Oil majors seeking to explore for oil and gas in Algeria’s most promising areas will have to offer stakes in their overseas schemes to state energy company Sonatrach.
Algiers says companies must have upstream gas assets in Egypt, Nigeria, Libya, Venezuela or Trinidad & Tobago that they are willing to share with Sonatrach in return for a stake in the Ahnet perimeter.
It is the first time a licensing trade-off of this kind has been used in the Middle East.
Oil Minister Chakib Khelil said last year that Algiers could push for access to international projects in return for licences (MEED 18:5:07).
“We do not need the money,” he said. “Sonatrach is flush with money. If it is just a question of depleting reserves, that is not necessarily what we need. If we give access to company X, maybe Sonatrach should get access to reserves somewhere else.”
Confirmation of the trade-off emerged when the Energy & Mines Ministry and Agence Nationale pour la Valorisation des Resources en Hydrocarbures (Alnaft) revealed details of the country’s new licensing round at a meeting on 26 July.
Oil companies received information on each of the 45 onshore blocks and zones on offer, as well as the criteria on each of the licences to be awarded.
The licences are split into two types: those that are open but without an operator; and those that are operated by Sona-trach. Bids for both types of licence will be evaluated and ranked on points.
Bidders will receive 150 points for each exploratory well they commit to drill, 15 points for each 50-square-kilometre 3D seismic study they commit to carrying out, and 10 points for every 100km of 2D seismic study.
On the 18 open blocks, the primary arbiter of bids will be Alnaft. Sonatrach will be the main client for the remaining blocks that it operates.
Sonatrach has placed specific emphasis on the seven blocks on offer in its Ahnet perimeter by attaching particularly stringent prequalification criteria.
In addition to bidders having international assets that they are willing to share with Sonatrach, companies need to have a liquefied natural gas (LNG) production capacity of at least 4 million tonnes a year and an annual gas production of more than 10 billion cubic metres.
The 17,400 sq km Ahnet perimeter lies in the far south of Algeria, southwest of the In Salah gas field operated by the UK’s BP.
It is the most southerly as well as largest of all the perimeters on offer. It is also the most promising. According to Sonatrach, 11 discoveries have been made, with five yet to be developed. A total of 43 wells have been drilled.
Notable fields within the perimeter include Bahr el-Hammar and Garet el-Guefoul.
According to data from the ministry, all but one of the blocks on offer in the licensing round have at least five leads and prospects, and all have been subject to extensive seismic studies.
“Practically everyone in the industry was represented,” says one international oil company executive who attended the recent explanatory meeting. “Interest is high because these kinds of opportunity do not come around very often.”
Bids for each block will be submitted on the morning of 3 December, with the offers opened two hours later. The contracts will be signed on 17 December (MEED 17:7:08). The interest in the bidding round does not appear to have been affected by the controversy surrounding the recent award by Sonatrach of the $4.5bn contract to build a new LNG plant at Arzew.
Sonatrach had selected a low bid submitted by a joint venture of UAE-based Petrofac International and Indonesia’s IKPT. However, it then disqualified the group, saying its offer did not comply with the terms of the tender. Instead, Sonatrach selected the Italian/Japanese consortium of Snamprogetti and Chiyoda Corporation for the contract just three days later on 26 July (MEED.com 27:7:08).
Petrofac sub-mitted a price of AD241.1bn ($3.92bn) when commercial prices were opened publicly on 12 July, 16 per cent lower than the price of AD281.8bn from Snamprogetti.
The offers were evaluated on the basis of the engineering, procurement and construction (EPC) cost per LNG tonne. On that measure, the Petrofac/IKPT offer was AD55,000 a tonne, based on a total capacity of 4 million tonnes a year (t/y), compared with the AD61,000-a-tonne offer, based on a 4.6 million t/y capacity, submitted by the Snamprogetti group.
However, Sonatrach says the low bid did not provide the necessary performance guarantees from the main equipment providers: the US’ Air Products & Chemicals (APCI) and Florence-based GE Oil & Gas.
It also says the lump-sum price had increased by AD16bn from the original amount.
Petrofac responded by saying its bid was compliant, and is seeking clarification from Sonatrach (MEED.com 23:7:08).
All parties involved in the bidding process, as well as the equipment and technology providers, declined to comment on the issue.