Located in the southwest of Algeria, the Ahnet field is sited near several tight gas prospects that international oil companies (IOCs) are hoping to develop jointly in an effort to make the marketing of such difficult resources financially viable.

GDF Suez, which operates the Touat concession, and Total, which is operator on the Timimoun permit, both of France, and Spain's Repsol, which operates the Reggane Nord permit, submitted development plans to Sonatrach in October 2008, but progress has since been stalled by disagreement over the price at which the gas produced from the fields should be sold. The UK/Dutch Shell Group and Norway's Statoil also operate permit areas in the same region, but delineation of these prospects is not yet complete.

"We are still in discussions with Sonatrach," Jean-Francois Arrighi, North Africa manager at Total, told MEED at the Energy Exchange's North African Oil & Gas Summit in Vienna in November 2008. "We need to declare the commerciality of the fields by the end of 2008. We have to agree the gas price and formula by the end of the year."

If a commercial agreement can be reached, the three permits are expected to produce as much as 10 billion cubic metres a year (cm/y) when they come on stream in 2014. But crucial to the scheme is Sonatrach's willingness to build a multi-billion-dollar pipeline to connect the remote prospects to the country's trunk pipeline network. The state company has already agreed to carry out the necessary infrastructure development, but current proposals for the new pipeline involve not only gas from Timimoun, Touat and Reggane, but also from Ahnet. If the development of the Ahnet field is substantially delayed, Algeria's entire southwest development plan could be affected.

Mounting obstacles

Sonatrach is bullish that the development of the acreage will go ahead as scheduled. "These projects are about to be sanctioned," said Said Sahnoun, head of partnerships at Sonatrach, on 14 December. "I expect them to be approved in three to four months." But the difficulties in negotiating a gas price for the project, Sonatrach's failure to award the Ahnet contract, and the recent downturn in the oil price, mean that the obstacles are mounting to what was already a project of only marginal viability. According to Sahnoun, the project will still be viable at an oil price of $30 a barrel, but Arrighi told MEED that "we maybe need an oil price of $80 [a barrel]".

If Sonatrach and its partners differ as widely on a gas price agreement and infrastructure plan as they do on the baseline oil price for a successful project, the scheme could be in trouble.