March 8, 2018 / 4:49 PM / 5 months ago

UPDATE 2-Angola to launch big oil block under shadow of OPEC cuts

(Adds details on timeline, long-term outlook)

By Libby George

LONDON, March 8 (Reuters) - The first vessel that will pump and store oil for Angola’s 230,000 barrels per day (bpd) Kaombo project is en route to the West African nation, operator Total said.

The Kaombo oil block will produce its first oil this summer, Total said on Thursday. Once it is fully up and running, it will add roughly 14 percent to the OPEC member’s average 2017 output of 1.632 million bpd.

The Kaombo Norte floating production, storage and offloading (FPSO) vessel left Singapore earlier this week, Total said. It can pump 115,000 bpd, half the oil block’s eventual production.

The $16 billion offshore project will add a significant amount of oil to Africa’s number two exporter at a time when it is bound by output limits under a deal orchestrated by the Organization of the Petroleum Exporting Countries.

A source close to the project said the block was expected to pump roughly 100,000 bpd by August.

Another FPSO, Kaombo Sul, is still in Singapore.

OPEC is reducing output by roughly 1.2 million bpd as part of a deal with Russia and other producers that began in January 2017 and was extended until the end of 2018.

So far, Angola has complied comfortably, pumping even less than the maximum agreed. Last month, its output of 1.6 million bpd amounted to 194 percent of compliance with promised cuts of 78,000 bpd.

Declining production at mature fields has cut into Angola’s output, but the Kaombo addition could complicate efforts to maintain compliance.

Angola’s state oil company Sonangol has said production will be roughly steady this year, and the above-target cuts earlier in the year could keep its average compliance for the year within OPEC’s limits.

Longer term, Angola is expected to struggle just to maintain output, with the International Energy Agency (IEA) warning that only Venezuela will see a bigger drop in production over the next five years.

Angola’s oil production peaked at 1.9 million bpd in 2008, the IEA said, warning in its five-year outlook that capacity will drop by some 370,000 bpd by 2023 even with the new projects.

“Angola is expected to post the biggest slide in capacity after Venezuela as ageing oil fields lose steam and foreign investors, faced with relatively uncompetitive prospects, lose enthusiasm,” the IEA said. (Reporting by Libby George Editing by Susan Fenton/Mark Potter/Alexander Smith)

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