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Angola Energy Review Launch

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					            Ambassador William C. Ramsay
              Deputy Executive Director

             International Energy Agency

        ANGOLA ENERGY REVIEW LAUNCH
     SEPTMEBER 25, 2006 – LUANDA, ANGOLA

Deputy Prime Minister Aguinaldo Jaime, Honourable
Ministers, Vice Ministers, Ambassador Cynthia G.
Efird, Ambassador Ralph Publicover, Ladies and
Gentlemen,

The importance of energy to Angola

It is a pleasure and an honour to be with you here
today as the representative of the International
Energy Agency to mark the publication of our in-depth
review of Angolan energy policy.

For anyone in the energy field, Angola is a land of
intriguing contrasts, complexities and challenges. You
are blessed with substantial oil and gas reserves which
make you the second largest oil producer in sub-
Saharan Africa and a major player in world oil
markets. On the other hand, following twenty five
years of civil war, too many of your citizens do not
have access to the reliable energy they need for their
daily lives. Electricity is available to less than twenty
percent of Angolans and that electricity is not

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sufficiently reliable. Most Angolans rely on wood or
charcoal for their household needs but charcoal is
damaging your forests and your citizens’ health.

The energy sector is essential to meeting the
aspirations of all Angolans for higher living standards.
I know that government and industry already have
substantial developments underway, but this is a tough
challenge and there is much to do.

Why is the IEA involved?
So we in the International Energy Agency were very
pleased to be able to respond to the request of the
government of Angola to provide our assessment of
the elements of a viable energy policy and to identify
key    priorities.  We    recognise   the   important
contribution Angola makes to supplying world markets
with oil-and in future, we hope gas as well. But
greater access to modern energy services for all
Angolans and improved quality of life should be the
logical consequence of this contribution and are
necessary to sustain it.

We adopted the model of peer review that we
regularly use within the IEA to critique each others’
energy policies. Our Member countries find that their
policy development benefits from the informed but
independent assessments the IEA can bring to their
thinking.

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So last year an IEA team of energy experts visited
Angola and held a broad range of in-depth discussions
with Angolan authorities, the private sector and the
international community here. We needed to
understand your views on the state of energy
development in the country and your plans and
aspirations for the future. The team then formed its
own independent judgment, just as we would do in
assessing one of our own member states.

 The publication we are presenting today is the result
of the team’s work. The book is entitled: Angola;
Towards an Energy Strategy.

The Review’s recommendations
Let me turn to the team’s key findings and some of
our recommendations. We focused the report on those
energy sub-sectors likely to play the largest role in
meeting domestic demand for modern energy services,
notably electricity and domestic demand for oil
products. Given the extremely large role biomass
currently plays in meeting the bulk of household
energy needs, this sub-sector. is also featured, with
emphasis on improving the sustainability of biomass
use.




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The Review recognizes that Angola has embarked on a
massive programme of general reconstruction, with
considerable focus on the energy sector. In Angola;
Towards an Energy Strategy we offer the government
our perspective and energy expertise on what we feel
to be the top priorities to be addressed to achieve a
sustainable energy future for the people of Angola.

Electricity is key. It is the leading indicator of
growing prosperity and the principal driver of a
modern society.       Improving access to electricity
services throughout the country is critical to Angola’s
economic and human development. The Review proposes
integrated solutions which take into account both the
supply and the demand side of the problems. The
electricity sector requires significant investment but is
currently not able to generate sufficient funds. Not
only do tariffs not cover costs, but collection rates on
bills are low. While raising tariffs is important, simply
raising tariffs may in fact aggravate the non-payment
problem if higher tariffs are not accompanied by
better service and by efforts to improve billing and
collection.

We therefore recommend, as a priority, that
collection rates of electricity bills be improved before
new tariffs are established in the electricity sector.
Priority investment is needed to improve information
systems in the sector, at least the implementation of

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reliable metering throughout the system. A rational
rate structure, metering systems and more effective
collections are essential to building a viable national
electricity business.

The Review recognises the importance to the Angolan
economy of revenues from the upstream oil sector. It
is critical that this sector continues to run smoothly.
The Review recommends that the upstream oil sector
be further strengthened by ensuring that the
regulatory framework provides sufficient stability for
the effective execution of existing contracts and the
continued attraction of foreign investment. The
Review also encourages the Angolan government to
continue its efforts to improve transparency in the
management of oil revenues. The country’s economic
and social development will rise or fall on how Angola
manages its oil revenues..

But the downstream supply of oil products to citizens
across the country presents even greater challenges.
Oil product prices are fixed below cost and are
uniform throughout the country, thus giving few
incentives to private companies to engage in their
distribution and sale. The only incentive to shipping oil
products across the country is to smuggle them into a
neighboring country where prices are higher. This is
a direct loss to the Angolan treasury and the Angolan
people. The Review therefore advises the Angolan

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authorities to continue their efforts       to liberalise
product prices, which ideally should      reflect world
levels plus the cost of transportation.   Investment in
transportation and oil product storage    infrastructure
is also a priority.

The Review further notes that in contrast to the oil
sector, the gas sector in Angola is underdeveloped.
Opportunities are being missed. To encourage vibrant
development it will be particularly important for the
government to present a clear gas development
strategy which will informto potential investors what
their rights and obligations are in participating in the
development    of    the    gas   industry.    Effective
implementation of the government’s policy to reduce
flaring not only makes economic sense but will also
bring significant environmental benefits.         Taking
advantage of that gas requires that investors
understand the rules of the road.

The Review also highlighted household needs leading to
the widespread usage of biomass as the primary fuel
for heating and cooking. Some 80% of Angolans rely
on biomass for most of their energy needs. But as the
woman on the cover of the book knows better than
any, gathering wood consumes a great deal of time
and energy that could be put to other productive
purpose.    In addition, the production of charcoal
contributes substantially to deforestation. We suggest

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that problems such as pollution and health-hazards
linked to such a high level of biomass consumption be
tackled within the wider framework of household
energy needs, in particular by recognising firewood
and charcoal use as a response to the lack of energy
alternatives. More people die in the world because of
smoke inhalation from traditional biomass than die of
malaria. Rationalising traditional biomass use is one
area requiring very close coordination between all
government departments.      This is not easy in any
government.

A final set of recommendations, and this may seem a
bit prosaic, but it is quite impossible to develop sound
government     policy    without   reliable   statistics.
Throughout the Angolan economy, the quality and
overall coverage of statistics needs considerable
improvement. The Review recommends that the
Angolan government should improve its capability to
collect, analyse and disseminate relevant statistics in
the energy and other sectors. Policy making would also
be strengthened by greater data sharing between
government departments. For example, it is impossible
to measure traditional biomass use without data from
rural development, the health sector, road transport
and forestry.       In this endeavour, the Angolan
government may wish to seek the assistance of
international institutions. We would be pleased to
help.

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This Review has been a truly collaborative effort
between the IEA and the Angolan government. But I
have to admit that coming up with a sector analysis
and policy recommendations is the easy part. We
hope that our report will be useful to the Angolan
authorities as they reflect on whether and how to
follow up its various recommendations. Governments
often get conflicting recommendations and must decide
which are most appropriate to the circumstances.
We hope that you will find our perspectives useful.
We also hope that the depth of analysis we have
provided here will help the wider international
community, including potential investors and financial
institutions to understand better the opportunities and
challenges you face here in Angola. We will share our
conclusions broadly among our Members and beyond in
an effort to inform and interest them in providing
assistance to help you meet your challenges.

Finally I thank once again, all those who helped us
produce what we hope is a useful and informative
Review, in particular the Deputy Prime Minister
Aquinaldo Jaime, ably assisted by Dr. Olim Neto. In
addition, I would like to thank the governments of the
United Kingdom, the United States and Portugal and
their Embassies here for the support they have given
in this endeavor. Your continued encouragement and
assistance have been vital to its success.

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Thank you for your kind attention.




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