Algiers’ plans to increase its oil and gas exports have been dealt a blow, with two of the country’s main field development schemes running into difficulties.
Bidding for the $3-4bn contract to develop the El-Merk oil area in the southeast could be delayed by up to a year, because of a drop in forecast output and ongoing differences between the developers: state-owned energy company Sonatrach and the US’ Anadarko.
Plans being developed by Sonatrach and Canada’s First Calgary Petroleums to develop a major gas discovery in the Berkine basin by 2010 are also under threat, as shareholders prepare to vote on proposals to remove its chairman and chief executive officer (CEO).
The two projects together represent a significant part of Algiers’ plans to boost oil and gas exports.
Technical bids were submitted in February for the main construction package on the El-Merk scheme. However, the April deadline for commercial bids has now been postponed.
“The production profile from one of the oil blocks has changed,” says a senior source at one of the bidders for the scheme.
“They are working on a new configuration of the central processing plant.”
‘They were maybe too optimistic about the field’s prospects when the plans were drawn up,” says the local country manager of another international contractor interested in the scheme.
Sonatrach and Anadarko are also locked in a dispute over the impact on the US company of changes made to Algeria’s hydrocarbons law in 2006, which are also thought to be slowing the process. Among the changes introduced is an oil windfall tax.
Anadarko says the charges, which could cost the company as much as $450m a year, are unnecessary given the provisions covering excess profits in its contract.
“There are some concerns between Anadarko and Sonatrach that they are trying to resolve before going ahead [with the El-Merk award],” says the country manager.
Three bidders are pursuing the main contract on the development of El-Merk: Canada’s SNC Lavalin, a team of Italy’s Saipem and Japan’s JGC Corporation, and Petrofac International.
They are expected to be asked to update their original bids, but have not been informed of a schedule for when the revised terms of the contract will be issued. “I am not sure they are going to be able to execute the project by year-end,” says the country manager.
Anadarko and Sonatrach were both unavailable for comment.
Delays are also expected on the project to bring a major gas discovery on line in the Berkine basin.
First Calgary shareholders are set to vote on a motion to remove chairman and CEO Richard Anderson on 8 April. Anderson has warned shareholders his departure would delay the $1bn project (MEED 8:6:07).
Algiers plans to increase oil exports to 2 million barrels a day (b/d) by 2010, from about 1.5 million b/d today, and to increase gas exports to 85 billion cubic metres a year (cm/y) by 2011-12, from 65 billion cm/y.
Companies are still awaiting the launch of the first upstream round since early 2005 (MEED 15:1:08).