Home OIL AND ELECTRICITY ALGERIA – World’s tenth largest gas producer and fourth largest gas exporter

ALGERIA – World’s tenth largest gas producer and fourth largest gas exporter


Algeria is the world’s tenth largest producer of gas and the fourth largest exporter of gas, and only Russia and Norway were already supplying Europe with more energy, as a result of a press release. We learn that most of the flows from Algeria to the continent are transported by tanker to liquefied natural gas (LNG) plants in France or by pipeline to Spain, Portugal and Italy. More specifically, the Maghreb-Europe pipeline transports Algerian natural gas through Morocco to Spain, where it is connected to the Spanish and Portuguese gas networks, while the trans-Mediterranean pipeline transports gas from Algeria to Sicily and Italy via Tunisia. In 2022, Spain and Italy each met a quarter of their annual gas demand from Algeria, and Italy will receive even more gas from Algeria this year, for a total of 25 billion cubic metres (mmc).

Its supply relations with the United States and China have much to do with this position, but it is Europe’s growing dependence on Algerian energy – oil and gas – that has helped break Algeria’s economic slump, A slump caused by the pandemic and the subsequent oil crisis. The African Chamber of Energy (AEC) examines the forces shaping Algeria’s energy industry in its new report entitled “State of African Energy Q1 2023 Report”.

The ways of potential
Oil and gas dominate the Algerian economy, accounting for almost a fifth of GDP. While this means that the nation and its social spending are vulnerable to market volatility, the rebound in energy prices after the pandemic and invasion has helped fund increased hydrocarbon exploration, production and export.

The national oil company (CPN) Sonatrach, which controls about 80% of the country’s oil and gas production, said that about two-thirds of Algeria’s territory remains underdeveloped or unexplored and estimates that there are 100 undeveloped discoveries – promising circumstances given that many of its production basins are mature or declining. Under the leadership of its CEO, Toufik Hakkar, the company has put in place a $40 billion five-year plan to capitalize on upstream and downstream potential. Of that, about three-quarters, or $30 billion, is for exploration and production. Investment in exploration is already bearing fruit, good news when we know that Algeria has not experienced an increase in its hydrocarbon reserves since 2010.

In the first quarter of 2022 alone, Sonatrach made six hydrocarbon discoveries in the Algerian Sahara, bringing the total number of discoveries since 2020 to 41. Among the most recent discoveries is gas condensate in two reservoirs in the Illizi basin, near the Libyan border, a gas potential in a reservoir in the Béchar basin, in northwestern Algeria, and crude oil in the northern region of the Berkine Basin, a discovery made in partnership with the Italian oil company Eni, which has been present in Algeria since 1981 and is the largest international oil company (IOC) operating in that country.

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However, none of these discoveries approached, in terms of magnitude, the massive discovery near the giant Hassi R’Mel field and its infrastructure. This is the largest gas discovery in Algeria in two decades and is believed to contain up to 12 trillion cubic feet of reserves. Sonatrach is accelerating its development in the hope that production will not only replace Russian gas for Europe, but also strengthen Algeria’s shaky financial regime.

In an email interview with S&P Global, Hakkar said the company “plans to supply the gas market with more than 110 billion m3 per year until 2027 to meet domestic and export demand.”

New laws, new partners
In addition to Eni, Sonatrach has established partnerships with other major international groups, including Western American, French TotalEnergies and Chinese Sinopec. According to the International Trade Association, more than two dozen international oil companies are currently working on more than 30 major projects in Algeria.

Many of these agreements were concluded following the adoption of the Algerian Hydrocarbons Act in December 2019, which ended a decade of damage caused by previous regulations that imposed high taxes on foreign oil companies and made the sharing of contracts with Sonatrach unattractive or even unprofitable.

In contrast, the new law, which aims to create a favourable environment for foreign investment, reduces tax rates, removes tariffs and taxes on exploration and production equipment imported into the country and improves regulatory conditions. It has also given Sonatrach full authority over oil and gas contracts in the country, eliminating the former contract regulator, ALNAFT. The new rules also allow an international oil company to enter into one of three types of contracts: a participation agreement, a production sharing agreement or a risk service agreement. Previously, the CIOs could only conclude an outdated system of production sharing.

An uncertain future?
Clearly, new discoveries and regulatory reforms are great news for Algeria and its economy – and potentially for a Europe that is trying to wean itself off Russian energy.

But it is too early to know what the lasting impact will be. For example, the report “The State of African Energy Q1 2023 Report” describes how OPEC+ production cuts have affected Algeria, who joined OPEC in 1969 and considers it his duty to follow the organization’s guidelines on cap-and-trade.


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