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* Debts to China climb to an estimated $25 billion
* Angola has less oil to sell to plug budget holes
* Other nations which borrowed using crude also faceproblems
By Libby George
LONDON, March 14 (Reuters) - Angola has found itself with adwindling amount of crude to sell as more of its oil flows toChina for debt repayment, leaving little revenue for anythingfrom oil sector development to health care in one of Africa'slargest oil exporting nations.
Following a trend also seen in Iraq, Kazakhstan, Russia andVenezuela, Angola has tied up more of its output in pre-financeddeals to bridge a drop in income due to the 70 percent fall inoil prices in the past 18 months.
The price slump means the Western oil majors which managethe fields and platforms that help Angola export 1.8 millionbarrels per day are also taking more oil in return for theirinvestment and services.
Countries with oil often use it as collateral for loans, andduring a previous oil price collapse, in 2008, the processhelped to tide many over until better times. But this time mostexperts say the rout will continue until at least next year.
As recently as five years ago, just over half of Angola's50-60 monthly cargoes went toward paying oil majors, with as fewas four to five cargoes going to pay back prefinanced deals,leaving the country's state oil company, Sonangol, with as manyas two dozen to sell on the market or to term buyers withongoing contracts.
Through a series of conversations with at least six oiltraders, Reuters found the number had been cut by more thanhalf, to fewer than 10.
Part of that was because more has been going to Western oilmajors such as Total, Chevron and BP due to the price fall.
No one foresaw the price collapse when the contracts werewritten, said Readul Islam, analyst with Rystad Energy. "Therewere no clauses in the contract about what happens to the profitsharing when prices dropped so low."
But another drain on Angola's oil was a fresh round ofprefinancing from China that more than doubled the number ofcargoes sailing east as repayment from February. The deal,struck with China's state-run Sinochem Group in December,involved as many as six cargoes per month, on top of three tofive already earmarked for fellow Chinese firm Unipec.
The deals with China by the MPLA party that has ruled Angolafor almost four decades financed infrastructure and also helpedsecure an important new outlet to make up for declining U.S.demand due to the shale revolution. http://tmsnrt.rs/24UIAGw
But its oil-backed debts are now estimated to have balloonedto $25 billion.
The December agreement was shrouded in secrecy; traders saidit involved at least $5 billion in advance financing to berepaid with oil, while some said it could have aimed atrestructuring older debt.
Roderick Bruce, principal energy analyst for West Africawith IHS, said in principle the lower the oil price, the morecrude it costs to service debt.
"That's an increasing amount of crude that can't be sold todirectly fill government coffers," Bruce said.
LITTLE FREE OIL
Existing contracts meant Angola had only one cargo to sellon the spot market in February, traders said, crimping itsability to generate cash when needed and ability to set pricesfor its term buyers.
A source close to Sonangol said it still had someflexibility to sell oil directly on the market.
It could get other loans, or refinance deals to limit theamount of crude paid to lenders, the source said, and hadalready dropped some contracts with term buyers who had notprefinanced them to keep back three to six cargoes each month.
In March, it got two or three and in April six, but some ofthat may reflect delays in meeting commitments under continuingcontracts which it will have to make up for later in the year.
Traders and analysts said between Sonangol's preexistingproblems and the precipitous drop in oil prices, the situationlooked difficult.
"They should be hearing alarm bells," Islam said.
The company did not respond to a request for officialcomment. Last month it said its net debt to foreign oilcompanies had risen 41 percent year-on-year in 2015 to $7.8billion and it expected this year to be "very difficult".
President Jose Eduardo dos Santos, who has ruled Angola for36 years since shortly after independence from Portugal, askedChina for a debt repayment freeze late last year, as thedebt-to-gross domestic product ratio hit around 46 percent.
The finance ministry is negotiating a new loan with theWorld Bank, but spending is already 40 percent lower than twoyears ago and cuts to rubbish collection and water sanitationhave spread disease in a country six places from the bottom ofthe World Bank's index of inequality.
The government forecasts a budget deficit of around 5.5percent of gross domestic product in 2016, based on oil pricesof $45 per barrel; Brent crude this year has thus far peaked at$41.48 and analysts say it could be subdued all year.
Last week, ratings agency Moody's placed the country'scredit rating under review, threatening a downgrade further intojunk territory.
Angola's oil woes are not unique: Iraq has built up debts ofover $2 billion to oil majors after it said budget needs meantit could not hand over increasing volumes of crude; Venezuelahas billions of dollars in oil-backed Chinese loans while Russiaand Kazakhstan borrowed heavily from oil traders Vitol andGlencore.
With a limited amount of other assets to leverage, there islittle room for manoeuvre.
"Probably, there is no way out of this dilemma for manycountries," one source familiar with the situation said, addingthey would have to learn to live with less oil to sell.
(additional reporting by Dmitry Zhdannikov; editing by PhilippaFletcher)
