Algeria seeks foreign investment to capitalise on its energy deposits

Working oil pumps
Source: DollarPhotoClub

Algeria, Africa’s largest gas producer and supplier of a fifth Europe’s gas needs, is looking for foreign oil explorers to help it explore the country’s mature fields.

After a disappointing round in 2011, when only two contracts out of the 10 offers – one to Spain’s Cepsa and the other to its own state energy firm Sonatrach – were awarded, the government has since passed a new hydrocarbons law to attract investors. The law, passed in 2013, offered tax and contractual incentives, and benefits for unconventional energy investments.

Yesterday, Ali Betata, president of Algeria’s national hydrocarbons agency ALNAFT, told Reuters that, with more than 50 firms joining in the early stages of the new energy round, interest in the potential fields was clear.

“Since we opened the data room sessions, the number of companies seeking different perimeters has not stopped increasing,” Mr Betata said. “From that rhythm of participation of the companies, we can conclude there is certainly interest.”

Among 31 fields that are on offer in the 2014 round, there are some of Algeria’s currently untapped shale resources. Algeria sits atop one of the largest shale deposits in the world, with American Energy Information Agency (EIA) estimating the amount of technically recoverable shale gas deposits at 707 trillion cubic feet.

At present, Algeria lacks infrastructure to develop it’s shale gas resources. The lack of large quantities of water required for shale gas well stimulation (fracking) may also pose a problem.

“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.”

“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.”

Yet some energy exploration firms are still weary of entering Algerian oil and gas fields. An Islamist militant attack in January 2013 on the In Amenas gas plant near the southern border with Libya, that killed 39 foreign contractors, is still fresh in everybody’s mind.
With half of the new fields on offer in the potentially volatile southern part of Algeria, international investor might think twice before sending their contractors to Algeria.

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