ANGOLA’S

INDUSTRY
OPERATIONS
 By Maria Lya Ramos

The research presented in this report is

drawn from a three-week trip to Angola
in November 2011, which included brief
visits to Cabinda and Soyo and conversations
with journalists, residents of Cabinda and
Soyo, academics, and representatives of oil
corporations operating in Angola, the United
States (US) government and non-governmental
organisations (NGOs). Various requests to
interview Angolan government officials were
declined. Following the field visit, interviews
were conducted with US government officials,
academics, journalists, and various NGOs
based in the US and United Kingdom (UK).
Executive summary
1. The state-owned oil company, Sonangol, is at the centre of the oil
industry in Angola. By law, multinationals that want to do business in Angola
must associate with Sonangol in the form of a joint venture or Production
Sharing Agreement (PSA). To win contracts, multinationals must pay
signature bonuses that can run into billions of dollars – and are not publicly
disclosed. Multinationals by law must also contract with Angolan companies
for oil services. Evidence points to Angolan public officials’ beneficial
ownership of, and shareholdings in, Angolan companies that have been
awarded oil contracts – in violation of Angolan and international law.

2. Although environmental protection in Angola is enshrined in the

Constitution, pollution control legislation and environmental standards are
extremely deficient. Technical capacity at the ministerial level is weak and
multinationals end up both developing the legislation and monitoring their
own activities. Multinationals apply international or home country pollution
control standards, but without any real enforcement mechanism by the
Environment Ministry. In the absence of regulations, multinationals tout their
voluntary practices under the banner of corporate social responsibility – but
they often only invest in voluntary efforts for their own cost-effective ends.

3. Sonangol both administers and regulates the oil industry, which creates
a clear conflict of interest. Sonangol performs functions that should be under
the purview of the Ministry of Finance, or the Central Bank. Sonangol plays
a monitoring role, bypassing the Ministries of Petroleum and Environment.
Political institutions to provide checks and balances to potential malfeasance
in the oil industry are weak – or non-existent. The judiciary is not politically
independent. The legislative branch lacks necessary and pertinent
information, and is only really accountable to the ruling MPLA party. Other
institutions, like the Attorney General’s office and the Ombudsman, report
directly to the president and do not make their reports public.

4. The principle of confidentiality enshrined in Angolan oil laws encourages

corruption and creates a pathway for the diversion of oil revenues, which are
legally shielded from the public domain. The Angolan government has taken
some initiatives to increase transparency by publishing some oil revenue and
production data, but this data is neither consistent, nor comprehensive, nor

Angola’s oil industry operations 01

independently verified. Sonangol’s PSA contracts never address transparency and human rights
also allow for some exemptions for disclosure. issues. In relation to the mitigation of impacts,
New United States (US) and European Union multinationals get almost a free pass. There
(EU) oil revenue transparency legislation will have been some efforts to hold multinationals
mandate US and EU registered companies to to account, particularly through home-country
disclose detailed tax and royalty payments to the anti-corruption instruments and civil society
Angolan government. advocacy, but these need to be ramped up.

5. Although institutions in Angola are weak, 8. In Angola, both the State and the multinational
public anti-corruption legislation is potentially operators are guilty of environmental injustice. The
strong. Utilising existing legislation to lodge government takes little care in enforcing existing
citizen’s complaints about alleged public laws to protect the public and environment,
corruption and violation of the law – coupled and prioritises economic growth over inclusive
with appropriate political and media monitoring sustainable development. A depletion of fish stocks
of these complaints – would elevate the issue is the leading complaint about oil operations in
publicly and begin to promote the rule of law. the northern provinces, while coastal residents
claim that there are regular oil spills from offshore
6. Sonangol’s current structure is porous, facilities. Too many spills go unreported, and post-
providing potential opportunities for corruption spill compensation procedures are ad hoc. There
and dubious financial transactions. Sonangol is the is a dearth of information on the impact of oil on
concessionaire, equity partner and operator in the communities, fisheries and public health. Without
industry. Sonangol’s three distinct roles result in independent scientific testing, it is difficult to
three budget transactions with the national budget: determine what is depleting fish stocks, damaging
crops and affecting the health of local people.
• Assets that Sonangol generates from equities in
oil concession shares are largely reinvested in 9. Angolans are under-informed about the
Sonangol and its subsidiaries; massive amount of money generated by the
• As concessionaire, Sonangol signs the contracts extractive industries and about the massive
and receives a share of the profits from the oil, percentage of these revenues that are illicitly
which are then transferred to the treasury; and siphoned off. Few Angolans make the link between
• Sonangol is tasked with an array of quasi-fiscal poverty, oil revenue distribution and high-level
activities that are funded from oil profits. corruption. The oil producing provinces of Cabinda
and Zaire are not receiving 10 percent of the oil
Sonangol is aggressively reinvesting in joint produced in the provinces as mandated by law.
ventures and subsidiaries, such as China
Sonangol, inside and outside Angola. Sonangol is 10. Avoiding Dutch Disease would entail
a player in corporate social responsibility (CSR) constraining the political patronage, increasing
through its management of social funds, which public spending, and growing the non-oil
are linked to signature bonuses and production economy. Public spending from oil revenues is
sharing agreements. concentrated on large infrastructure projects,
with an opaque procurement process. Little
7. Multinational oil companies do not address funding is going toward social spending and
governance or transparency issues in Angola. households. The government is doing little to
The companies’ continued transactions with grow the non-oil sector, and agriculture and
the government – without calling the terms of small and medium enterprises in particular.
the transactions into question – have facilitated The Fundo Soberano Angolano (FSA) – Angola’s
patronage problems, rent seeking and exacerbated sovereign wealth fund – is no guarantee against
the resource curse. Some exceptions exist, corruption, and could just perpetuate it. Sonangol
but these rare efforts are not industry wide. already operates like a sovereign wealth fund
Companies tout their CSR projects, but these by reinvesting oil revenues in domestic and
projects often lack community input, and international ventures.

02 Angola’s oil industry operations

 Contents
04 Background
05 Legal framework of the Angolan oil industry
07 Environmental laws
09 Administrative capacity to manage the oil industry
11 Fiscal regime, transparency and accountability
16 Oil revenue utilisation
19 Policies and practices of Sonangol
20 Policies and practices of multinational oil companies
24 Oil industry and environmental justice
27 Oil industry and economic empowerment of local communities
28 Angola and Dutch Disease
30 Recommendations
33 Conclusion
34 Endnotes
36 List of abbreviations

Angola’s oil industry operations 03

 South Photographs/Afripics/Africa Media Online

04
Angola’s oil industry operations
Background
Oil was first discovered in Angola in 1955 in the onshore Kwanza basin near
Luanda. However, the oil did not take off until the 1960s when Cabinda
Gulf Oil, now Chevron, discovered the massive reserves off the coast of the
northern province of Cabinda. By 1973, oil had overtaken coffee as Angola’s
principal export. In the late 1970s, the government initiated a programme
to attract foreign investment. The Angolan coast, excluding Cabinda, was
divided into several exploration blocks, which were leased to foreign oil
companies under production-sharing agreements. Production increased
steadily throughout the 1980s. In the early 1990s, international oil companies
reported major discoveries in the deeper waters further off the coast. In
2007, Angola officially became the 12th member of OPEC.

Today, Angola is the second largest producer of crude oil in sub-Saharan

Africa, behind Nigeria. The country produces about 1.6 million barrels per
day, and plans to increase this output to 2 million barrels a day by 2014.1
Angola’s crude oil is primarily destined for export. China is the biggest
importer of Angola’s crude oil – buying around 43 percent of the country’s
oil exports. The US is the second largest importer. Angola consumes about
74,000 barrels a day. The country boasts about 9.5 billion barrels in proven
crude oil reserves.

Angola produces light sweet crude oil containing low volumes of sulphur.
It is ideal for producing derivatives like gasoline, kerosene and high
quality diesel. Angola’s oil industry is dominated by the upstream sector –
exploration and production of crude oil and natural gas. The downstream
sector – refining and distribution of products derived from crude oil –
remains underdeveloped. The one oil refinery in Luanda is currently unable
to meet domestic demand so a refinery in Lobito is planned, which will be
capable of refining 200,000 barrels per day.

Areas to be explored for oil are normally delimited into blocks averaging
5,000 km2 and each oil concession is generally granted for 20 years.
There are 44 oil blocks in Angola, both onshore and offshore. Within each
block, there are a number of oil fields in various stages of exploration and
production. Of the 34 blocks, 11 are currently in production mode and 33 in
exploration mode. The offshore blocks are divided into three bands: shallow
water blocks; deepwater blocks; and ultra-deepwater blocks.2 Angola’s most
lucrative block is block 0, which is operated by Chevron.

Angola may see a surge of oil production in the coming years. In December
2011, the government granted foreign oil companies 11 new oil licenses
in the Kwanza Basin – Angola’s deep-sea, pre-salt region. There are high
expectations that the region holds major deposits of light oil and gas.

Angola’s oil industry operations 05

Legal Framework of the
Angolan oil industry
In Angola, the two most important laws relating to the oil and gas sector are the 2004
Petroleum Activities Law3 and the 2004 Petroleum Taxation Law. The Activities Law
establishes that all oil mineral rights belong to the state and that the state oil company
Sonangol is the sole concessionaire of rights to all exploration and production activities.
Companies – both foreign and domestic – that want to operate in Angola must, by law, enter
into association with Sonangol, which can also participate directly in the oil block, either as
an operator (the company responsible for carrying out the specific exploration, development
or production activity) or as a partner (one of the companies responsible for funding the
operation and entitled to receive a share of the profits).

The main contractual agreements used by Sonangol in its Foreign oil companies prefer PSAs because they guarantee
associations with other companies are joint ventures and rights to the oil reserves, offer an opportunity to earn
Production Sharing Agreements (PSA). Joint ventures include massive profits, and ensure predictable tax and regulation
the older Cabinda block 0, as well as the onshore blocks FS- regimes.4 The government prefers PSAs because they
FST. Under joint ventures, the government cedes ownership guarantee the government revenue even in the event that
of the oil to the companies in return for royalty payments and oil extraction is not profitable for the companies. The
income taxes. In PSAs, the ownership of the oil remains with Petroleum Minister, Jose Botelho Vasconcelos, explained it
the government, while the companies function as contractors further, “We are a Third World economy, and have difficulty
to Sonangol. The majority of oil contracts in Angola are obtaining capital. We therefore prefer production sharing
covered by PSAs. For the new pre-salt, deep-sea oil blocks, agreements because government investment is only required
Sonangol has entered into risk shared service agreements. once a discovery has been declared economically viable.”5
This type of agreement is new in Angola.
Risk Share Service Agreements are new to Angola and cover
The Petroleum Taxation Law lays out the cost recovery the 11 pre-salt blocks in the deep-sea. Under this type of
regime and profit share calculation for PSAs and contract, a company will finance oil exploration activities. If
corresponding Concession Decrees. Under a PSA, a foreign no oil is found, the company does not get to recover the costs
oil company will make an initial investment to explore or of its investment. This is the risk incurred. But if oil is found,
produce oil in a particular block, and can deduct a share of then the company can extract the oil and will be paid out
the oil that is produced and sell it to cover their investment either in cash, oil or through a discount in the purchase of oil,
costs. This is known as ‘cost oil’. This ‘cost oil’ is deduced as the oil companies are not entitled to the oil extracted from
from the total crude oil that is produced in the oil block. the particular block. Just like the PSA, the costs and revenues
The oil that remains is then split among the companies are calculated on a block-by-block basis, according to each
and the government according to the terms of the contract. particular contract.
This remaining oil is dubbed ‘profit oil’. Some of Sonangol’s
share of the investment costs can be paid upfront by other To operate an oil block, an oil company also needs a Concession
oil companies, which can then recoup their money from Decree granted by the Angolan government and published in
Sonangol’s share of ‘cost oil’. The government’s share of the Official Gazette. Whereas the various other agreements
‘profit oil’ is calculated according to the terms of each stipulate the financial terms of any oil activity, the Concession
individual contract and according to the market price of oil Decree primarily outlines the operational terms. These include:
and rate of return achieved each quarter – meaning that no approval of work plans, geophysical reports, geological reports,
two oil blocks will have the same cost and revenue scheme. cutting samples6, and issuance of monthly reports to the
The market value data to determine ‘profit oil’ is analysed Ministry of Petroleum.7 The Concession Decree also regulates
quarterly by the Ministry of Petroleum and the Ministry of the currency exchange and how to make payments.
Finance. Once ‘profit oil’ is calculated, Sonangol can sell the
oil. Sonangol calculates its administrative costs and deducts Beyond the various contracts and cost and revenue terms, oil
them from the revenues earned from these sales. Sonangol is companies also pay taxes on their earnings. The oil taxation
allowed to deduct 10 percent of the revenue. regime in Angola is complicated and will be explained in

06 Angola’s oil industry operations

Chapter 5, which will also discuss additional revenue flows companies, Nazaki Oil & Gas and Alper Oil. The companies
from oil companies to the government, including signing participate in oil blocks 21/09 and 9/09. Cobalt paid for these
bonuses. For the most part, all these revenue flows are paid companies’ signature bonuses and expenditures in relation
directly to Sonangol and should, in theory, be tracked by the to the initial work.10 In a US regulatory filing in late February
Ministries of Petroleum and Finance. However, as will be 2012, Cobalt stated that it was under a formal probe, started
seen later, these figures are not always consistent or reliable. in November, by the US Securities and Exchange Commission
(SEC) and the US Department of Justice following allegations
The Petroleum Activities Law also mandates that oil that ‘one of its junior partners in two of the blocks, Nazaki Oil &
companies must bid for a concession contract through Gas, is linked to senior Angolan officials’.11 Nazaki Oil & Gas is
a public bidding or open tender process. Alternatively, owned by the former Chairman and CEO of Sonangol, and by the
Sonangol, as concessionaire, can decide to directly award the Minister of State and his top lieutenant.12
contract to a company, which will be published in the Official
Gazette, but only if it receives no bids following an open It is a clear conflict of interest for the former Sonangol
tender or if it considers the bids unsatisfactory. 8 However, Chairman to sign the agreement with Cobalt in his position
these tenders are often not public. For example, a total of 13 as chairman, while also partnering with the company as
companies participated in the most recent tender for Angola’s a private businessman. It is also in violation of Angolan
pre-salt, deep-water blocks, but it was never officially corruption laws.
announced. It should be noted this was Angola’s first offshore
bidding round since 2007. As for Cobalt, the company is trying to dodge any potential
violation of home country laws – namely the US Foreign
In an effort to build national capacity in the oil sector, the Corrupt Practices Act – by pre-emptively disclosing its
Petroleum Activities Law 9 stipulates that the government partnership with Nazaki Oil & Gas and Alper Oil to the SEC.
should promote and give preferential treatment to Angolan- In its filings, Cobalt claimed that it was pressured into the
owned companies for the contracting of oil industry services partnership by the Angolan government, and was ignorant
by adopting ‘…measures to guarantee, promote and encourage about the local companies and their shareholders.
investment in the petroleum sector by companies held by
Angolan citizens.’ Meanwhile, new tax incentives signed into There have been similar, albeit uncorroborated, reports
law by the President give even more preferential treatment that the shareholders of Somoil include a former Petroleum
to Angolan-held companies by offering them tax breaks and Minister and Industry Minister, the former Chairman of
other exemptions. Sonangol and other high-ranking public officials. Somoil is
a shareholder in block 2/85, which is operated by Sonangol
For the Angolan government to mandate foreign oil and includes Petrobras and Chevron as shareholders. Two
companies to partner with Angolan companies is neither other private Angolan companies, Poliedro and Kotoil, also
unethical nor even irregular in a global business context. participate in block 2/85. Similar uncorroborated reports
The problem lies in which companies are selected and list the Minister of Territorial Administration and the
how. There is increasing evidence that to comply with administrator of the Institute for State Business as Poliedro
host country laws, foreign companies are paying massive shareholders. Meanwhile, Kotoil shareholders include two
fees to public officials and other Angolan elites to contract Members of Parliament from the ruling MPLA. Yet another
with ‘front’ companies that all too often lack the technical uncorroborated report lists a number of former Sonangol
capacity and financial resources to support the oil operation. directors and a former Sonangol Chairman as shareholders
The ownership and shareholding structure is often opaque, of Initial Oil & Gas, which holds shares in block 6/06 that is
and the company’s actual capacity to develop the license operated by Petrobras.
is often inadequate so the work is done by the foreign
oil company. In agreeing to pay huge fees that go straight into the
pockets of Angolan elites and in agreeing to be partners in
A series of recent investigations by Angolan and international these concessions, foreign companies are supporting and
organisations, and US government agencies have documented perpetuating rent-seeking and high-level corruption. For
public officials’ ownership of, and shareholdings in, Angolan foreign oil companies operating in Angola, the prevailing
companies that have been awarded oil contracts. For example, wisdom is that things are easier with the right partners, and
in February 2010, the small Houston-based Cobalt Energy given the profits they stand to make, they are willing to look
International formed a consortium with two private Angolan the other way.

Angola’s oil industry operations 07

Environmental laws
Environmental protection in Angola is enshrined in Article 39 measures are taken or penalties imposed on projects that
of the Constitution, which states that, ‘Everyone has the right do not comply with EIA rules and recommendations.18 The
to live in a healthy and non-polluted environment…’ and that law also mandates that there is a public consultation process
the ‘…State shall adopt the necessary measures to protect on the EIA.19 However, reading dense, technical reports is
the environment and the rational exploitation of natural beyond the capacity of most Angolans, who have even less
resources within a sustainable development framework’. ability to provide comments.
The Constitution also establishes the important ‘polluter
pays’ principle – reinforced in a recent Presidential Decree, Environmental Management Systems (EMS)
establishing that those who are responsible for producing
pollution are also responsible for paying for remediation of EMS refers to the management of the oil company’s
the environment. environmental programmes in a comprehensive, systematic
and documented manner. Apart from broad statements about
In Angola, the Ministry of Environment is responsible for the the government’s duty to protect the environment, there
protection of the environment, including the development and are no legal provisions imposing specific EMS in Angola.
implementation of environmental policies, the most important Instead, foreign oil companies follow their own standards, in
of which is the 1998 General Environmental Law.13 This law accordance with international standards, such as ISO 14001. All
provides the framework for all environmental legislation the oil majors operating in Angola have an EMS.
and regulations in Angola – along with key international
sustainable development declarations – and establishes Monitoring and compliance
principles for the prevention and mitigation of pollution.14
Angolan laws, including both the Environmental Framework
However, in relation to environmental protection from oil Law (Article 18) and the Petroleum Activities Law (Article
activities, responsibility rests with the Ministry of Petroleum 24), require environmental audits, but mention nothing about
(Minpet), which regulates oil and gas exploration and how often these audits should be conducted. Article 76 of the
production activities in collaboration with Sonangol. Minpet Petroleum Law does require companies to submit monitoring
is mandated to monitor and inspect oil operations and can reports to the Ministry of Petroleum, but the content and
impose infractions and penalties for pollution and other frequency of these is spelled out in the concession license,
illegal activities, although the lines are often blurred among which is not a public document, and there is nothing in the
the Ministries of Petroleum and Environment and Sonangol, legislation providing for public disclosure of the reports.
and even oil industry executives are sometimes confused
about the division of roles.15 Minpet’s authority to protect the Emissions
environment rests mainly within the aforementioned 2004
Petroleum Activities Law. There is no legislation in Angola regulating greenhouse gas
emissions. The government ratified the UNFCCC, but not
Environmental Impact Assessment (EIA) and the Kyoto Protocol. Article 73 of the Petroleum Activities
Environmental License Law prohibits gas flaring,20 but leaves it up to the discretion
of the Ministry of Petroleum to make exceptions and impose
Prior to the start of any oil activities, companies need to fines. With the development of Angola’s liquid natural gas
conduct a study of all possible environmental impacts – (LNG) plant, the government aims to reduce emissions, as oil
called an Environmental Impact Assessment (EIA).16 The companies plan to gather associated gas from oil blocks for
Ministry of Environment reviews and provides comments export and domestic consumption.
on the EIA and advises the Ministry of Petroleum on
the acceptability of proposed projects. The Ministry of Waste
Petroleum gives the final approval to the EIA, and then
issues an Environmental License.17 EIA legislation is the Oil production generates tremendous amounts of hazardous
most detailed and specific of all environmental legislation waste, such as produced water (the underground fluid that
in Angola. However, technical capacity is lacking and there is brought up with the extracted oil and gas), metal cuttings
is seldom any follow-up in relation to the implementation and drilling fluids. However, Angolan legislation on waste
and monitoring of EIAs. As a result, it is rare that mitigation control and standards is weak. There are two waste related

08 Angola’s oil industry operations

decrees administered by the Ministry of Petroleum: Petroleum spill, establishes communication structures and a chain of
Activities Waste Management, Removal and Disposal, command, and identifies high-risk ecosystems. Companies
Decree No. 8/05 and Management of Operational Discharge working in Angola are also required to have their own
During Petroleum Activities, Decree No. 12/05 – but these procedures and preparations in the event of a spill from
merely mandate that oil companies have a plan in place to their facilities. However, the Angolan government has no
deal with waste. Presidential Decree 194/11, which regulates specialised equipment. So if a major spill occurs, the oil majors
responsibility for environmental damage, also thinly references (BP, Chevron, ENI, ExxonMobil, and Total) have developed a
“quality standards in force in Angola are those set out by the mutual assistance agreement to allow maximum use of each
International Organization for Standardization…” Assuming other’s resources. As a result of the BP Gulf of Mexico oil spill,
this refers to ISO 14000 on Environmental Management – the Ministry of Petroleum has been evaluating new procedures.
this is would just revert to what the oil majors already utilise Still, Angolan officials have publicly stated their concern that
as standards. The problem, then, is that there is no adequate the four principal petrol-producing zones do not have local
monitoring of hazardous waste disposal by government, or contingency plans.27
public information about the amount of hazardous waste
produced. Therefore, responsibility for monitoring and The Gulf of Mexico spill also prompted the Ministry of
reporting falls on the oil companies. For example, in its 2010 Petroleum to establish an Incident Management Team (IMT)
Angola Sustainability Report, BP states that it disposed of 426 that responds to emergencies. Various oil companies in Angola
tons of non-hazardous waste, but makes no mention of the cooperate in the IMT, and IMT equipment is stored at the
disposal of hazardous waste. Sonil base in Luanda. In any emergency response, Sonangol,
which leads from a legal point of view, has to be notified and
Penalties, liability and access to justice must approve any clean-up or other operation by the IMT. The
technical operation and implementation is in the hands of the
The law establishes the important ‘polluter pays’ principle, international oil companies through the IMT.
regulation of which rests in Presidential Decree 194/1121.
The law mandates that operators immediately inform the Sonangol granted 11 new oil licenses in December 2010. The
government of damages; sets five years as limit for reparation licensing round was the first to focus on Angola’s pre-salt
and prevention measures; and grants the right of affected region. It is believed the area is analogous to pre-salt Brazil,
person(s) to seek government intervention, as well as the mirroring Brazilian deposits of high-quality light crude, where
courts. The law does not exempt companies from civil oil is located below layers of salt under the seabed. In Angola,
liability,22 and citizens can seek recourse through the Public the pre-salt layer is between 2,000 and 5,000 meters below sea
Prosecutor for environmental damages.23 While companies level. Ultra-deepwater drilling seriously increases the risk of
are mandated to have liability insurance24, the amount is a potentially catastrophic spill given the increased complexity
not specified (this issue has been of major concern in the US of the operations – exemplified by the failure of the blowout
following the BP Gulf of Mexico disaster).25 If companies are preventer on the BP oilrig in the Gulf of Mexico and the
found to have breached legislative provisions in general, the subsequent environmental disaster. Risk assessments have not
Ministry of Petroleum will impose a fine, the amount of which sufficiently accounted for water depth or spill volume and the
is regulated by decree, with 60 percent going to the State and Angolan government, by its own admission, lacks the technical
40 percent to the Ministry of Petroleum.26 expertise and resources to deal with such an event.

Right to know Overall, pollution control legislation and environmental

standards in Angola are weak. The majority of Angolan
Angolan citizens’ right to access environmental information legislation serves to establish the ‘principle’ of environmental
is protected in Article 21 of the Environmental Framework protection, with few areas where actual quantified standards
Act. Although important, this provision has not been utilised have been developed. In the meantime, foreign oil companies
in Angola. apply pollution control standards established by the World Bank,
the World Health Organization or control standards from their
Emergency preparedness home countries, but with no mechanism for real enforcement
by the various ministries. In the absence of regulations, foreign
To deal with the potential for an oil disaster, the government oil companies tout their voluntary practices under the banner of
approved the National Marine Oil Spill Contingency Plan corporate social responsibility, often only investing in voluntary
in 2008. The plan details procedures in the event of an oil efforts for their cost-effective ends.

Angola’s oil industry operations 09

 Information on the oil industry tends to be
concentrated within the presidency, Sonangol
and key ministries – and little information is
provided to the legislature in relation to contracts
and other oil-related policies and practices.
10 Angola’s oil industry operations
Administrative capacity to
manage the oil industry
Political institutions provide the checks and balances that underpin democracy.
Without checks and balances, corruption goes unrestrained. Therefore, corruption
can be said to be a symptom of weak institutions. Economically, corruption impedes
development since funds are not necessarily invested to promote development of the
country as a whole, extends politicians’ control over the private sector and blocks
competition. 28 In Angola, political institutions that provide checks and balances to
potential malfeasance in the oil industry are weak – or non-existent.

Within the legislative branch, Angolan legislators are not directly elected but offshore spill site. Meanwhile, water
law does not grant the National Assembly are appointed through party lists so they and fish samples are collected by the
the power to investigate state-owned do not represent specific constituencies. oil companies themselves and taken to
companies, like Sonangol. The state As a result, they face fewer demands foreign laboratories of their choosing
oil company is accountable to the from their ‘constituents’. Legislators’ since independent laboratories capable of
president, and not the National Assembly. reluctance to challenge ministerial testing them do not exist in Angola.
Budgetary resources for Assembly counterparts from the same party also
members are low. Legislative staff are limits legislative oversight. Regulatory oversight by the Ministry
poorly trained and thinly stretched. The of Petroleum is also weak when
perception of the sector’s complexity can As for the judicial branch, the president compared to the political power exerted
serve as a psychological barrier, in as appoints all judges on the Constitutional by Sonangol. Every oil block has a
much as legislators do not take advantage Court, the Supreme Court and the Court chairman from Sonangol, who may
of simplified information that is available of Audits. The prosecutor general also communicate further with the Ministry
in the public domain.29 As a matter of reports to the president. So the judicial of Petroleum. 32 A report commissioned
course, legislators receive final audited branch is institutionally unable to provide by Norad, the Norwegian development
accounts more than two years after the the necessary checks and balances. agency, is illuminating. It states, ‘The
end of the fiscal year, and the Assembly institutional cooperation between NPD
itself does not regularly receive financial Institutional capacity at the ministerial (the Norwegian Petroleum Directorate)
information about the oil sector. In level is also weak. Angola’s minimalist and Minpet was started under the
November 2005, for example, Angola’s environmental regulations are partly assumption that Angola would see a
National Bank, for the first time, issued deliberate, as a means of attracting oil legal institutional change, and that
a financial report on the 2003-2004 corporations, and partly the result of Minpet, or a separate body under
fiscal year to the National Assembly. a dearth of technical capacity within Minpet, would assume regulatory
Information on the oil industry tends to the Ministry of Environment.30 There functions similar to those of NPD. This
be concentrated within the presidency, is simply not enough local technical development did not take place, as
Sonangol and key ministries – and little knowledge and resources. As a result, Sonangol was unwilling to reduce its
information is provided to the legislature oil companies have played a leading power. It appears evident in retrospect
in relation to contracts and other oil- role in advising both the Ministries of that the anticipated reduced role of
related policies and practices. On the Petroleum and Environment on the Sonangol and increased role of Minpet
few occasions that the Assembly has formulation of regulations – something was not anchored in political reality’. 33
tried to exercise its legislative oversight, to which even oil company officials
the Executive has not responded, or the will admit.31 Enforcement is also weak On fiscal matters, the Ministry of
initiative has been quashed. and the Ministry of Environment lacks Finance has limited access to Sonangol’s
the political power and resources to accounts. A 2002 IMF-mandated audit
In addition, Angolan politics are ensure compliance. In the event of an of the oil sector by the auditing firm
extremely partisan and legislators oil spill, for example, the Ministry of KPMG revealed that the Central Bank
often prioritise party loyalty ahead Environment must rely on Sonangol’s was ‘unaware of the values of export
of the public interest. Furthermore, helicopters, SonAir, to take staff to the sales by Sonangol and the foreign

Angola’s oil industry operations 11

currency generated and the related Within the international oil sector,
effect on Angola’s balance of payments’.34 Sonangol is regarded as competent,
The KPMG audit found that revenues professional and well run. According
routinely bypassed the Ministry of to a report from the UK’s Department
Finance and the central bank and went for International Development (DFID),
directly to Sonangol and the presidency. ‘Even during Angola’s civil war,
Sonangol repaid its oil-backed loans
Structurally, Sonangol performs and stuck to its contracts. It has also
functions that should be under the negotiated some of the most favourable
purview of the Ministry of Finance or terms of any African country for its
the central bank. A large share of income contracts with oil companies. Sonangol
and expenditure is executed outside employees are the most talented
the ordinary budgetary framework and professionals in the country’. 37
a parallel state finance system exists,
which makes it very difficult to track Overall, efforts to strengthen Angola’s
monetary transactions between the administrative capacity to manage the
various institutions representing the oil industry have been limited. Inside the
state – such as the treasury, the central country, institutions that should provide
bank, Sonangol and the Banco Africano critical checks and balances, particularly
de Investimentos (a private Angolan on Sonangol, are weak. Meanwhile, the
bank whose largest shareholder is governments of industrialised countries
Sonangol). From 1997-2003, unaccounted have been unwilling to pressure the
funds amounted to US$4.22 billion, Angolan government over issues of
while from 2007-2010, unaccounted governance and redistribution, and have
funds amounted to a massive US$32 chosen instead to prioritise their own
billion. A World Bank report notes that national interests and protect their own
this ‘multifarious work program creates business interests and national oil supply.
conflicts of interest and characterizes a
complex relationship between Sonangol The Norwegian government, in
and the government that weakens the particular, has been providing technical
formal budgetary processes and creates assistance to strengthen the role of
uncertainty as regards the actual fiscal the Ministry of Petroleum since 1987;
stance of the state’. 35 today that assistance is under the Oil
for Development banner. The aim of
When it comes to management of their most recent 2008-2010 funding
the oil industry, Sonangol is at the tranche of US$2.7 million to the
centre. All revenues the government Ministry of Petroleum was to ‘promote
generates from oil production in one improved management of national
way or another go through Sonangol. petroleum resources as one of the tools
As concessionaire, Sonangol signs for sustainable economic and social
contracts with lease holders and development in Angola. This includes
receives a share of profit oil, markets improving the capability to exercise
that oil and transfers the earnings to regulatory control and to develop policies
the Treasury. The company holds equity and strategies for ensuring better
shares in oil fields, which generate administration of the Angolan petroleum
income that is then largely reinvested resources’.38 But Norway’s Oil for
in subsidiaries, joint ventures and other Development programme adopts a state-
businesses Sonangol oversees. The centric approach that works within the
company also manages other ‘quasi- political economy structures in Angola;
fiscal’ activities paid from profit oil it does not address these as the source of
earnings due to the Treasury. 36 the problem.

12 Angola’s oil industry operations

Fiscal regime, transparency
and accountability
Fiscal regime

The oil tax regime is the government’s conduit for collecting example, whereas Nigeria takes in around 80 percent of
revenues from oil production. The 2004 Petroleum Tax total oil production and both Gabon and Cameroon take over
Law was Angola’s first law on taxation of the oil sector. 70 percent, Angola takes in between 50 and 65.75 percent.
The law harmonises the many disparate fiscal regimes that But while the taxes may be lower, Angola’s tax regime is
previously governed oil concessions. In a global sense, complex. Below is a breakdown of the tax regime and the
Angola’s taxation regime is relatively attractive, particularly government’s revenue stream based on the type of contract
in comparison to other African oil-producing countries. For agreement and company.

Oil companies with production Oil companies with joint ventures

sharing agreements (covers the Cabinda and FS-FST Sonangol
(covers most oil blocks) onshore blocks)
Concessionary receipts/revenues: The State’s
Petroleum Income Tax: Set at 50% (on Petroleum Income Tax: Set at 65.75%
share of ‘profit oil’. Sonangol sells this oil in the
the company’s share of the ‘profit oil’). (on revenues minus expenses). Paid
name of the government and should revert sales to
Paid to Sonangol, which should then to Sonangol, which should then
the Treasury Account on a quarterly basis. This is
revert it to the Treasury Account. revert it to the Treasury Account.
the government’s most important revenue stream.
Price Cap Excess Fee: This fee is collected
Production Tax/Royalty: Calculated as total
when the market price of oil (as established
oil produced minus oil used in operations.
by the Ministries of Petroleum and Finance)
Can be paid out in cash or in oil. If paid in oil,
rises above a certain cap established
Sonangol is responsible for selling the oil and Dividends: Paid by Sonangol EP to the
in the PSA. The excess is multiplied by
delivering the receipts to the government. State for its shares in Sonangol.
the number of barrels of profit oil the
Set at 20% (with a possible reduction
company/companies have netted each
to 10%). Paid to Sonangol, which should
month. Paid to Sonangol, which should
then revert it to the Treasury Account.
then revert it to the Treasury Account.
Sonangol may retain up to 10% of the
Petroleum Transaction Tax: Payable
revenues to cover expenses related to the
on the exploration, production,
control and supervision of companies.
transportation and storage of oil. Set at
(This includes all revenues except bonuses
70%. Paid to Sonangol, which should
and possibly the production tax, as the
revert it to the Treasury Account.
2004 Taxation Law does not specify).
Surface Fees: This is set at US $300
Surface Fees: This is set at US$300 per
per square kilometre per year of the
square kilometre of the area being developed.
area being developed. Paid to Sonangol.
Paid out to the relevant tax office.
Paid out to the relevant tax office.
Bonuses: Signature bonuses are paid on the Bonuses: Signature bonuses are paid on the
award of a contract to explore and produce award of a contract to explore and produce
oil. These can run into billions of US dollars oil. These can run into billions of US dollars
and are one-off payments. Other bonuses and are one-off payments. Other bonuses
include exploration, first oil and annual include exploration, first oil and annual
production bonuses. These are smaller than production bonuses. These are smaller than
signature bonuses and can run into millions signature bonuses and can run into millions
of US dollars. Paid to Sonangol, which should of US dollars. Paid to Sonangol, which should
then revert them to the Treasury Account. then revert them to the Treasury Account.
Training of Angolan Personnel: Training of Angolan Personnel:
Specific amount stipulated by decree. Specific amount stipulated by decree.
Paid into the National Treasury. Paid into the National Treasury.

Angola’s oil industry operations 13

The Ministry of Finance posted annual percent for companies in joint ventures ever before. The Ministry of Finance
oil revenues of US$37.99 billion for 2011. to 35 percent – the standard corporate publishes block-by-block oil prices,
The bulk of this – US$25.26 billion – tax rate. The law also grants Angolan taxes, royalties and export data, as
was from Sonangol. Of the remainder, companies exemptions from paying well as the revenues of Sonangol on a
US$6.68 billion came from the signing bonuses and contributions to monthly basis on its website. Likewise,
petroleum income tax, US$2.56 billion social programmes. the Ministry of Petroleum publishes
from the petroleum production tax, data on oil production and export on a
and US$3.49 billion from the petroleum Transparency monthly basis on its website. Sonangol
transition tax. 39 also publishes audited annual financial
Transparency is a fundamental and statements on its website. But while there
Companies also make direct tax necessary, but not sufficient, condition is more information publicly available,
payments to provincial governments – for successful management of the oil this has not necessarily led to increased
set at 10 percent of the oil tax income industry, and for the efficient and transparency. As OSISA’s own reporting
stemming from oil produced in the accountable taxation of oil industry with Global Witness44 has concluded, the
provinces of Cabinda and Zaire.40 The rents. For Angolan citizens, journalists, information published by the Ministries
idea is that the tax revenue will help members of the National Assembly of Petroleum and Finance and Sonangol
offset some of the costs of hosting and watchdog groups to hold the is not consistent, comprehensive, reliable
facilities in the province. Angolan government to account for or independently verified. Without
the responsible use of oil rents, there accurate information, Angolan citizens
Previously, oil companies operating must be public information about the cannot hold the government to account
in Angola were not required to use sector. But in Angola, there is little for responsible usage of public funds. The
Angolan banks in lieu of foreign banks transparency regarding the public report flagged some of the biggest gaps in
to make their financial transactions. management of oil wealth. The country the data, including:
Legislation, enacted early this year ranks 168th out of 183 countries in
now41 requires oil companies (starting Transparency International’s 2011 • The sum totals of concessionary
May 2013) to use local banks to make all Corruption Perception Index. The payments reported by the Ministry
payments related to their oil operations oil industry is the backbone of the of Finance and Sonangol are similar,
– including tax payments, payment of Angolan economy, accounting for but when broken down by block,
bills owed to local providers, and even around 80 percent of public revenues, they disagree in a way that cannot be
payments to foreign suppliers. yet the government has kept oil explained from the reports themselves;
accounts, revenues, expenditures and • There are substantial discrepancies
It should be noted that the tax rate contracting procedures concealed. In between the receipts reported for
for the oil industry is the highest for particular, the relationship between the petroleum income tax paid to the
any industry in Angola. As a basis government and Sonangol is secretive Angolan government by the Ministries
of comparison, the standard rate of and complex. Most oil revenues flow of Finance and Petroleum. Both report
Angola corporate tax is 35 percent. through Sonangol, which feeds a vast higher receipts of income tax from
Mining is taxed at a slightly higher rate patronage system with these revenues. Sonangol than Sonangol reports in its
of 40 percent,42 while agriculture and This patronage system, overseen by the own accounts;
forestry enjoy a reduced corporate tax President, has kept the ruling MPLA • There is a large discrepancy between
rate of 20 percent.43 party and the government in check by the petroleum transaction tax figures
rewarding elite public officials, family from the Ministries of Petroleum and
Until recently, the tax rate for the oil members and the military. Finance that cannot be explained;
industry applied across the board, but • Sonangol records large dividend
the recent Presidential Legislative However, in response to increasing payments that do not appear to be
Decree 3/12 favours the national oil public scrutiny, the government has accounted for in other government
industry. The new tax regime reduces taken some steps since 2004 to increase reports; and
the oil income tax rate for Angolan oil transparency by publishing data on the • Signature and other bonuses paid by oil
companies whose capital is held entirely production and export of oil, as well as companies to the government appear
by Angolan individuals from 50 percent taxes and royalties and other revenues to be poorly reported when compared
for companies engaged in PSAs with to the government. There is undoubtedly to what has been reported in the media
Sonangol to 35 percent, and from 65.75 more information disclosed now than and in government accounts.45

14 Angola’s oil industry operations

Picking up where that earlier report left off, a partial review of currently The discrepancies in the data can amount to
published data records similar discrepancies. For example, concessionary massive sums. In 2002, as a pre-condition of
revenues for the year 2010 (the latest annual figures published by the International Monetary Fund (IMF) for
Sonangol) reported by Sonangol and the Ministry of Finance vary on a eventual lending, the international accounting
block-by-block basis and in total. firm KPMG initiated a monitoring system and
an assessment of Angola’s oil revenues. This Oil
Diagnostic highlighted major mismanagement
Concessionary Revenues Concessionary Revenues of oil revenues, and raised a series of serious
Oil block Ministry of Finance (in Sonangol (in Dollars* issues, including US$4.2 billion of unaccounted
Dollars and Kwanzas) and Kwanzas oil revenues for the years 1997-2002. Eventually,
56,796,054 USD 52,956,039 USD in 2009, the IMF agreed to a stand-by agreement
Block 2-05 and granted Angola a loan of US$1.4 billion to
5,090,119,182 AKZ 4,918,239,235 AKZ
stabilise its balance of payments after a drop in
45,527,183 USD 45,445,054 USD the price of oil and improve transparency in the
Block 2-85
4,133,349,277 AKZ 4,220,664,034 AKZ government’s accounting process. More recently,
in December 2011, the IMF issued a report
433,586,420 USD 444,904,870 USD
Block 3-05 that highlighted an unexplained US$32 billion
37,122,517,786 AKZ 41,320,094,957 AKZ discrepancy in the Angolan government’s 2007-
2010 fiscal accounts linked to Sonangol’s quasi-
172,726,591 USD 157,313,340 USD
Block 3-85 fiscal activities. This figure amounts to a quarter
13,051,860,788 AKZ 14,610,319,214 AKZ of Angola’s gross domestic product.
125,821,053 USD 118,501,246 USD
Block 3-91 These quasi-fiscal activities are financed out
9,424,819,544 AKZ 11,005,684,724 AKZ
of oil revenues, but are not recorded in the
18,039,260 USD 21,954,612 USD national budget and thus lie completely outside
Block 4
1,652,375,616 AKZ 2,039,012,642 AKZ the official process. These activities include fuel
subsidies and the servicing of the national debt.
2,115,075,178 USD 2,320,033,670 USD Responding to the IMF, the Angolan government
Block 14
182,010,766,467 AKZ 215,470,807,080 AKZ stated it would release Sonangol from this
function in the future.
7,770,321,179 USD 7,573,691,091 USD
Block 15
655,312,869,902 AKZ 703,398,986,441 AKZ Beyond oil revenues, there is even less
5,223,258,488 USD 5,198,820,822 USD transparency around expenditures and credit
Block 17 lines for investment projects. The public
426,3,74,560,096 AKZ 482,835,285,097 AKZ
procurement process is lax and the National
429,178,728 USD 367,314,441 USD Assembly has little oversight over major
Block 18
33,639,181,455 AKZ 34,113,961,437 AKZ investments. For example, the government is
investing billions of dollars in infrastructure
16,390,330,114 USD 16,300,935,190 USD projects – financed by oil-backed Chinese
TOTAL
1,367,812,420,115 AKZ 1,513,933,054,862 AKZ bank loans – that have been controlled by
the National Reconstruction Cabinet (GRN),
which was originally created by President
Jose Eduardo dos Santos to deal with the
Likewise, total oil exports reported by the Ministry of Finance and Ministry country’s massive reconstruction projects. But
of Petroleum vary. the institution is ad hoc, reports only to the
president and has been run by a retired general.
Since September 2010, Sonangol’s housing
Ministry of Ministry of arm, Sonip, succeeded GRN in relation to the
Finance Petroleum construction of housing and infrastructure –
yet there has been no thorough reporting of
Total oil exports (barrels) 52,324,030 50,889,569
GRN’s accounts to the National Assembly.

Angola’s oil industry operations 15

 Dodd-Frank 1504 Outside Angola, there are efforts to increase tlements, in-kind payments, infrastructure
and the Extractive transparency around repor ting of oil improvements and bonuses. The data will
Industries payments from companies to governments be provided in a disaggregated manner,
Transparency and ensure these are not aiding corruption. In on a project-by-project basis, and includes
Initiative (EITI) July 2010, the US Congress passed the Dodd- data from all companies, their subsidiar-
Frank Wall Street Reform and Consumer ies and other entities under their control.
Protection Act, which included an important Companies will disclose annual payments
transparency provision, Section 1504. The over US$100,000 and will report this on an
law mandates oil, gas and mining compa- annual basis. The data will be publicly avail-
nies registered with the US Securities and able on the SEC website. Partial reporting will
Exchange Commission (SEC) to publicly begin after September 30th, 2013.
report their payments to foreign govern-
ments for access to the country’s oil, gas The US Congress mandated that the SEC
and minerals. This provision follows years make the rules for the law and the SEC finally
of lobbying by international human rights announced the rules in August 2012, follow-
and transparency groups. Payments to be ing almost two years of intense lobbying
disclosed include taxes, royalties, fees (i.e. by industry groups – namely the American
license fees), dividends, production enti- Petroleum Institute and the US Chamber

Accountability However, the template for Sonangol’s Production Sharing

Agreements (Article 34 and 33 for Cabinda and all other blocks
In Angola, the most powerful institution is the presidency, respectively) states, ‘Unless otherwise agreed by Sonangol…
followed by Sonangol. Their complex and secretive relationship all technical, economic, accounting or any other information…
has created a sort of parallel government, wherein oil revenues shall be held strictly confidential…either party may, without
that flow from Sonangol feed a patronage system that such approval, disclose the aforementioned data: to the extent
rewards an elite few and keeps the government and MPLA in required by any applicable law, regulation or rule (including
check, while completely bypassing the formal structures of without limitation, any regulation or rule of any regulatory
government that could provide needed checks and balances. agency, securities commission or securities exchange on which
the securities of such Party or of any such Party’s affiliates
Accountability laws are mixed. There are some strong anti- are listed)’. And the Angolan government does provide this
corruption laws in the statute books, while other legislation authorisation. For example, Norway’s Statoil discloses payment
serves to perpetuate state secrecy. However, the institutions to information from all the countries where it operates, including
enforce the laws are weak. Without institutions to enforce the Angola, as required by Norwegian law. The Brazilian company
laws and, more importantly, break the political hold that the Petrobras also discloses payment information from countries
presidency and Sonangol have over the country, real democracy where it operates.
will not be possible.
Beyond this, the Angolan Constitution explicitly establishes the
There is nothing in Angolan legislation that protects illegal right to freedom of information. Constitutional Article 40(1)
acts in business, but existing legislation does perpetuate states, ‘Everyone shall have the right…to inform themselves
secrecy and creates a loophole for the mismanagement of oil and to be informed, without hindrance or discrimination’.
revenues. Article 77(1) of the Petroleum Law states that ‘…all In 2002, the National Assembly passed the Law on Access to
finance related information provided by oil companies should Administrative Documents, which grants open access to public
be confidential’. The Petroleum Taxation Law states in article documents and the right to request information. But implemen-
68 (1) that ‘…all revenues received from oil companies should tation of the law is unclear and it was eventually subverted by
be kept confidential’. the State Secrets Law,46 which preserves the government’s right

16 Angola’s oil industry operations

of Commerce, which had been pressing forestry companies, as well as large private ency in oil, gas and mining – transpar-
the SEC to weaken the rules. In particular, companies, to disclose all payments of ency over payments by companies to
industry groups claim that such transpar- €80,000 or more to governments – also governments, as well as transparency
ency will hurt their ability to compete. They country by country and project by project. over revenues by host country govern-
pushed for the project-by-project disclosure If the European Commission and individual ments. Companies operating in coun-
requirement to be scrapped and for exemp- member states vote for the final directive, tries that are implementing the EITI
tions in countries whose laws and contracts these new transparency requirements would have to publish what they pay to the
prohibit such disclosure. Industry groups had apply to hundreds of companies not covered government. Currently about a dozen
cited Angola as such a country – although by the Dodd-Frank requirements, including countries are EITI compliant countries
exemptions in Angolan contracts do allow state-owned companies. The final vote is and two-dozen others are EITI candi-
for such disclosure. anticipated early next year. date countries. The crux is that while US
and EU legislation is mandatory, the EITI
Similar transparency legislation in other Interestingly, many the companies that have is a voluntary process that is not binding
countries is closing the transparency loop been lobbying for weaker transparency rules and lacks enforcement mechanisms.
with even stricter requirements. In mid also support the Extractive Industries Trans- Data standards also vary among coun-
September of this year the European Parlia- parency Initiative (EITI). The EITI is a ten-year tries that have signed up and the data is
ment’s Legal Affairs Committee voted to old multilateral process that establishes a set often imprecise and unverifiable. Angola
require EU-registered oil, gas, mining and of voluntary global standards for transpar- is not a participant in the EITI process.

to classify information with high discretion. It states that ‘… response, the National Assembly approved a law on Public
financial, economic and commercial interests of the State can Probity in March 2010, which regulates the use of public
be classified as secrets’. The law also grants the government funds and goods in Angola. The law penalises corruption and
the authority to imprison anyone who releases information that obliges top public officials to declare their personal wealth at
could be regarded as damaging to State interests. home and abroad. Although the law is transparent and clear, it
never mentions the word ‘corruption’. The law allows anyone
At the international level, Angola is also party to the to denounce abuses by public figures, but severely penalises
International Convention on Civil and Political Rights, which anyone making accusations that are deemed to be false.
states in Article 19, ‘Everyone shall have the right to hold Important articles include:
opinions without interference. Everyone shall have the right of
freedom of expression; this right shall include freedom to seek, • Article 18: Prohibits public officials from receiving gifts,
receive and impart information and ideas of all kinds’. either directly or indirectly, from Angolan or foreign entities’
• Article 25(1a): Prohibits officials from receiving money,
As per anti-corruption laws, the Benefits of Public Office assets or other economic benefits, either directly or
Bearers, Decree 23/90, prohibits public officials from indirectly, in business deals where they have decision powers
engaging in business activities involving the state for personal or influence; and
benefit. Decree 24/90 also deals with Rules for Gifts to Public • Article 25(1h): Forbids public officials from pursuing jobs or
Office Bearers. The Law of Crimes Against the Economy consulting services that may pose a conflict of interest.
criminalises extortion, as well as passive corruption: Section
49(1) deals with active corruption, Section 17 deals with At the international level, Angola is also a signatory to the
illegal appropriation of goods, and Section 19 deals with Convention Against Corruption of the African Union, the
improper use of goods and services. These laws have since United Nations Convention Against Corruption and the SADC
been harmonised under the new Public Probity Law. Protocol Against Corruption.

Since November 2009, President dos Santos has been calling However, Angola does not have a politically independent
for a ‘zero tolerance’ approach to tackle public corruption. In anti-corruption institution with a mandate to investigate

Angola’s oil industry operations 17

and prosecute corruption cases. There are agencies with transparency activist filed suit under the Public Probity Law
some level of accounting mandate, but many of these report against the head of Sonangol, the Minister of State and his
to the president. advisor – as partners of Nazaki Oil – and the directors of Cobalt
for illicit enrichment (art. 25,1,a) and for failing to comply
In July 2010, the National Assembly passed the Money with a mandatory public tendering process (Petroleum Law
Laundering and Combating the Financing of Terrorism, No. 10/04). Cobalt’s partners were also accused of influence
Law No. 12/10, although implementation of the law is largely peddling and active corruption of leaders (as per Criminal Code
deficient. The 2002 Audit Law, which requires audits for all Art. 321). Angola’s Attorney General did not properly responded
‘large’ companies, has also failed to make a difference since the within the 20 allotted days, but the investigation – coupled
lack of a professional accounting oversight body has impeded with a US Department of Justice and SEC investigation – did
its enforcement, and because the law does not require audit garner international attention.
results to be made public.47 There is also no legislation in
Angola that protects whistle-blowers from retaliation – neither
in the public nor private sector.

As previously mentioned, the president appoints all judges to

the Court of Audits, which is Angola’s supreme audit office.
This agency has the authority to conduct audits of public
agencies, including the Ministry of Finance and Ministry of Oil revenue
Petroleum. Although the Court has recently started to audit utilisation
the accounts of some ministries and provincial governments, it
generally struggles to operate in the face of large unaccounted Human capital
funds and a restrictive political environment. The findings and
recommendations of the Court are not discussed inside the The oil industry provides more than
National Assembly and are not disclosed to the public. 85 percent of total government
revenue.48 Effective revenue distribution
Angola also has an Attorney General and any citizen can lodge mechanisms are a condition for the
a complaint if there is evidence of corruption. This is enshrined effective use of revenues. In Angola,
in the Constitution. The office has 20 days to decide on the revenue distribution mechanisms are
merits of a case, and 3 months to make a determination. Once insufficient. This insufficiency results
that time expires, the citizen can then seek international in high levels of poverty and inequality.
remedy. The Attorney General reports to the president. Angola ranks 148th of 187 countries in
the UN Human Development Index and
In 2005, Angola established the Office of the Ombudsman. two-thirds of Angolans live on less than
However, it is not sufficiently protected from political US$2 per day.
interference to be wholly efficient, nor does the government
take heed of its reports. The Ombudsman reports to the The government’s 2004 Poverty
Commission of the National Assembly twice a year, but these Reduction Strategy Paper is loaded
reports are not publicly available. with terms like social equity and
redistribution.49 But this strategy
A High Authority Against Corruption was supposed to be was never adopted. Instead of pro-
created, as per the 2005 Law of the High Authority Against poor development, Angola’s political
Corruption. However, this mechanism has not yet been economy is characterised by a
established. Section 8 of the law provides for the President to development model that is controlled
propose the creation of mechanisms to the National Assembly. by a narrow state-based elite and
redistributes wealth upwards and
Although judicial institutions in Angola lack the political outwards. 50 Public services are
independence, means and technical expertise to hold the oil portrayed not as citizens’ rights and
industry to account, civil society in Angola is using existing legal entitlements, but as commodities
legislation to lodge citizens’ complaints about alleged public that citizens must pay for or as gifts
corruption. For example, in January 2012, an Angolan that they must show gratitude for.

18 Angola’s oil industry operations

 The oil industry
provides more than
85 percent of total
government revenue.

Government spending accounts for Cabinda or whether they simply replace ANNUAL BUDGET
PROVINCE
around 33 percent of GDP. 51 Yet, when money earmarked for regional budgets. (in US Dollars)
it is broken down, the share spent on What’s more, the 10 percent is unreliable
Bengo 258,288,306
social sectors is low. In Angola, one and the distribution policy does not ac-
of the greatest deficiencies is human count for the inflated cost of living result- Benguela 647,289,723
capital. For example, from Angola’s 2011 ing from an inflated local market because Bié 337,183,308
annual budget of US$45 billion, only 13.5 of the industry’s presence in the regions.
percent was earmarked for education Among the remaining provinces, the Cabinda 459,715,178
and health – with education receiving revenue distribution policy has increased Central gov-
just 8.37% (3.76 million) and health inequality and animosity, as there is no 37,187,032,267
ernment
5.14% (2.31 million). 52 nationwide revenue distribution mecha-
nism. These stark inequalities are evident Exterior 340,959,555
Conversely, 41.7 percent of the budget when distribution is broken down per Huambo 520,976,879
was earmarked for ‘general public province as a percentage of the
Huíla 505,330,464
services’, which include the executive US$45 billion 2012
branch, fiscal and finance issues, state budget53: Kuando Kubango 281,068,038
external relations, general services,
Kuanza Norte 247,148,660
basic investigation. And the distribution
13.5

of public expenditure on social sectors Kuanza Sul 297,377,050

is even more biased when it comes to
3 .88 Kunene 233,299,042
spending on different regions.
Luanda 1,745,717,950
62
Nationwide revenue distribution 82 .
Lunda-Norte 232,830,112

By law, the provinces of Zaire and Cab- Lunda-Sul 231,032,284

inda are assigned the equivalent of 10
Malanje 359,040,541
percent of the tax income from the oil
activity in each province. This revenue is Moxico 314,180,943
allocated to public investment expendi-
Namibe 205,654,510
tures, with a view to enabling these prov-
inces to benefit more directly from oil ac- Central government: 82.62% Uíge 384,228,275
tivities. It is unclear whether these funds Luanda province: 3.88%
Zaire 222,709,811
represent additional money for Zaire and Remaining 17 provinces: 13.50%

Angola’s oil industry operations 19

20 Angola’s oil industry operations
Instead of pro-poor development,
Angola’s political economy is
characterised by a development
model that is controlled by
a narrow state-based elite
and redistributes wealth
upwards and outwards.

James Oatway/Sunday Times

Angola’s oil industry operations 21

Small and medium enterprises Infrastructure investments

Beyond this, the government should Instead of direct investments in allocated among projects and how
facilitate employment by supporting the provision of social services and much money has been spent so far.
micro, small and medium-sized lines of credit for the development of What’s more, since September 2010,
enterprises (SMEs). Earlier in 2012, Angola’s non-oil private sector, the Sonangol’s housing arm, Sonip, has
the government announced that it government has largely utilised oil succeeded the GRN in relation to
would invest US$1.8 billion – financed revenues to fund large infrastructure the construction of social housing
through the state budget, national projects, including railway lines, and infrastructure. However, the
development fund and others – to help airports, road construction and transfer of these GRN activities was
create SMEs, develop existing ones housing. But the country’s lax not preceded by a clarification of
and reduce the economy’s dependence procurement policies have led to finances, nor have GRN competences
on the state. The government is the suspicions that significant leakage returned to appropriate ministries.
country’s biggest employer and support and corruption occur through these
for SMEs, particularly through credit large-scale projects. As stated Interestingly, in March 2011
extension, would go a long way towards previously, these projects have been the government established the
enabling sustainable development in administered through the National Petroleum Development Fund by
Angola. The Catholic University of Reconstruction Office (GRN), Presidential Decree 48/11. This new
Angola’s socio-economic research which was created to manage large fund, financed from oil revenues, is
centre, CEIC, records unemployment investment projects, and in direct expected to promote the development
at around 25 percent, but notes more response to political rivalries within of energy and water projects. The
than half of the population relies the state 56 . The GRN is exclusively government, for example, is expecting
on the informal sector to generate accountable to the president and to invest around US$20 billion in the

The President’s son and nephew were appointed

to the fund’s board, and the presidential
economic advisor will head the fund.

income, and in rural areas most remain does not operate within the formal construction of new hydroelectric
dependent on subsistence farming. 54 structures of government. The GRN dams over the next five years. The
Beyond human capital and social was headed by the president’s top fund has a legal status, owns property
capital constraints, poor entrepreneurs military advisor and Head of the and assets and has administrative
in Angola are financially constrained. Military House. The GRN managed a and financial autonomy. It is seen as a
A 2008 survey commissioned by the 2005 US$2.9 billion oil-backed line of public relations initiative in response
Angolan Central Bank and UNDP credit from the China International to criticisms that the oil sector lacks
found that ‘only 0.4 percent of micro, Fund for infrastructure projects, transparency and revenues are not
small and medium-sized enterprises which were to be carried out by invested on poverty alleviation. The
in Angola have obtained credit’ and Chinese construction companies. President’s son and nephew were
that ‘most banks limit their lending to Although GRN’s financial f lows appointed to the fund’s board, and the
a select group of customers whom they should officially pass through the presidential economic advisor will
know and trust’, while ‘most businesses Ministry of Finance’s accounts, 57 it is head the fund.
and households continue to lack access unclear how much money is directly
to financing for investment’. 55 managed by the GRN, how funds are

22 Angola’s oil industry operations

Policies and practices
of Sonangol
Behind the presidency, Sonangol is the most economically and politically important
institution in Angola. Sonangol is at the centre of the country’s financial strategy.
Billions of dollars in oil rents pass through Sonangol and are reinvested and
doled out to feed the vast patronage system that helps the presidency and party
maintain political power.

Sociedade Nacional de Combustíveis de Angola (Sonangol E.P.) was established in

1976 and is the largest company in Angola. Its roles are various. It is the country’s sole
concessionaire, and the lead negotiator for every oil exploration and production license.
The company also produces petroleum, and has exploration and production capacity.
Sonangol funds its share of production through oil-backed borrowing. It collects oil
revenues and sells oil on behalf of the state. It regulates the oil industry. But Sonangol
reaches beyond oil, with a diverse portfolio, under the banner of Grupo Sonangol, which
consists of dozens of subsidiaries that have Sonangol as their primary client. Sonangol
has been acclaimed as the country’s most competent institution and, through strategic
global investments, it is a primary vehicle used to control Angola’s image abroad.58
Sonangol reported US$33.78 billion in sales and US$3.3 billion in net profits for 2011.59

Sonangol’s current structure and control of oil rents provide major vehicles for
potential mismanagement of state funds, including:60

• Like other oil companies operating in treasury. These activities, for example, in 2006 Petrobras paid US$50 million
Angola, Sonangol is liable for taxes. include free supply of fuel to certain for oil block 26, while Petrobras paid
The core of its assets consists of the agencies. Yet these QFAs are not fully US$1.1 billion for oil block 18 and
equity shares in the oil concessions included in the government budget, Total also paid US$1.1 billion for oil
that the government has entrusted nor are they explicit in Sonangol’s block 17.61 These funds should also be
to it – meaning, its partnership in oil financial statements. For example, the reverted to the national treasury.
blocks. These assets generate a net 2010 budget includes US$9.8 billion to
income that, in theory, should go to the cover the ‘general subsidisation and • Oil companies, as per their PSAs, also
State as the exclusive shareholder in free supply of retail petroleum products pay a contribution to Sonangol for
Sonangol, but in practice, these funds to select agencies’. It is these quasi- social projects. The amount of these
are largely reinvested in Sonangol and fiscal expenditures that account for the is stipulated each contract and is
its subsidiaries. In 2009, for example, missing US$32billion, as reported by also largely undisclosed. There is no
these funds amounted to US$2.8 billion. the IMF in its December 2011 report. public information about what types of
social activities oil companies finance
• As concessionaire, or government • Sonangol receives signature bonuses – under PSAs or their selection criteria.
fiscal agent, Sonangol signs the as mandated by the Petroleum Law and Sonangol dictates the use of these
production sharing agreements with PSAs – paid by foreign oil companies funds in dialogue with the operator
foreign oil operators in Angola and on the award of a concession. Signature of each block and Sonangol controls
receives a share of the profits from that bonuses are standard practice around the use of the funds. Also, as per the
oil, which are then transferred to the the world. They are leveraged during Petroleum Activities Law, a portion of
national treasury. the public bidding process for granting the aforementioned signature bonus
an oil concession and weighed against is also earmarked for social purposes.
• Sonangol is tasked with an array of other offers. The amounts of these one- There is little information on how the
quasi-fiscal activities (QFAs), which time payments are largely undisclosed, funds for social purposes are used,
are paid from the aforementioned but can range in the billions. For and, again, Sonangol has the final
oil profits that are transferred to the example, industry media reported that decision on the use of these funds.62

Angola’s oil industry operations 23

And it does not end there. Sonangol is currently at the forefront of several key sectors of the economy,
and its interests are expanding. The taxes Sonangol pays to the state are largely reinvested in Sonan-
gol, its subsidiaries and other projects – which are growing and diversifying. On its website, Sonangol
claims to have approximately 30 subsidiaries. Sonangol’s Sonagas, for example, is developing Angola’s
natural gas, while Sonangol Shipping and Sonangol Distribuidora transport crude oil and supply
downstream petroleum products to domestic markets respectively. Sonangol is involved in housing
via Sonip, which is currently overseeing development of the Special Economic Zone outside Luanda
as well as several housing projects in Lobito and others. Sonip’s main partner is China’s CITIC63
construction company.64 Sonangol will be involved in manufacturing, via the newly created Sonan-
gol Investimentos Industriais, particularly in the economic zone of Luanda Bengo. Sonangol is also
involved in telecommunications via MSTelcom, in air transportation via SonAir65, and in health care
via Clinica Girassol. Beyond these, Sonangol has a dozen other oil-related subsidiaries and projects.66

Sonangol has also been acutely involved in the banking sector – and some Angolan banks were
first established with Sonangol as the main shareholder, such as the Banco Africano de Investi-
mento (BAI). BAI currently ranks as Angola’s top bank with assets of US$7 billion.67 In 2010, it
was the subject of a money-laundering inquiry by a US Senate panel. The panel analysed the ties
between the multinational bank, HSBC, and Angola, alleging that HSBC provided US bank-
ing services to politically connected officials of Sonangol through BAI without designating the
transactions as potentially high risk. Sonangol also has an indirect share of the Portuguese oil
company, Galp Energia, through a joint venture with the president’s eldest daughter and BAI.
Sonangol is also a major shareholder in Millennium BCP, Portugal’s biggest private bank.

Furthermore, Sonangol’s reach outside Angola is growing. Sonangol maintains Sonangol USA Com-
pany (for US markets), Sonangol Limited (for UK markets), and China Sonangol. Sonangol has opera-
tions, exploration ventures and equity in oil projects in Cape Verde, Congo-Brazzaville, São Tomé and
Príncipe,68 Brazil, Cuba, Venezuela and the Gulf of Mexico. The company withdrew from Iraq last
December and recently announced withdrawal from Iran because of international sanctions.

Set up in Hong Kong in 2004, China Sonangol is a key joint venture for the company. Sonangol
maintains a 30 percent share, while private Hong Kong investors own the remaining 70 percent.
China Sonangol is part of what a US agency has dubbed ‘The 88 Queensway Group’ – a series of
Chinese firms operating in Angola and elsewhere with headquarters in the same Hong Kong ad-
dress, which includes China International Fund.69 Until September 2011, the chairman of Sonangol
also served as chairman of China Sonangol. China Sonangol is shrouded in secrecy and has been
at the centre of global investigations.70 The company and its subsidiaries71 have ‘pledged to invest
billions of dollars across sub-Saharan African, Latin America and South East Asia, largely as part
of resource for deals in Guinea and Zimbabwe’. China Sonangol currently holds shares in 4 oil
blocks in Angola. China Sonangol is also a partner in Sonangol Sinopec International (SSI), which
is joint venture with the state-owned China Petroleum and Chemical Corporation (Sinopec).72 SSI
holds shares in 4 oil blocks. The Economist reports that China Sonangol buys oil from Angola at
a low price that was fixed in 2005 and sells it to China at today’s market price – a US$50/barrel
difference (although the contract is a secret). In return, the China syndicate is involved in housing,
infrastructure, roads, railways, hydroelectric plants and other projects.73

When the price of oil dropped in 2009, the Angolan government turned to the IMF for financing
(the government owed US$9 billion in arrears to foreign construction firms in the country74) and
the IMF agree to a US$1.4 billion loan. Ironically, shortly after this agreement, Sonangol bought a
20 percent share of Marathon’s stake in offshore block 32 for US$1.3 billion.75 The Sonangol Chair-
man was quoted in a Sonangol magazine as saying, “We will add this share in block 32 to a joint
venture we have with the Chinese called China Sonangol.”76

24 Angola’s oil industry operations

Policies and practices of the post-independence civil war –
multinational oil companies through weapons procurement, dubious
charitable donations, and other forms
In Angola, oil production is increasingly taking place in deep and ultra-deep water. The of assistance.77 While UNITA forces had
technology involved in drilling is complex, and the field development costs are extremely access to diamonds, the MPLA exploited
high, as are the risks. Small players cannot participate without linking up with large the oil revenues.
multinationals – and even Chinese companies, although partners, are not operators in
these oil concessions. Therefore, multinationals are irreplaceable and this increases Co-operation among the oil majors
their leverage and ability to influence government policies. Beyond this, foreign would make it difficult for the Angolan
companies have market power and technical capacity that could potentially be directed government to threaten to or even
towards boosting Angola’s overall development. Instead, in Angola, as across the globe, expel firms on purported violation of
multinationals’ influence has primarily been directed at ways to maximize their profit. domestic laws. Instead, companies’
continued transactions with the
Angola’s multinational oil operators government – without calling the
include: Chevron (US), ExxonMobil terms of the transactions into question
(US), BP (UK), Total (France), – has facilitated patronage problems,
Petrobras (Brazil), Cobalt (US), encouraged rent seeking and exacerbated
Tullow (UK), Vaalco (US), Pluspetrol the resource curse.
(Argentina), Maersk Oil (Denmark),
Eni (Italy); and those awarded licences However, there are some exceptions.
to operate in the most recent pre-salt In 2001, BP announced that it would
deep-sea concessions: Statoil (Norway) publish its total production by block,
and Repsol (Spain). Beyond these, a its payments to Sonangol, the taxes it
number of other foreign oil companies paid to the Angolan government and its
are partners in oil blocks, including: signature bonuses. But this attempt at
Galp (Portugal), SSi (China), Marathon transparency was met with an aggressive
(US), Falcon Oil (US), Prodoil response from Sonangol and a threat to
(Norway), Ajoco (Japan), Svenksa revoke its licence. Ironically, this is the
(Sweden), Tenenge (Brazil) and Partex same level of revenue reporting under
Oil & Gas (Portugal). Other companies the US Dodd Frank Act that BP – and
include Acrep, Inter Oil, Geminas, other multinational members of the
Initial Oil & Gas, Ina-Nafta, Naftagas, American Petroleum Institute – lobbied
companies’ Force Petroleum, Alper Oil, Nazaki Oil to try and prevent.
& Gas, and Somoil. Chevron has the
continued longest history in Angola, beginning Among the oil majors, Norwegian
its operations in the late 1950s. companies lead in transparency efforts.
transactions with Meanwhile, BP has been in Angola for Statoil has been disclosing information,
almost 40 years, Statoil for almost 20 such as that now mandated by the Dodd
the government and ExxonMobil since the mid-1990s. Frank Act, in Norway as per Norwegian
securities regulations. The company
... has facilitated On the whole, oil companies do not touch uses the disclosure exemption provision
governance or transparency issues in in its Production Sharing Agreement
patronage problems, Angola and this has historically always with Sonangol, whereby Sonangol will
been the case. Multinational companies authorise foreign operators to publish
encouraged rent have been drilling for oil in Angola such information if mandated by home-
for decades and, in general, securing country laws.78 Outside of the Norway,
seeking and their access to the state-controlled Angola is the largest source of oil for
commodity means that they have needed Statoil – relying on Angolan crude for over
exacerbated the to remain on good terms with each 170,000 barrels of its 2 million barrels
government in turn. In Angola, this per day portfolio.79 Meanwhile, another
resource curse. translated into oil financing and fuelling Norwegian firm, Norsk Hydro, has tried

Angola’s oil industry operations 25

to include anti-corruption provisions in Production Sharing Agreements broadly deal with spills, the Angolan government
its contracts. After singing a PSA with require companies to support CSR has approved oil companies’ use of
Sonangol in 2005, Norsk Hydro attempted projects, although what these projects the chemical dispersants, Corexit and
to incorporate in its joint operating consist of and how exactly they are Inipo, even though there are safer
agreement a ‘warranty that the parties developed is not clear. Nor is there alternatives available. Corexit and Inipo
would not make corrupt payments and information on how the effectiveness have been linked to serious neurological
a requirement that any public officials and efficiency of the projects will be damage and cancers and are extremely
with an ownership interest in one of evaluated. And since Sonangol controls hazardous to marine life. The UK’s
the partners would not participate in the use of the funds, projects related to Marine Management Organization
governmental decisions affecting the improving governance are highly unlikely. banned Corexit over a decade ago; so if
venture (as already required by Angolan there were a spill in the UK’s North Sea,
law)’.80 Although laudable, these efforts The Petroleum Law also requires BP is banned from using Corexit. But in
are singular and have not been copied by that part of the signature bonus be Angola, BP uses Corexit. Indeed, Corexit
others in the industry. earmarked for social purposes. Again, is clearly included in the country’s
there is little information on how the national oil spill plan.85
On its part, Chevron has been consist- funds for social purposes are used, and
ently complacent in efforts to address just like PSAs, Sonangol has the final However, there have been some efforts
governance problems. In Cabinda, in decision on the use of the funds, which, recently to hold multinationals to
particular, where the company has the again means no funding for projects to account. Since 2009, OSISA has been
biggest presence, community groups promote good governance. participating in the True Cost of
have for years been calling on the Chevron Network, and has addressed the
company to use its economic power as Projects funded by post-tax voluntary company’s senior management, board
leverage with the Angolan government contributions are what are normally and shareholders about the company’s
– and for years, Chevron has stated that thought of as CSR – and it is these operations in Angola during Chevron’s
it does not get involved in democracy or projects that are most widely promoted annual meetings. Cabindan residents and
governance issues.81 Chevron is the most by multinationals. Oil companies manage environmental groups, such as Gremio
important market player in Angola’s oil these on their own. Projects are either ABC, have also for years demanded
industry and the oldest foreign operator. run directly by company managers or that Chevron end its environmental
The company has been drilling for oil in through partnerships with NGOs and and human rights abuses and called for
Angola since 1958, through its subsidi- church organisations, which implement improved compensation and revenue
ary Cabinda Gulf Oil Company. It is the the projects. Chevron plays a leading role distribution mechanisms. In a unique
lead operator in Angola’s most profitable in these partnership arrangements. Once turn of events, the Angolan government,
oil blocks (namely block 0), and it is the again, no partnerships directly address for the first time, imposed a fine on
largest foreign oil industry employer.82 governance and democracy issues. Chevron in 2002 after poorly maintained
It is one of Angola’s largest oil produc- Instead, voluntary projects focus on the pipelines used to transport crude oil
ers, with shares in deep-water and provision of basic services. from its platforms leaked. International
shallow-water oil wells and in Angola transparency watchdogs like Global
LNG. The company also invests mil- On the protection of the environment Witness have also called out the majors,
lions of dollars in CRS projects, but none and mitigation of impacts, multinationals including BP, for failure to disclose
of this money is directed at democracy operating in Angola get a free pass. payments to the Angolan government.
building initiatives. The Ministry of Environment lacks the
technical, resource and staff capacity to Still, multinationals in Angola have
However, Chevron is not the exception. properly monitor the oil industry. Local not found themselves ensnared in
Multinationals often tout their CSR capacity is so weak that the oil industry major international human rights or
projects as a means of improving the practically writes the environmental environmental scandals, or litigation
livelihoods of the communities where laws and monitors its own activities and – unlike in other countries where they
they operate. In Angola, multinationals impacts. And although multinationals operate. The majority of Angola’s oil
contribute to social activities through may claim that they follow global reserves are offshore reducing their
three different channels, two of which environmental, health and safety accessibility and visible impact and
are required by law and one of which policies, they often take advantage of requiring much less security to protect
is voluntary:84 weak host-country laws. For example, to the facilities than is required, for

26 Angola’s oil industry operations

example, by Shell or Chevron in their for contracts awarded to build liquefied either of these companies in the past,
onshore fields in Nigeria. In addition, natural gas facilities in Nigeria.87 and, therefore, our familiarity with these
the majority of Angolans are uninformed companies is limited’.88 As previously
about the realities of the oil industry and Similarly, Cobalt International Energy stated, Nazaki Oil & Gas is owned by
its impacts on governance, corruption, disclosed a potential FCPA violation the (now former) Chairman and CEO of
the environment and human rights. in its March 2011 10K report filed with Sonangol, and by the Minister of State,
the SEC, suggesting that the company and his top lieutenant.89
Multinationals may on the whole be was forced by the Angolan government
skirting by governance issues in Angola, to partner with two local oil and gas For multinationals operating in Angola,
but they are increasingly – albeit slowly – exploration and production companies the standard assumption should be
being called to task by their home country (Alper Oil and Nazaki Oil & Gas) that that ‘good’ institutions are in their best
governments in relation to corruption Cobalt knew nothing about, stating ‘In interest. Instead, multinationals, for
allegations. For example, the US Foreign connection with entering into our Risk the most part, are choosing to actively
Corrupt Practices Act (FCPA) was Services Agreements for blocks 9 and perpetuate rent seeking and patronage
enacted to counter the bribery of foreign 21 offshore Angola, two Angolan-based systems. Instead of seeing this as a
officials. The anti-bribery provisions E&P companies were assigned as part collective problem, there is collective
of the FCPA make it ‘unlawful for a US of the contractor group by the Angolan complacency and collective avoidance of
person and certain foreign issuers of government. We had not worked with governance issues.
securities to make a payment to a foreign
official for the purpose of obtaining
or retaining business for or with, or Chevron in Angola
directing business to, any person’. Since
1998, the anti-bribery provisions also In 2002, Chevron launched the Angola Partnership Initiative (API) – incidentally,
apply to ‘foreign firms and persons who two years before a major decrease in USAID’s funding for humanitarian assistance
take any act in furtherance of such a to Angola. Chevron allocated US$25 million for the five-year duration of the
corrupt payment while in the United programme. In its reporting on the Initiative, Chevron states it ‘chose to treat
States’. The Department of Justice (DOJ) API as not just a responsibility but also an investment that could serve to deepen
has jurisdiction over all related criminal stability and build capacity in the host country’. The company claims ‘API also
violations under the act, and the SEC strengthened Chevron’s reputation within the United States government’.83
tracks civil violations committed by To a company that made a profit of US$27 billion in 2011, US$25 million over
US companies. Companies have found a five-year period is a paltry amount. But this small contribution was worth
that the most effective way to mitigate a tremendous amount in terms of the company’s public relations efforts. In
punishment and lessen penalties is particular, it helped to:
through self-disclosure. So rather than
being dragged into a high-profile court (1) Secure a ‘social license’ to operate in Angolan communities
case, companies will settle out of court. without fear of sustained local protest;
(2) Present itself globally as a company that cares; and
Texas-based oil and gas services giant (3) Associate itself with American democratic values despite
Halliburton, as per its disclosure to contributing to an autocratic regime in Angola.
the DOJ and the SEC, is currently
conducting an internal investigation into Following the five-year Initiative, Chevron’s CSR has become much wilier.
possible FCPA violations in Angola after Chevron has shifted from a regional focus to a national focus. And the company
the company received an anonymous has shifted its ‘philanthropic’ giving to a ‘development model’ of assistance
email in December 2010 alleging FCPA – meaning that Chevron is creeping into spaces traditionally occupied by
violations ‘principally through the development organisations, engaging in capacity building initiatives while really
use of an Angolan vendor, including ensuring the community’s dependency on the company. By expanding nationally
conflicts of interest and self dealing’.86 to regions outside the company’s geographical sphere of operations, Chevron is
In February 2009, Halliburton paid out also buying broad community acceptance and cementing its favourable relations
US$579 million to settle FCPA violations with the government – especially by addressing development and reconstruction
after pleading guilty to paying Nigerian needs in areas where the government is largely absent.
officials at least US$182 million in bribes

Angola’s oil industry operations 27

James Oatway/Sunday Times

Oil industry and environmental justice

In Angola, the link between the oil industry and environmental justice is twofold. It pertains to the
State’s responsibility to ensure that the extraction of the country’s natural resources is done in a
sustainable manner, respects local people and the environment, and the benefits are distributed
equally; and it pertains to the oil companies’ corporate responsibility in ensuring environmental
safety and sustainability in their practices. In Angola, both the State and the multinationals
are guilty of environmental injustice. The government takes little care in enforcing laws that
protect the public and environment, and prioritises economic growth over inclusive sustainable
development. In Cabinda, in particular, the prevailing ‘security’ discourse often serves to ignore
the real economic and environmental problems faced by vulnerable populations. For their part,
multinationals are guilty of double standards: they collaborate with a kleptocratic government and
hide behind weak host country laws.

The damage from oil and gas operations is chronic and cumulative. The risk of damage occurs at
every stage of the oil cycle: exploration, production, transportation, refining and consumption.
In Angola, the risks and damage to the environment, public health and livelihoods of residents
have been very poorly addressed.

28 Angola’s oil industry operations

Project cycle impacts cuttings into the ocean.92 The older the well, the more produced
water it will generate. These produced waters contain
Fishing communities and residents along the Angolan coast hydrocarbons that are dangerous to marine life. As previously
claim that oil spills from offshore facilities are constant. mentioned, there is no adequate government monitoring of
Anecdotal information abounds. However, hard data is difficult hazardous waste disposal, or public information about the
to obtain and there do not appear to be any estimates of amount of hazardous waste produced.
spillage – at least none that are publicly available. The Angolan
government and oil companies do not necessarily report all Companies in Angola also employ hydraulic fracturing to
spills, while some spills are underreported and others are increase production. Hydraulic fracturing injects water and
reported long after the fact. The source of the spills is also at chemicals (like 2-butoxy ethanol, benzene and others) into
times unclear. For example, Chevron will sometimes claim that wells at high pressure to fracture subsurface rocks and push oil
spills reaching Cabindan waters originate in the Democratic and gas to the surface. Fracturing can challenge the structural
Republic of Congo (DRC) or the Republic of Congo. Chevron stability of aquifers and can provoke saltwater intrusion. For its
claims to have the capability to conduct environmental fracturing activities, Halliburton uses 2-butoxy ethanol, which
‘fingerprinting’ analysis – a technique for identifying the is odourless and tasteless in low concentrations. This process can
composition and origin of oil.90 potentially endanger domestic water wells near fracturing sites.93

Angola has not suffered a major oil disaster since 1991, when Gas flaring is also used by operators in Angola as a means of
260,000 tons of oil spilled into the ocean after the ABT getting rid of gas that is released as an associated by-product of
Summer oil tanker exploded 1,300 kilometres off the coast. oil production. Gas flaring produces greenhouse gas emissions,
There was no clean-up of the spill, as it was believed that the including carbon dioxide, methane, sulphur dioxide, nitrogen
high seas would disperse the oil naturally. Since then, there dioxide, and other carcinogens. The most recent figures show
have a number of smaller spills, including the 1999 spill at the that Angola flared 3.1 billion cubic meters of gas – or 69 percent
Malongo terminal, which resulted in Chevron compensating of its production – in 2008.94 The 5-million-tons per year LNG
victims with around US$2,000, and the aforementioned plant near Soyo was built to capture and market this natural gas.
Chevron spill in 2002, when poorly maintained pipelines used
to transport crude from the platforms leaked, leading the For LNG, the liquefaction of natural gas involves the freezing of
government to impose a US$2 million fine on the company. liquid gas so it can be shipped to markets in refrigerated tankers,
Other reported spills at Chevron facilities include one in where it can be warmed back into a gas to be injected into local
August 2010, another in February 2011 (4,000 barrels at its pipelines. Although the impact of leaked oil exceeds the impact
Malongo base) and yet another in December 2011. Many more of leaked gas and although gas does not contribute as much as oil
spills go unreported, as per local anecdotal information. to global warming, the potential risk of an explosion at the LNG
terminal – given that natural gas is highly flammable and that
Beyond oil spills, artisanal fisher folk in Cabinda have there is a genuine risk of tanker collisions – is real. Yet this has
complained that seismic testing has also driven away the fish. not been fully disclosed to local Soyo residents.
Operators perform seismic testing during the oil exploration
phase. It involves a series of high-intensity and low frequency Health and ecosystem impacts
sounds emitted to develop graphic representation of
subterranean oil deposits. For marine creatures, it can be akin Oil seeps, leaks and spills release polycyclic aromatic
to a cannonball blast next to the eardrum. Seismic testing can hydrocarbons (PAHs) and other volatile components into the
disturb migration patterns, damage the auditory capacity of marine environment in high concentrations. PAHs are some of
certain fish species, harm shellfish and drive away fish.91 the most persistent and toxic components in crude oil. Volatile
components of oil can burn eyes and skin, and irritate or damage
The exploration and production phase both generate waste in sensitive membranes in the nose, eyes and mouth. Hydrocarbons
the form of metal cuttings, drilling fluids and produced water. can trigger pneumonia if they enter the lungs. Benzene and other
Drilling fluids (or drilling muds) are used for the lubrication light hydrocarbons can damage red blood cells, suppress immune
and cooling of the drill bit and pipe. They can release toxic systems, and strain the liver, spleen and kidneys. Oil workers in
chemicals, like methyl mercury, that can also affect marine particular are at risk of injury and chronic disease from exposure
life and bio-accumulate in fish. One drilling platform normally to PAHs and other chemicals, such as cadmium, arsenic, cyanide
drills between seventy and one hundred wells and discharges and lead. People who clean up shorelines from oil spills are also
more than 90,000 metric tons of drilling fluids and metal at risk of injury. Residents in Cabinda have complained of rashes

Angola’s oil industry operations 29

and respiratory problems.95 This may or may not be related to oil water and oxygen depletion, which harm various species. The
exposure – since there have not been any public health studies Benguela Current is also characterized by currents, which
conducted in Angola’s main oil producing regions to help make rapidly dissipate pollution.
that determination.
In the absence of unbiased scientific testing and laboratory
In terms of marine life, chronic exposure to PAHs can shorten facilities, however, it is difficult to determine what is depleting
life spans, interrupt important breeding physiology and the fish populations. For example, if a spill occurs and Chevron
behaviour, and result in population level effects. In Cabinda, accepts responsibility (following their ‘fingerprinting’ test)
there is concern about the degradation of mangroves. In then the company will collect water and fish samples, which
the village of Landana – the location of the largest regional are sent to overseas laboratories of their choice since there are
mangroves – Chevron and the Ministry of Environment have no laboratories in Angola equipped for that level of testing.
done studies, including water sampling, to determine the cause Chevron has not made the results of these tests publicly
of mangrove degradation, but with no clear conclusion. available. Chevron did commit itself to establishing a water-
testing laboratory in Cabinda following the 2002 spill, but to
As with the majority of environmental problems along the date, the laboratory is still not operational.
northern coast, there have been no independent studies
conducted. Similarly, communities complain of crops drying Interestingly, in September 2007, BP began the DELOS
up. Hydraulic fracking offshore in Cabinda, and onshore project – with the aim of understanding the deepwater areas
and offshore in Soyo could lead to a salinisation of crops. around BP facilities, particularly block 18. The project will
But again, no independent scientific studies have ever been monitor the ocean floor for 25 years. The DELOS project
conducted in the region. is led by the University of Aberdeen. Other vessels, which
are funded by the Norwegian aid agency Norad, are also
Fisheries monitoring deep-sea fish stocks, as fisheries are of great

The depletion of fish stocks is the leading complaint about oil

operations in the northern provinces. Artisanal fisher folk
in Cabinda insist that there has been a steady decline in fish
stocks for the better part of a decade. They claim that they
now have to travel much further out to sea, only to return
with a small catch. Fisher folk attest that explosive charges
from seismic testing have affected fish in the area. They
complain that oil spills are far more frequent than the region’s
main operator, Chevron, formally reports and that these
have contributed to a decline in fish stocks. They also contest
the limitations the government and companies have set that
prevent fishing near oil platforms. The government contends The depletion of fish stocks
this is a preventative security measure.
is the leading complaint
In response, the Angolan government has claimed that
industrial fishing is responsible for the depletion in stocks. about oil operations in
Another theory is that the number of artisanal fishermen
has increased. If there is an increase in the number of people the northern provinces.
fishing, this may be due in part to an increase in the number
of people registered with the Institute for the Development
of Artisanal Fishers and Aquaculture (IPA) – the main
government body dealing with artisanal fisheries, and not
necessarily to an increase in the actual number of artisanal
fisher folk. Chevron has incentivised registration by favouring
those who are registered when doling out compensation
following a spill. Yet another theory points to the Benguela
current and climate change contributing to nutrient poor

30 Angola’s oil industry operations

importance to the Angolan government. But they are only to contracting NGOs, such as World Vision, to implement
collecting data on fish stocks and species, not on heavy metal ‘development projects’, such the “Tuenda Tububa” project,
contamination in fish. which includes the distribution of fishing nets and boat motors.

Compensation An effective environmental justice movement in Angola would

involve providing communities with independent, scientific
Procedurally, when oil reaches the shore and a spill is information on the status of oil-related impacts on fisheries,
acknowledged by, for example, Chevron, the company will send mangroves, waterways and public health, particularly those
a clean-up crew to the area. Chevron will dole out compensation in the northern provinces. But without unbiased laboratory
to those claiming damages. In Cabinda, fisher folk are organised facilities, it is difficult to determine what is depleting the
into associations – including the leading two, VOPESCA in the fish stocks, damaging the crops and affecting the health of
north and APESCAB in the south of the province. To receive local people, beyond anecdotal information. The movement
compensation, fisher folk need to be registered with IPA. would also need to develop a community-based environmental
Fisher folk attest that Chevron favours wealthier registered monitoring programme, which works in tandem with broader
fisher folk over informal, day labourers, while disregarding efforts to increase the local knowledge base on a range of
the wider affected community, including women fish traders. rights issues, such as citizens’ ‘right to know’ laws, oil revenue
People claim that Chevron used to deal directly with fisher distribution, the legislative and regulatory structures of the oil
folk but that compensation negotiations are now carried out industry, and environmental protection. Finally, a successful
indirectly. People complain that there is no transparency in the environmental justice movement would need to create linkages
compensation process and that compensation criteria are non- and solidarity networks across the country and internationally
existent, which is consistent with the absence of any national in order to share experiences and build relationships, which
regulations establishing compensation criteria. Moreover, would lead to a wider knowledge base, more effective
Chevron is transitioning from doling out direct compensation, collaboration and greater collective power.

Lori Waselchuk/South Photographs/Africa Media Online

Angola’s oil industry operations 31

James Oatway/Sunday Times

Oil and economic empowerment

of local communities
In Angola, economic empowerment starts with information – information about oil
revenues and communities’ entitlement to these revenues, and information about
citizens’ economic and social rights.

Oil producing-provinces of Zaire and Cabinda are entitled to 10 percent of the

revenue from taxes collected on the oil produced in each province. Payments are
made directly by oil companies, via the Ministry of Finance. But these transfers are
not commensurate with the amount of oil produced. For example, basing calculations
on the most prolific oil blocks, in 2011, Blocks 0 and 14 in Cabinda province yielded
a total of 1.08 trillion Kwanzas in ordinary revenue, while Blocks 15 and 17 in Zaire
province yielded a total of 2.2 trillion Kwanzas in ordinary revenue.96 However, in
2011, total annual transfers to Cabinda were budgeted at 0.95 percent of total regional
transfers – equal to 39 billion Kwanzas, while total annual transfers to Zaire province
were budgeted at 0.39 percent of total regional transfers – equal to just 16 billion
Kwanzas.97 Therefore, an effective economic empowerment programme would need
to begin by calculating exactly how much revenue the most affected provinces are
entitled to, and subsequently – through budget monitoring training – analyse how
provincial and municipal governments are spending it.

Although corruption concerns dominate the national oil advocacy landscape, most
civil society engagement around oil impacts and beneficiation has been confined

32 Angola’s oil industry operations

to the province of Cabinda, where the Angola and Dutch Disease
majority of the offshore oil is being
produced. Compared to the rest of Broadly speaking, Dutch Disease refers to the decline of other economic sectors —
the country, Cabinda’s population usually manufacturing and agriculture — associated with the increased exploitation of
is naturally more engaged on the natural resources. The basic premise is that increased resource revenue will inflate the
issues, as they bear the burden of oil value of the local currency and make other exports less competitive, while at the same
extraction and because they supposedly time, economic emphasis on that sole sector will undermine development in other sec-
receive additional benefits in the form tors. Angola is vulnerable to Dutch Disease – as are other oil producers that are depend-
of extra revenue, employment and ent on oil-backed consumption booms, especially when oil prices decline. In the summer
social services. This is typical of oil of 2009, Angola turned to the IMF because the plummeting price of oil was threaten-
production across the globe, where ing the country’s balance of payments.
the localised tensions created by the
industry are often not shared with Nigeria is a classic example of a resource in public discourse, but the government
the rest of the country. It becomes a boom gone wrong. A narrow economic is doing little to incentivise growth.
marginalised issue, and the struggles focus on oil exploitation through the
and protestations of the local population latter half of the last century led to a Sovereign wealth funds
are ignored, minimised and sometimes steep decline in agriculture and other
framed by the national government as economic sectors – with the result that Many resource-rich countries and re-
impediments to development. the country’s GDP today is actually in the gions have established sovereign wealth
range of what it was in the 1960s. While funds and stabilisation funds to combat
According to OSISA’s own national there has been little net gain in overall Dutch Disease. The idea is to set aside
survey on citizens’ perceptions about national wealth, considerable wealth has part of the earnings from oil production,
natural resource and transparency, been – and is being – generated but it is which can be invested abroad or held
Angolans are under-informed about the concentrated around the oil industry, in bonds and which can be drawn from
massive amount of money generated by leaving the vast majority of the country when oil income falls.99 When asked how
the extractive industries and about the much worse off than before the resource to avoid the booms and busts of the com-
massive amount that is siphoned off. 98 Few boom. Conversely, Norway is cited as a modity cycle, Chile’s Finance Minister
Angolans make the link between poverty, role model for avoiding Dutch Disease. said, “Spend that which is permanent
oil revenue distribution and high-level The Norwegian government has used and save that which is transitory.”100
corruption. When asked what problems its resource rents to expand the public
the government should resolve in the near sector, adopted labour market policies In November 2008, President dos Santos
future, poverty and unemployment were to avert a decline in the manufacturing announced the creation of Angola’s
at the forefront of people’s concerns – not sector, and set up the Government own sovereign wealth fund, Fundo
transparency or corruption. Pension Fund – a sovereign wealth fund Soberano Angolano (FSA), which was
– with some of its oil profits. praised by the IMF. In theory, the FSA
Therefore, an economic empowerment will be sourced from oil revenues,
programme at the local level should In Angola, avoiding Dutch Disease would specifically from all revenues over US$58
start here – by addressing community entail constraining political patronage, a barrel. It is expected that the FSA will
concerns about poverty and increasing public spending, and replicate the investment strategy of
unemployment and making the linkages growing the non-oil economy. However, Norway’s Government Pension Fund by
to unfair oil revenue distribution. currently, the government doles out oil- purchasing small stakes of common stock
Arming communities with knowledge backed patronage to a small number of in international companies – and the
about their economic and social rights, supporters, rather than delivering proper Norwegian government has supported
their rights to access information (and public services to the population as a Angolan in planning this.
how to access this information), their whole. Public spending from oil revenues
public entitlements and the realities is centred on large infrastructure Yet the FSA is no guarantee against
about oil revenues would help to foster projects with a low rate of return and corruption. Indeed, it could just
a genuine national debate on the oil shady procurement processes – with few perpetuate corruption if it is not set
industry and generate public demand funds going toward social spending and up with appropriate accountability
for the fairer distribution of its wealth households. Growing the non-oil sector – mechanisms in place. As it stands,
and benefits. agriculture, in particular – does feature the FSA would be accountable to the

Angola’s oil industry operations 33

president. Additionally, Sonangol already development of impartial institutions. goods. Unreliable electricity, poor
operates much like a sovereign wealth Economists, such as Paul Collier, point transport networks, and limited access
fund by reaping money through dubious to three policies to grow the non-oil to finance have pushed up the cost of
oil-related transactions and investing it economy101 - namely de-tax the non-oil local production, so that it is still cheaper
around the world. For example, China economy, encourage SMEs and support to import goods at skyrocketing prices
Sonangol is a joint venture between the agricultural sector. than it is buy them from local sources.
Sonangol and private investors based Small-scale farmers have reverted to
in Hong Kong, and the company has The private sector in Angola remains subsistence farming, and two thirds of
committed itself to investing billions excessively regulated in order to the population is reliant on subsistence
of dollars across Africa, Latin America facilitate taxation. The corporate agriculture for food, income and
and Southeast Asia. Until September income tax is 35 percent. But Angola employment. As such, development of
2011, Manual Vicente (the Chairman does not need to raise tax revenue from the agricultural sector holds far greater
of Sonangol) served as the Chairman sectors other than oil and diamonds. importance for the majority of people
of China Sonangol. Where the Angolan Deregulation would support the growth than the oilrigs offshore.
government is concerned, keeping money of micro, small and medium-sized firms.
outside the country is hardly a guarantee The Ministry of Agriculture has stated
of transparency. So, if not a sovereign Support for SMEs would not only it is keen to encourage colonial-era
wealth fund, what then? diversify the economy, it would ‘cash crops’ alongside essential staple
create employment, and grow the crops for domestic consumption. And
As mentioned earlier, constraining economic and political power of the a US$1.2 billion loan from the China
Angola’s political patronage will non-oil private sector. Interestingly, Development Bank in 2009 was supposed
involve setting up systems to contain the government recently announced to finance agricultural development
corruption and ensure transparency that it would distribute some US$220 over the following four years. But it is
and accountability. These checks and million as investment credits for SMEs unclear whether this financing even came
balances include the transparency of and provide incentives and training – through – let alone what it might have
public revenues and expenditures, a through the newly created Programme been used for. What is more, while the
free and informed media, an informed for Development of Small and Medium country relies heavily on food imports,
citizenry and a vibrant civil society. Enterprises. The funds will be made the government has set its sights on the
But public officials in Angola are available to the two state banks to development of biofuels – calling into
currently benefiting too greatly to set up support small businesses. Although question the allocation of fertile land for
legitimate checks and balances, while a positive step, it is unclear how the crops that are not intended to produce
the government is doing little to invest programme will be operationalized, food for domestic consumption. In March
in social spending and ensure a fair or how it will fit into the approved 2010, the government passed a law
distribution of oil revenues. Finally, the national budget. regulating the country’s biofuel industry.
Angolan government could take broad The law stipulates that foreign companies
steps to grow the non-oil economy, Oil and war explains why once big producing biofuel in Angola will have to
but seems unwilling to do so and risk employers, such as coffee, cotton and sell some of the product to Sonangol to
relinquishing economic control. maize, have been neglected since supply the local market.102
independence. Oil production is an
Diversifying the economy enclave economy in Angola with few Finally, with Angola importing
links to the rest of the economy. Before huge amounts of food for domestic
Diversification of oil-dependent oil took over as Angola’s primary export consumption it has been claimed
economies is of great concern to new in the early 1970s, Angola depended on that various members of the political
oil producing countries across Africa, agricultural products, such as coffee, elite have heavily vested interests
such as Uganda and South Sudan, which sugarcane, bananas and palm oil. These in the importation business. These
are looking to their peers in Algeria, provided a great source of employment powerful individuals stand to lose from
Mauritania, Botswana and South Africa and the country was self-sufficient in Angola growing increasingly self-
for successful diversification strategies. most foods. Today, the agricultural sufficient in food.103
Diversification of Angola’s economy sector accounts for less than 10 percent
would not only reduce Dutch Disease, it of Angola’s GDP and the country imports
would reduce rent seeking and spur the about 80 percent of its consumable

34 Angola’s oil industry operations

Recommendations may provide for an independent judiciary, but in practice the
judicial system lacks the means, experience, training and
political backing to assert its independence. Nonetheless,
1. lodging citizens’ complaints could help to foster widespread
Promote public debate and societal support for the rule of law. Of equal importance, the
civic engagement on transparency mere act of filing complaints would send a message to those
culpable of public corruption. This strategy should be coupled
At the forefront of OSISA’s mission is opening spaces for civil with a strong media component. This programme would
society participation. The Angolan oil industry is shrouded in entail training a small group of lawyers, legal scholars and law
secrecy and Angolans have the right to know exactly where students to jump-start the process.
government oil revenues and expenditures are going. However,
some information is publicly available but citizens may not
be accessing it or may not know how to access it. Roving 4.
town hall meetings, which create open spaces for debate and Promote mechanisms to hold
participation both in Luanda and across the country, would Sonangol to account
stimulate discussion and the provision of information about
transparency, oil impacts and citizens’ right to know laws. Sonangol wields tremendous political and economic influence
These meetings would also promote active civic engagement – in Angola – and increasingly, Sonangol is expending its business
such as citizen groups to promote citizen-led legislation to be interests both inside and outside the country. There is an
taken up by the National Assembly. obvious conflict of interest in relation to Sonangol since it
both administers and regulates the oil sector. There has been
concerted pressure on the government for years to address this
2. conflict of interest. However, this pressure has largely been
Promote citizen-led calls external – from foreign governments and donors, such as the
for fair distribution of revenues IMF under its stand-by arrangement loan to Angola. More
recently, there have also been efforts to expose Sonangol’s
Civil society should advocate for the government to pursue business operations. But there has not been a concerted push
sustainable development, which prioritises the fair distribution inside Angola to expose Sonangol and call for a major overhaul of
of revenues and the investment of these revenues in income and its structure – such as demanding the creation of an independent
employment generating sectors, like agriculture, to diversify regulator for the oil industry. Similarly, there has not been a
the economy. It will be necessary to start by producing concerted call for Sonangol’s audits to be made public. Elevating
economic studies on the cost of living in oil-producing regions these discussions in the national discourse would work in
in comparison to other provinces, and viability studies on tandem with current international advocacy efforts.
economic alternatives for the country – and to fully understand
how much revenue is being generated by the oil industry and
how much of it reaches the provinces. 5.
Expand Angolan transparency
demands internationally
3.
Strengthen implementation The US authorities have softened their public stance on
of current legislation government corruption in Angola recently either because of
a conflict of interest with US business interests in Angola, or
There is nothing in Angolan legislation that protects illegal acts a perceived decline in their influence in Luanda, or the lack
in business. Laws relating to public corruption, in particular, of a strategy, or a general disinterest in engaging. However,
are quite clear. Angolan citizens have at their disposal a the reality is that – although the Angolan government has
series of laws with which to push back against economic, smartly positioned itself vis-a-vis a range of public and private
environmental and public corruption. If the authorities do actors – the US government still retains considerable leverage
not want to enforce the law, it is up to citizens to use the laws in the country. Angola must be put back onto the agenda of
and litigate. Understandably given the partiality of Angolan US government officials who can ruffle the feathers of their
courts, enforcing accountability through judicial means has Angolan counterparts merely by asking questions, holding
been underutilised up until now. The Angolan Constitution hearings or making public statements. It should also extend to

Angola’s oil industry operations 35

 Recommendations

aid – namely channelling USAID funding to democracy and companies based in those countries to account. Information
governance initiatives. This strategy will ensure that issues gathered from investigative reports could be passed along
of transparency and beneficiation are always on the agenda to security commissions and departments of justice to hold
when it comes to US–Angola relations. However, advocacy multinationals and Angolan elites to account. Building on Dodd-
should also extend to the governments of other countries, Frank requirements, international advocacy would also include
whose companies are engaged in Angola, such as Norway, to calling on financial institutions to harmonise transparency
provide grants to civil society organisations to promote fiscal requirements for extractive industries in major stock exchanges.
transparency and monitor revenue flows.

9.
6. Promote Angolan-led, media-driven
Promote mechanisms to hold investigative reporting
multinationals to account
When in doubt, follow the money! Global Witness, Human
There have been a few local and international efforts to shine Rights Watch, the Centro de Estudos e Investigação
a spotlight on the practices and policies of multinationals Científica da Universidade Católica de Angola, and Angolan
operating in Angola – such as OSISA’s participation in the transparency activists have performed impactful investigative
True Cost of Chevron Network, international transparency and documentation work on public corruption, and have
campaigns by groups like Global Witness and direct utilised the media as a tool for strategic dissemination. There
engagement between Cabinda residents and Chevron. is tremendous need for additional investigative reporting
However, multinationals in Angola continue to operate and exposés on the oil money trail. Where are Angolan elites
with total impunity. The promotion of mechanisms to hold investing? Where are these companies doing business? Which
multinationals to account would include the provision of banks are holding these funds and which are issuing lines
information about their activities, production levels, impacts of credit? A small team of Angolan-based, professionally-
and resources they channel to government – as well as trained, low-profile, dedicated investigators could uncover
building bridges to engage company officials directly. additional information to buttress national and international
transparency initiatives and advocacy campaigns.

7.
Strengthen institutional capacity 10.
Promote alternative reporting
Angolan institutions with a mandate to regulate the and access to information
industry are weak. They lack trained, skilled employees,
who understand the laws and can implement them. This Public access to information in Angola is challenged by the gov-
work would focus on providing members of the National ernment’s control of traditional mechanisms of mass commu-
Assembly and some of its critical committees, as well as nication. Although not a focus of this report, social media has
key institutions, with access to credible information and served as an important organising tool and as a great equaliser
technical assessments, as well as advice on how to utilise with regards to access to information. Urban-based Angolans,
existing information – including Angola’s own laws – in an in particular, are increasingly using Facebook, Twitter and
effort to enhance oversight. texting. A guerrilla marketing or wild postings campaign could
also be effective in Luanda. [Guerrilla marketing is an adver-
tising strategy that utilises unconventional means to generate
8. buzz. Wild postings are temporary, highly engaging forms
Promote usage of international of street-level advertising]. In the provinces, the provision of
anti-corruption instruments independent radio programmes could be expanded and it could
include political and economic literacy programming on the oil
Anti-bribery, money laundering and corruption laws, like the industry. Similarly, video is a powerful medium with which to
US Foreign Corrupt Practices Act, the OECD Convention on reach a broad audience. Advocacy videos on Angolan inequi-
Combating Bribery of Foreign Public Officials in International ties are few, and even fewer are videos that can break down the
Business Transactions and various EU laws are important tools numbers for people and juxtapose the riches of Angola’s elites
for holding corrupt public officials to account, and holding with living conditions across the rest of the country.

36 Angola’s oil industry operations

 Millions of dollars are being diverted
from the state treasury, either through
institutionalised or straight up corruption.

Conclusion

Angola’s oil production drives an enclave the country’s long term sustainable are put in place. Recent events in
economy that enriches wealthy political development, are instead reinvested by Angola show that if the circumstances
elites and leaves the masses in dire Sonangol in joint ventures and subsidiary are right, external actors can help
poverty. Sonangol exerts undue political businesses, which benefit just an elite to kick-start the process of reform.
and economic power, and institutions to few. Environmental impacts of the NGOs, international organisations,
provide checks and balances are weak. industry go largely unmitigated, while and some foreign governments have all
Sonangol is accountable only to the communities in oil producing provinces played a role in pressing the Angolan
president. There is an obvious conflict of receive no real benefits. government to make itself more open.
interest in that it both administers and In initiating the process of building
regulates the oil sector. The company’s A well-functioning governance system checks and balances, pressure from
transactions with the national budget involves political, economic and overseas complemented the activities
are porous and allow for state funds to legal constraints designed to limit of Angolan civil society. Transparency
be siphoned off. Millions of dollars are misconduct by those in power. In is necessary for accountability. But the
being diverted from the state treasury, Angola, people are poor because the ultimate constraint on any government
either through institutionalised or country’s institutions are dysfunctional – democratic or authoritarian – is its
straight up corruption. Angolan elites and have not provided the needed citizenry, the power of the people.
and public officials are reaping huge checks and balances. Corruption is Transparency informs the citizenry
profits from the legal obligations of just a symptom of the deeper malady of abuses. It does not in and of itself
multinational companies to contract of weak, failed or missing institutions. solve corruption, but it goes a long way
with Angolan companies. Multinational A kleptocracy is unlikely to reform towards speeding up the search for a
companies, for their part, turn a blind itself voluntarily. It must be prodded. solution. By building up knowledge, and
eye to corruption. Oil revenues, which Even if the government does change, broadly disclosing information, about
should be invested in social sectors and it may not be replaced by a better one government misdeeds, transparency can
in diversifying the economy to support unless sound governance institutions empower the citizenry to take action.

Angola’s oil industry operations 37

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Angola’s oil industry operations 39

 List of Abbreviations
APESCAB Associação dos Pescadores de Cabinda
API Angola Partnership Initiative
BAI Banco Africano de Investimento
BNA Banco Nacional de Angola
CEO Chief Executive Officer
CITIC China International Trust and Investment Corporation
CRS Corporate Social Responsibility
DFID Department for International Development
DOJ Department of Justice
EIA Environmental Impact Assessment
EMS Environmental Management System
EITI Extractive Industries Transparency Initiative
FCPA Foreign Corrupt Practices Act
FSA Fundo Soberano Angolano
IMF International Monetary Fund
IMT Incident Management Team
IPA Instituto de Pesca Artesanal e Aquicultura
MPLA Movimento Popular de Libertação de Angola
Minpet Ministry of Petroleum
NGO Non-Governmental Organization
NPD Norwegian Petroleum Directorate
OPEC Organization of the Petroleum Exporting Countries
PAH Polycyclic Aromatic Hydrocarbons
PLD Presidential Legislative Decree
PSA Production Sharing Agreement
QFA Quasi-Fiscal Activities
SADC Southern African Development Community
SEC Securities and Exchange Commission
SIIND Sonangol Investimentos Industriais
Sinopec China Petroleum and Chemical Corporation
SME Small and Medium Enterprises
Sonangol Sociedade Nacional de Combustíveis de Angola
Sonip Sonangol Imobiliária e Propriedades
SSI Sonangol Sinopec International
UK United Kingdom
UNDP United Nations Development Program
UNFCC United Nations Framework Convention on Climate Change
UNITA União Nacional para a Independência Total de Angola
US United States of America
USAID United States Agency for International Development
VOPESCA Voz do Pescador

40 Angola’s oil industry operations

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