After years of declining external interest, Algeria could again welcome international oil and gas investment
Algeria may finally be about to reverse its waning fortunes as an oil and gas investment destination, as the government vows to pass a new hydrocarbons law to woo companies back.
The country is also turning its attention to further shale gas exploitation.
This month it emerged that state energy company Sonatrach is in talks with ExxonMobil and Shell for new partnerships to help tap what Sonatrach reckons to be 600 trillion cubic feet of recoverable shale gas reserves yet to be developed.
The new partnerships will be similar to the agreements signed earlier with Italy’s Eni and Canada’s Talisman Energy.
While Exxon went big on shale, buying XTO Energy to become the US’s largest shale gas producer, Shell has had comparatively little exposure to shale gas operations.
Youcef Yousfi, Algeria’s energy minister, is enthusiastic about shale gas prospects in the country. He says Algeria intends to launch a licensing round, including offshore blocks for the first time, within the next two years.
For Algeria, a shale gas boom would have little effect on domestic supply, which is already plentiful and heavily subsidised.
Instead, the effect would more likely be a decline in gas prices in Europe, which already gets much of its gas from the country, and see Algeria a key source of future gas supply.
Updates
E.ON recently announced further tight gas and oil discoveries in the Rhourde Yacoub license area, following the drilling of seven exploration wells.
In 2011 Petrofac was awarded a $1.2 billion lump-sum EPC contract by In Salah Gas (ISG), an association between Sonatrach, BP and Statoil, to develop the Garet el Befinat, Hassi Moumene, In Salah and Gour Mohmoud fields in the south.
Work includes a new central production and gas gathering facility at In Salah comprising two dehydration trains, with the capacity to produce approximately 16.8 million cubic metres of gas per day.
In Salah is also home to an industrial-scale CCS project which has been in operation since 2004. Three million tonnes of CO2 have been sequestrated to date, and BP, Sonatrach and Statoil aim to bury a further 14 million by 2024.
French seismic player CGGVeritas is making a comeback in Algeria with its first onshore survey award in the North African country since the 1990s.
High-end proprietary 3D Vibroseis survey is to be carried out over a 2240 square-kilometre area in the Timimoun block in the south, for a JV of Sonatrach, Total and Spain’s Cepsa, which are hunting for unconventional gas.
It’s not just Algeria’s gas resources that are drawing large upstream companies back.
Partners Anadarko Petroleum and Maersk Oil will receive additional crude volumes from their Algerian production after settling a long-running tax dispute with the government, an encouraging sign that attitudes in Algeria are changing.
Law Reform
Yousfi says that a new hydrocarbon law is needed, as the last one was passed in an era of $20-30 barrel oil. Current oil and gas laws have turned the once foreign- investor friendly country into a backwater upstream destination. Yousfi says this will be addressed by the end of 2012.
In addition to the equity stakes between private sector partners and Sonatrach, the government is said to be reviewing taxation and technology sharing requirements.
“We have to guarantee local supplying security on the long term, as well as preserving the key role of Algeria in the international energy market,” Yousfi said in March.
