Countries (OPEC) after a dispute over its output quota. The move could pave the way for more Chinese investment in the country’s oil and other sectors, as part of a deepening of decades-old ties.
Angola’s Foreign Minister Tete Antonio said the decision to leave OPEC, effective from Jan. 1, 2023, was based on the country’s national interest and sovereignty. He also 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, which relies on oil for 90% of its exports, has been seeking to diversify its economy and increase its revenue. It also sought a higher OPEC output quota, as the group’s restrictions limit its ability to attract oil investment and boost its earnings. The country’s oil output has shrunk for years due to underinvestment and aging fields.
China, A Pivotal and Proven Partner
Angola’s exit from OPEC follows an agreement signed between China and Angola earlier this month on enhanced cooperation. China is Angola’s largest trading partner and creditor, having provided loans and investments for the country’s post-war reconstruction since 2002. Angola has been paying back its debt to China with oil shipments, but its reduced production and low oil prices have strained its finances.
“China stands out as a pivotal and proven partner,” Antonio said during a visit to Beijing when the deal was signed. He added that Angola was ready to work with China on the Belt and Road Initiative, a global infrastructure and trade project that aims to connect Asia, Europe and Africa.
China has a vested interest in Angola’s quest to overhaul its economy because Luanda owes Chinese creditors just under $21 billion, according to World Bank data. China has also been seeking new sources of oil as it has reduced its imports from Iran and Venezuela due to US sanctions, and rerouted some of its supplies from Russia after Moscow’s 2022 invasion of Ukraine.
Chinese firms have invested just shy of $14 billion in Angola over the last decade, the bulk of which was in energy. This year, Chinese investment into Angola consisted of $250 million from PowerChina, a state-owned civil engineering firm, into developing Angola’s telecommunications infrastructure, according to data from the American Enterprise Institute think tank.
In 2021, the company made two separate investments of $160 million and $150 million into Angola’s transport and healthcare sectors.
A New Era of Energy
Angola’s departure from OPEC could open the door for more Chinese involvement in the country’s oil sector, which has struggled to attract new players and capital. China is the world’s largest energy consumer and has been expanding its presence in Africa’s oil and gas industry.
Some environmental campaigners have urged Angola to use its exit from OPEC as an opportunity to pursue a green transition and invest in renewable energy sources. Angola has abundant solar and hydro power potential, but also faces challenges such as poverty, corruption and poor infrastructure.
Based on a report by Reuters, the recent COP28 U.N. climate deal stopped short of calling for a phase out or phase down of fossil fuels, and the economics of renewable energy can still be less enticing than the returns of oil and gas.
Angola’s decision to leave OPEC marks a new era for the country and its relationship with China. Whether it will lead to a more prosperous and sustainable future remains to be seen.
