OIL & GAS

Angola takes charge
03/21/12, Biodun Omojola

Angola's lawmakers have approved a law compelling overseas oil companies to pay their taxes and make other transactions through the country's banking system. This means new oil companies operating in Africa's second largest crude producer after Nigeria will have to pay their taxes and their bills from overseas sub-contractors and suppliers in dollars through local banks. Analysts say government has shown doggedness in winning its long battle with the oil companies to force them to use local banks. Angola is now the focus of various foreign oil companies because of Nigeria's inability to quickly pass oil its legislation. Foreign companies see the huge finds in Angola's ultra-deep water blocks known as sub-salt worth investing in and are doing so.

Until now, international oil firms were allowed to use overseas banks for their activities in Angola under a special regime, mainly because the African country's banking system was seen as still developing and unable to handle the transactions. The wording of the bill shows government believes the national financial system has developed sufficiently to take an active role processing the oil industry's transactions.

Analysts are of the view that Angola's banking sector is solid, with its banks well managed and boasting resilient asset quality. The country's main banks, which include state-owned Banco Africano de Investimento and local units of Portugal's Banco Espirito Santo and Banco BPI, are set to get a capital boost from the law. About $10 billion could enter the financial system of Africa's second largest oil producer each year due to this law.

Angola's economy relies heavily on oil revenues, which make up around 45 percent of gross domestic product and over 90 percent of export income. The new law, according to Angola's Central Bank will help shore up the country's foreign reserves, an effort seen as crucial to protect the economy from the risk of shocks from possible oil price and demand drops. Oil majors including Britain's British Petroleum, Italy's Eni and France's are among the international majors that were awarded concessions to explore promising ultra-deep water blocks.