Angolan President Joao Lourenco (L) starts the pump of Kuito water supply project in Kuito, Bie Province in central Angola on Oct. 19, 2019. The Chinese-built water supply project is expected to benefit more than 160,000 people in central Angola. (Photo by Qiang Xingxing/Xinhua)

Angola has promised to increase oil shipments in August and September to ensure that it makes its total shipments in the third quarter to Unipec, after cancelling three oil shipments for July that were supposed to pay down debt from China, a source close to the matter told the Global Times on Monday. 

Unipec is the trading arm of the Chinese giant Sinopec, and it is one of two companies that import oil from Angola as repayment for state-backed loans from China other than Sinochem.

The three oil cargoes originally planned to be shipped in July to Unipec will now be delivered in August and September, the source said. Eight tankers usually bring oil to Unipec every quarter, and Angola has promised to maintain that number through the end of September. 

About 10 oil cargoes are scheduled to be shipped to China every month under a long-term, oil-backed loan agreement - three to Unipec, seven to Sinochem. 

The two companies' payments for the oil are usually made directly to China's two main banks that finance overseas development, China Development Bank (CDB) and the Exim Bank of China, to repay Angola's debts.

Under heavy pressure from the coronavirus pandemic, Angola decided in late May to cancel the July shipment to Unipec. According to the source, Angola made the decision in May to suspend the July shipment, but said it intends to adhere to the long term agreement. The seven oil cargoes scheduled to be shipped to Sinochem were cut to five. 

Angola and China have had an oil-backed loan agreement for more than a decade, and the African country has been paying back China's Exim Bank with oil since 2004. It has more than $20 billion of bilateral debt, most of which is owed to China, according to Reuters. 

As China's biggest and most stable oil source in Africa, Angola ranked third in the total volume of oil exported to China in 2018, after Russia and Saudi Arabia. Oil production and its supporting activities contribute about 50 percent of Angola's GDP and about 89 percent of its exports.

The cancellation of the July shipment was seen as an effort by the indebted country to seek a suspension in servicing its debt to China. Under the influence of the COVID-19 outbreak and a sharp plunge in global demand, April saw the price of crude oil futures drop below zero for the first time in history, significantly constraining Angola's income. 

Angola's ability to export and cash in on its oil production has also been hit by the decision of the Organization of Petroleum Exporting Countries (OPEC) to slash oil output by 9.7 million barrels per day (bpd) in May and June, which translates into a cut from 1.39 million bpd to only 1.18 million bpd in Angola.

Under immense financial pressure, Angola is also in negotiations with the members of the G20 requesting debt relief under the G20 Debt Service Suspension Initiative. On Sunday China announced that it will suspend the debt repayment of 77 developing countries and regions in response to the G20 initiative.