Firing on all cylinders

16 December 2005
Rarely has a country laid out a more ambitious programme for the development of its oil and gas sector. In the next five years, Algeria aims to increase oil production by 43 per cent, boost gas exports by 87 per cent and both expand and diversify its hydrocarbons offering through the development of two new trans-Mediterranean pipelines, an integrated liquefied natural gas (LNG) project, a world scale gas-to-liquids (GTL) plant, a new 300,000-barrel-a-day (b/d) refinery and a comprehensive raft of new petrochemicals facilities.

'Our ambition is to increase oil production to 2 million b/d by 2010 from 1.4 million b/d today, and we are on track to do this,' Energy Minister Chakib Khelil told MEED on 6 December. 'We have made a tremendous effort on exploration in the last four-to-five years. We made 13 discoveries in 2004 and six so far in 2005. We now need to invest more in LNG and natural gas facilities. And we want to diversify our exports.'

'We want to stay in the forefront of the gas industry,' says Mohamed Meziane, chief executive officer (CEO) of state energy company Sonatrach. 'Our objective is to export 85,000 million cubic metres a year [cm/y] of gas by 2010, and 100,000 million cm/y by 2015.'

Central to the government's ambitions has been the introduction of a new hydrocarbons law. The legislation, which was originally tabled in 2002 and finally reached the statute books in July 2005, aims to create a more level playing field for international oil companies (IOCs) and Sonatrach. The state company is stripped of its responsibilities for the oil and gas tendering process and regulation of the sector. In addition, its right to take a 50 per cent equity stake in any project is replaced with an option to take 20-30 per cent and its monopoly of hydrocarbons distribution and transportation is broken.

Relieved of its additional responsibilities, the law gives Sonatrach the freedom to operate more as a commercial entity than as an arm of the state. The transition will be a significant challenge, not least because of the company's cumbersome workforce, but the government is confident that Sonatrach can be a successful commercial player (see box).

'Sonatrach is the 11th-ranked operator in the world and it does a very good job,' says Khelil. 'Maybe it isn't quite as good as the biggest IOCs, but it at least holds rank with the best national oil companies. It has very good liquidity, a very ambitious investment programme and revenues of $3,000 million-4,000 million a year. It is doing a good job of finding oil, and has expanded its operations both here and abroad.'

Focusing increasingly on international markets, Sonatrach has formed joint exploration companies with Tunisia and Libya, and has investments in Niger, Peru, South Korea, the UK and the US. Markets in Africa and South America are under consideration for further development. 'Our target is to reach an overseas production capacity of 120,000-150,000 b/d of oil equivalent by 2015,' says Meziane.

Against the backdrop of the new law, the government has launched or is in the process of launching an array of projects across the whole hydrocarbons spectrum. In the months preceding the law's implementation, Repsol and Gas Natural were awarded the estimated $3,000 million contract to develop an integrated LNG project at Gassi Touil, and the introduction of competition into the distribution and transportation sectors means that such schemes are likely to become increasingly common.

Expressions of interest are being sought in five world-scale integrated petrochemicals projects, set for award in the first half of 2006. 'The new hydrocarbons law allows for the consolidation of upstream and downstream activities, enabling us to have lots more emphasis on petrochemicals than before,' says Khelil. 'We have had a lot of interest in the new projects from IOCs - from France, from t

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