More than 50 firms joined in the early stages of Algeria’s new energy round when it hopes new oil law incentives and the potential of fields on offer will draw strong bids, a top energy official said.
Africa’s largest gas producer and supplier of a fifth of Europe’s gas needs, is looking for foreign oil explorers to sign up to help offset stagnating crude and gas output after a disappointing round in 2011.
Increasing output is vital for a government that relies heavily on energy exports for state income and to pay for social programmes, and food and fuel subsidies that have helped keep it stable amid turbulent times for its neighbours.
Ali Betata, president of Algeria’s national hydrocarbons agency ALNAFT, told Reuters interest in the potential fields was clear during the data room meetings for initial due diligence process that closes later this month.
“Since we opened the data room sessions, the number of companies seeking different perimeters has not stopped increasing,” he told Reuters in an e-mail response to questions. “From that rhythm of participation of the companies, we can conclude there is certainly interest.”
Algeria’s last energy auction round in 2011 awarded only two contracts out of the 10 offers – one to Spain’s Cepsa and the other to its own state energy firm Sonatrach.
It was a disappointing result for a North African country that gets most of its energy output from mature fields and needs foreign investment to develop new reserves.
The government has since pushed through a new hydrocarbons law in 2013 it hopes will make the difference, offering tax and contractual incentives, and benefits for unconventional energy investments.
For the 2014 round, 31 fields are on offer, with some of the gas perimeters from Algeria’s shale reserves, which are among the world’s largest and largely unexplored. Algeria has also said it had made some “promising” discoveries among the more than 30 finds last year.
Asked about Algeria’s output, Betata said for 2013 total production would be 192mn tonnes of oil equivalent (TOE), including 121mn TOE of natural gas, 54.5mn TOE of crude oil, and 9.5mn TOE of condensate.
“In terms of production forecast for 2014 and 2015, and considering the start of new deposits, we will record an increase in overall production that may go beyond 200mn TOE,” he said. “This upward trend will continue beyond 2015.”
Still, companies will also be looking at costs and other factors, such as security, when studying the potential of Algeria’s new offers for the auction round later in the year.
Half of the new fields on offer are in southern Algeria, with five in the north.
BP and Norway’s Statoil – partners in the In Amenas plant – have still to fully return their contractors to the gas field, though Algerian officials say they have met all their demands for increased security on the ground. Algeria also has no experience of developing shale gas, which involves new technologies such as hydraulic fracturing and horizontal drilling.
Analysts say there are also questions over how it will develop the infrastructure for shale operations and manage the large water resources required for unconventional drilling. “Evaluation of unconventional hydrocarbon resources is just beginning,” Betata said. “Areas that have been the subject of evaluation work already show considerable potential in unconventional hydrocarbons, both in liquid or gas.”
Betata said according to those initial assessments, technically recoverable resources may reach 30tn cubic meters of gas and 10bn barrels of oil in Algeria.
“With Algeria, it is clear only companies with experience in this area will be allowed to practice such activities in partnership with Sonatrach, and permit the state company to gain from the new experience.” Reuters / Gulf Times