Home Economy Will Algeria Be a Top Energy Producer in 2023? Evidence Points in a Positive Direction (By NJ Ayuk)

Will Algeria Be a Top Energy Producer in 2023? Evidence Points in a Positive Direction (By NJ Ayuk)

by Hope Jzr
0 comment
A+A-
Reset

By NJ Ayuk, Executive Chairman, African Energy Chamber (https://EnergyChamber.org)

When Europe began searching for alternatives to Russian oil and gas following that country’s invasion of Ukraine, one of the producing countries they focused on was Algeria.

The decision made strategic sense from both a supply and access standpoint. Algeria is the world’s 10th largest global gas producer and fourth largest gas exporter, and only Russia and Norway were already supplying Europe with more energy. Most of Algeria’s flows to the continent travel 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 connects to the Spanish and Portuguese gas grids while the Trans-Mediterranean pipeline carries gas from Algeria to Sicily and Italy through Tunisia. In 2022, Spain and Italy each met one-quarter of their annual gas demand from Algeria, and Italy will be getting even more gas from Algeria this year, for a total of 25 billion cubic meters (bcm).

Algeria also has supply relationships with the U.S. and China, but it was Europe’s growing dependence on Algerian energy — oil as well as gas — that helped snap Algeria’s economic slump, a downturn brought on by the pandemic and subsequent oil price shock.

The African Energy Chamber (AEC) looks at the forces shaping Algeria’s energy industry in its new “State of African Energy Q1 2023 Report.”

Pathways to Potential

Oil and gas dominate the Algerian economy; the sector represents nearly one-fifth of GDP. And while that means the nation and its social spending are vulnerable to market volatility, the post-pandemic, post-invasion rebound in energy prices have helped finance an uptick in hydrocarbon exploration, production, and export.

National oil company (NOC) Sonatrach, which controls about 80% of the country’s oil and gas production, has said that about two-thirds of the Algerian territory remains underdeveloped or unexplored and estimates there to be 100 undeveloped discoveries — promising circumstances given that many of its producing basins are mature or in decline. Under the leadership of CEO Toufik Hakkar, the company has rolled out a $40 billion, five-year plan to take advantage of both upstream and downstream potential. Of the total amount, about three-quarters, or $30 billion, is earmarked for exploration and production. The investment in exploration is already paying off, welcome news considering Algeria hasn’t experienced an increase in hydrocarbon reserves since 2010.

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

None of those came close in magnitude to the massive find near the giant Hassi R’Mel field and its infrastructure, however.  Algeria’s largest gas discovery in two decades, it is believed to hold as much as 12 trillion cubic feet of reserves. Sonatrach is fast-tracking development with hopes that production there will not only replace Russian gas for Europe but will further shore up Algeria’s shaky financial regime.

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

New Laws, New Partners

In addition to Eni, Sonatrach has established partnerships with other international majors, America’s Occidental, France’s TotalEnergies, and China’s Sinopec, among them. The International Trade Association says there are currently more than two dozen IOCs working on upwards of 30 significant projects in Algeria.

Many of those deals followed passage of Algeria’s hydrocarbons law in December 2019, which reversed a decade of damage caused by earlier regulations that imposed high taxes on foreign oil companies and made contract-sharing with Sonatrach unpalatable, if not unprofitable.

By contrast, the new law, aimed at creating an enabling environment for foreign investment, reduced tax rates, removed customs duties and taxes on exploration and production equipment brought into the country, and improved regulatory conditions. It also put all authority for the country’s oil and gas sector contracts into Sonatrach’s hands, eliminating the former contractual regulator, ALNAFT. New rules also allow an IOC to enter into one of three types of contracts — either a participation agreement, a production sharing agreement, or a risk service agreement. Previously, IOCs could only enter into an outdated production-sharing system.

Future Unclear?

Obviously, new discoveries and regulatory reforms are incredibly good news for Algeria and its economy —and, potentially, for a Europe trying to wean itself off Russian energy.

But it’s too early to tell what the lasting impact will be. For example, “The State of African Energy Q1 2023 Report” describes how OPEC+ production cuts have affected Algeria, which joined OPEC in 1969 and considers itself duty-bound to follow the organization’s quota-capping directives.

To learn more about Algeria and how its oil and gas sector will fare going forward, download the “AEC’s The State of African Energy Q1 2023 Report,” which will be available soon at https://EnergyChamber.org.

Distributed by APO Group on behalf of African Energy Chamber.

Source : https://www.zawya.com/en/press-release/africa-press-releases/will-algeria-be-a-top-energy-producer-in-2023-evidence-points-in-a-positive-direction-by-nj-ayuk-jjozbu88

You may also like

Leave a Comment

Quick Links

About Us

A team of volunteers under the supervision of HOPE JZR founder of the site, animated by the desire to sow hope by proposing effective solutions to existing problems through your contributions in the different sectors in order to converge all towards a new Algeria, an ALGERIA ALGERIAN, plural and proud of its cultural diversity. FOR MORE INFORMATION PLEASE VISIT MENU «ALGERIAN ALGERIA»

Who We Are

Hope JZR, founder of the site and also owner of the eponymous YouTube channel, has gathered around his project a team of volunteers from the national territory and the diaspora with profiles as diverse as they are varied, a circle of patriots that only holds, to you and your enthusiasm to expand. Indeed, we invite you, all compatriots with a positive and constructive mindset to join us, through your contributions, in this adventure of defense and construction of a new Algeria.

What We Do

We work continuously and scrupulously to provide the public with reliable, objective and eminently positive information. Faithful to the founder’s credo of “sowing hope”, our ambition is to create an enthusiastic dynamic (without pouring into euphoria), federating competencies in the service of their homeland. Our publications, as you will notice, will always highlight positive performances and achievements in different fields, and also reflect our critics whenever we see problems affecting the lives of our fellow citizens, providing adequate solutions or calling for our elites to help solve them.

Our Mission

Our unique goal is to make this platform the first in Algeria to be devoted exclusively to positive information that sows hope among our youth and entice them to participate in the development of our country. The building of this new Algeria of which we dream and to which we aspire will be a collective work of all citizens jealous of the greatness of their nation and its influence. It will be the guarantor of the preservation of its independence and sovereignty and will honor the legacy and sacrifice of our valiant Chouhadas.

© 2023 – Jazair Hope. All Rights Reserved. 

Contact Us At : info@jazairhope.org

Letest Articles