Oil & Gas Special Report: Algeria loses market share

10 January 2011

Algeria’s hydrocarbons sector has experienced a dramatic turnaround in fortunes over the past couple of years

Having built the world’s first liquefaction unit and begun liquefied natural gas (LNG) exports in 1964, Algeria quickly built up a dominant position in the European LNG market.

With Europe increasingly vocal in recent years about its desire to reduce its reliance on imports of gas from Russia, the North African state was well placed to plug the gap with plans for major pipelines to Spain and Italy. In March 2009, then energy minister Chakib Khelil pledged to spend $69bn on energy projects by 2009 and as much as $120bn by 2020.

However, state-energy firm Sonatrach has in the past 12 months been dogged by corruption investigations that have derailed investment plans, stalled projects and seen multiple changes in personnel. Khelil himself was removed from his post in May 2010.

Concerns are now emerging over the condition of Algeria’s hydrocarbons infrastructure with reports that maintenance has been neglected with serious consequences. Production is understood to be well below capacity and the country’s share of global gas sales is declining.

With competition rising regionally to secure LNG export deals, the new management will need to move fast to reassure foreign investors and get vital projects back on track, otherwise the opportunity to seize further market share in Europe may be lost.

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