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Algeria Plans To Increase Its Gas Supply

15.10.2015 / Energyboardroom

Algeria’s domestic gas consumption is expected to rise in the coming years. Whereas in 2013 it consumes an estimated 1.18 Tcf, in 2023 it is expected to consume 1.72 Tcf. Producing enough to meet that demand is becoming a priority for Algeria. Although the country exports a great deal of gas, it must now increase its production to meet domestic demand. But the government is working to meet the challenge.

Despite possessing some of the world’s largest resources of oil and gas, Algeria wants more. “There is a need to considerably expand the nation’s hydrocarbon reserves to meet long term demand, to diversify our energy resources and markets, and to finance the economic development of the country and accelerate industrialization,” explains Youcef Yousfi, Algeria’s former minister of energy. Indeed, estimates suggest Algeria’s GDP will grow at a rate of around four percent over the next decade, with domestic gas consumption set to rise from an estimated 1.18 Tcf in 2013 to 1.72 Tcf in 2023. Dealing with this rise in domestic demand is becoming a priority for Algeria: as one of the world’s leading gas exporters, through LNG tankers and pipelines to Europe, the country must add more annual production in order to meet the demand both at home and abroad. Something has to be done, and fortunately, the government is taking steps to address the challenges.

Increasing supply in a holistic manner starts with exploration, where Algeria still has plenty of potential: according to Sonatrach, Algeria’s NOC, roughly two-thirds of the country remains either unexplored or underexplored. Although some of these resources are to be found in the north of the country and offshore, the majority are still in the south of the country, where Algeria’s biggest fields are already producing. But there is still a lot of gas left in the tank: as of January 2014, Algeria had 159 Tcf of proven natural gas reserves, the tenth largest natural gas reserves in the world and the second largest in Africa behind Nigeria. Algeria’s gross natural gas production was 6.4 Tcf in 2012, a four percent decline from the previous year.

However, Algeria’s stakeholders play down this decline. “The supposed decline in production has been much exaggerated,” says a representative of the Sonatrach management team. “A proper decline would be when you have lost 50 percent of your production capacity. In 2014, we produced five percent more than in 2013, so the gap is not so wide in real terms. Preconceived ideas

of our hydrocarbons industry being in decline are simply not borne out by the facts. We have actually increased our reserve base by a full 10 percent from 2010 to 2014. Meanwhile, we have produced almost an additional 8 million tons of oil equivalent, which leads us to calculate

that our ratio of discoveries to production is in excess of one.”

It is Algeria’s track record with gas that as early on as the 1960s established the country’s reputation for innovation, with the first ever LNG cargoes setting sail from the country back in 1964. “We have a proven track record in commercialization having successfully marketed our

natural gas in all sorts of areas from the US to Europe to Asia,” explains Yousfi.

Despite gas being the main talking point for many in Algeria, the country also has significant oil production and potential – Algeria is a member of OPEC, and in April 2015 produced an average of 1.12 million b/d. Algeria’s main oil reserves are located in a small number of large basins in the south of the country. The majority of proven oil reserves are in the Hassi Messaoud province,

which contains about 71 percent of the country’s 3P oil reserves, and contributed more than 40 percent of the country’s total crude oil production in 2013, which averaged 1.2 million b/d.

It remains to be seen whether recent tax reforms and vast belowground potential will help draw

interest from multinational companies in Algeria’s next licensing round, when weighted against the high level of state involvement, regulatory uncertainty and ongoing regional instability.

To address some of this, new legislation was laid down in 2008 that created a new regulator Alnaft (Agence Nationale pour la Valorisation des Ressources en Hydrocarbures), tasked with running the bidding rounds for new blocks, once the domain of operator Sonatrach. “The hydrocarbon sector

was organized in such a way that it was the national company Sonatrach that had a dual role as an investor and as the owner of field titles,” explains Sid Ali Betata, Alnaft’s president.

“Alnaft launched its first licensing round in July 2008.” Algeria has now completed four of these block auctions under the new system. “The fourth bidding round was conducted against a backdrop of unsteady oil prices and as a result there were a confluence of factors that apparently generated investor cautiousness,” explains Bjørn Kåre Viken, Statoil’s senior vice president for North Africa and country manager for Statoil Algeria. “We can only hope that oil price will stabilize and that the next fifth bidding round will become even more interesting than the fourth.”

Click here to read more articles and interviews from Algeria, and to download the latest free oil and gas report on the country. 

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