Angolan Strategic Financial Oil Reserve to fund infrastructure investments

21 December 2010

Luanda, Angola, 21 Dec – As of 2011 Angola will have a new vehicle for investment in infrastructure, called the Strategic Financial oil Reserve, which will be fed by Angola’s revenues from exporting oil and gas.

The creation of the reserve, which will be the responsibility of the Angolan presidency, is considered to be an “a notable innovation” in the Angolan state budget for 2011 by analysts from the Economist Intelligence Unit, in its latest report on Angola to which Macauhub has had access.

The new oil fund, “will fund investments in basic infrastructures using profits from state oil production,” the Economist noted.

The Angolan government is also preparing the legal framework for future sovereign fund, focused on investment in assets.

The fund will be conservatively managed at its launch, until its framework and asset management capacities are considered to be sufficiently robust, according to information provided by Angola to the International Monetary Fund (IMF).

According to the Institute of Sovereign Funds, Angola had been due to launch this financial instrument in 2009 to manage oil revenues.

Based on economic growth of 7.6 percent, oil production of 1.9 million barrels per day and a price of US$68 per barrel, the Angolan state budget for 2011 outlines revenues of 3.4 trillion kwanzas (US$36.2 billion), or 6 percent more than in 2010.

Projected expenditure totals 3.2 trillion kwanzas, a drop of 0.3 percent which, “reflects the government’s commitment in relation to spending restrictions,” the Economist said.

The biggest slice of the expected surplus of 2 percent of GDP will be applied to reducing internal debt, which has accumulated over the last few years, particularly that owed to construction companies.

Angolan oil production, which this year has been affected by technical problems at important oil fields, in January is expected to see a “weak” recovery, according to the Economist.

The difficulties in the Plutónio field (block 18, BP) are expected to take production to a minimum of 1.57 million barrels per day this month.

This drop was felt in the level of exports to the United States and to China, with both countries posting record drops in imports of Angolan oil in November.

Despite this, according to the Economist, overall production in 2010 was an average of 1.84 million barrels per day, a little over the amount for the same period of last year.

The Angolan government plans to increase production to 2 million barrels per day.

The Economist expects Angolan economic growth to speed up, from 2.9 percent this year to 7.3 percent next year and 8.5 percent in 2012.

This acceleration is linked to a “rise in oil production and public investment, together with the expected payment of most internal debts, the analysts said.

Oil production, according to the same source, is also expected to continue to grow, reaching 1.925 million barrels per day in 2011 and a maximum of 2.175 million barrels in 2015. (macauhub)