‘THE other oil companies are all waiting to see what we can do,’ said a British Petroleum Company (BP) official in summer 1995. His company was negotiating an exploration and production sharing agreement for the In Salah gas field, eagerly watched by other oil companies. Events have proven him right. BPs signature in December triggered a wave of other agreements with international oil companies, proving Algeria by far the most attractive hydrocarbons province in the Middle East for international investors. Renewed threats by Islamist militants against anyone working in the oil industry have not deterred investors. On the contrary, several are already in negotiations with state energy company Sonatrach for more production sharing agreements likely to be signed this year.

The novelty of BP’s contract was that it opened gas production to foreign investors Just a month later, Sonatrach agreed to a second gas production scheme, with France’s Total and Spain’s Repsol.

The joint venture is to invest $850 million to develop and exploit the Tin Fouye Tabankort gas field. Development work, scheduled to take three years, will involve drilling an extra 30-50 wells, boosting production at the existing 30 wells and building a liquefied petroleum gas (LPG) separation plant to process the Tin Fouye wet gas. The $600 million engineering and construction contract was awarded to the US’ Brown & Root.

Sonatrach only holds a minority stake of 35 per cent and will carry its share of the investment cost. Total, with a 35 per cent holding, will operate the field, and the remaining 30 per cent is held by Repsol. The LPG and condensate output will also be shared according to their equity participation and Sonatrach will receive all dry gas. This clause in the contract will enable it to meet its commitments to Spain and Portugal from 1997.

Sonatrach is already negotiating its next gas production sharing agreement, with Exxon of the US. Exxon will follow BP’s initiative in more than one way: it wants to produce gas in district 3, the virgin area BP will open up. It has given no details of its plans, but the negotiations are understood to concern exploration of gas fields at In Salah not covered by the BP contract and possibly several joint projects. The US’ Enron is understood to be interested in a wet-gas project, in the In Amenas region.

Arco arrives

The other production sharing agreement signed in 1996 is for oil production. Arco of the US is to invest $1,300 million to rehabilitate the Rhourde el-Baguel field using production enhancement technology. The field is the country’s second largest, with further reseves of 3,000 million barrels’. It currently only produces 25,000 barrels a day (b/d). Arco is to lift the production level to a peak of 125,000 b/d with additional wells and gas injection. It expects to produce more than 500 million barrels over the 25-year life time of the project. Sonatrach holds 51 per cent of the field and will receive the same proportion of the output. The remaining 49 per cent of oil goes to Arco. So attractive was the project that Arco was willing to pay Sonatrach a signature bonus of $225 million.

The next oil production sharing agreement is expected to be with the US’ Anadarko, which has been negotiating to develop the Hassi Berkine and Hassi Berkine South fields since 1994. Anadarko is waiting for its provisional exploration authorisation, but it has budgeted $94 million for development work on the two fields in 1996. The full development project, for a capacity of 250,000 b/d, is estimated to cost $1,000 million. The initial phase will involve producing 40,000 bid.

Other development work is planned under production sharing agreements signed recently. Cepsa of Spain is preparing to develop a second field in its Rhourde Yacoub permit, raising production there to 70,000 bid by the end of 1996. Italy’s Agip is preparing a development plan to appraise the Zemoul el-Kbar field in block 403, ahead of full-scale development. It is to decide on the initial production capacity in the first quarter of 1996.