China Loaning Sonangol Billions for Oil Projects

China's Sinopec has joint venture with Sonangol; Angola cash-strapped after oil price slump.

China will lend Angola's Sonangol $2 billion to expand oil and gas projects, the state energy company said, helping to cement Beijing's influence in Africa's second-largest oil producer.

The Chinese funds will provide welcome relief for Angola, which has been hit by a nearly halving of oil prices since June, helping send its kwanza currency to an all-time low on almost a daily basis this month.

Oil hit a five-year low of $58.50 a barrel this week but bounced 2 percent on Thursday as energy firms cut investments.

Angola, which relies on oil and gas exports for 60 percent of gross domestic product, has budgeted for an oil price of $81 a barrel next year.

Analysts say this projection is too optimistic and could put Luanda's goal of 8.8 percent economic growth at risk while seeing its budget deficit balloon.

The loan was signed between Sonangol Chairman Francisco de Lemos José Maria and the president of the China Development Bank, Zheng Zhijie, in Beijing on Dec. 12, Sonangol said in a statement. There was no information on terms.

"Chinese funding should support Sonangol's expansion projects in the oil and gas sector," the company said, adding that there were prospects for more financing from China.

China has strengthened its ties with Angola in recent years and the southern African country now sells around half of its 1.7 million barrels per day oil output to Beijing.

Beijing has issued several oil-backed loans to Angola dating back to 2003, a year after the African nation emerged from a 27-year civil war. Prior to this loan, China had lent Angola $14.5 billion since the war's end.

China's state-owned oil company Sinopec has a joint venture with Sonangol, operating several large deep offshore projects.

Sinopec also bought Marathon Oil Corp's stake in a huge Angolan oil and gas field for $1.52 billion last year.

Angola has a long-term goal of raising oil production to 2 million bpd but has been struggling to increase output due to lower oil prices and failed exploration projects.

Norway's Statoil (STO) took a $350 million hit by capping wells in Angola last month after poor drilling results.

By Joe Brock