Petroleum Africa
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Monday, January 6, 2014
The North African producing powerhouse Algeria has not seemed like much of a powerhouse lately, with things being pretty quiet on the hydrocarbon front. Currently Algeria sits in the number three spot of African oil producers and is the continent’s number one gross natural gas producer.
The last real news of exploration out of the country came out in early in Q4 2013 when a large oil discovery was announced in the southern region of Hassi Messaoud (although it should be noted that Sonatrach is relatively miserly when it comes to announcements). At the time Youcef Yousfi, Algeria’s oil minister, said that the discovery was one of the most important in the last 20 years and that Sonatrach would rely on unconventional techniques to extract 50% of the reserves, including hydraulic fracturing.
According to reports oil officials and the government are more than optimistic about the coming year, with Sonatrach head Abdelhamid Zerguine telling reporters that Algeria’s energy sector was ready for a turnaround.
The Sonatrach head said production would begin increasing ‘over the next five years’; this would be in spite of its dwindling output and declining interest from foreign firms. Zerguine attributed the industry decline on the country’s awarding of some permits to small operators that did not have the “financial capacity” to meet the requirements of local projects, leaving them “overstretched”. The awarding of permits to small operators could be because the major firms have shown little interest in Algeria since the enactment of stricter terms and a windfall tax in 2006. One round offering ten blocks last year attracted only two interested parties and one of those was Sonatrach.
The government finally received the message that firms were not interested in Algeria under its current terms and planned a legislative turnaround of the industry in order to bring major players back into the fold. At the time the industry was happy to hear of the possible new terms until it became clear that the legislation was not aimed at traditional exploration and production projects, but at exploiting the country’s unconventional potential.
While there is no doubt of Algeria’s current and future potential in both the conventional and unconventional arenas, until Algeria’s problematic terms are addressed most firms will be unwilling to give it a go in this North African nation.
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