When the UK's BG Group announced plans in June to spend $1,300 million to boost natural gas production in Tunisia, it marked a new-found confidence in the country's ability to lure much-needed investment to harness its hydro-carbons reserves.

The republic imports most of its petroleum products as its ageing fields have declined in production over the past 15 years. Tunisian crude oil output peaked in 1992 at 114,000 barrels a day (b/d), which at the time was surplus to requirements.

Yet the ageing nature of its two biggest fields, particularly El-Borma, meant Tunis became a net importer in 2000 for the first time since the 1970s.

Production declined to just 78,000 b/d in 2000 and by 2006, average oil production equalled 68,250 b/d, a 4 per cent drop on the 2005 level of 71,137 b/d, according to consultant IHS Energy.

While declining production from the ageing fields has been compensated for by recent discoveries in the Adam concession, the trend in home production is overwhelmingly down.

Natural gas production, on the other hand, rose to 2,600 million cubic metres in 2005 from 2,400 million cubic metres in 2004.

State oil and gas company Entreprise Tunisienne d'Activites Petrolieres (Etap), says natural gas now accounts for less than half of the country's total hydrocarbons reserves of 697 million barrels of oil equivalent.

It marks a dramatic turnaround, with Tunisia producing almost no gas at all before the offshore Miskar field was first developed in the 1990s.

'Tunisia is finally paying more attention to its gas reserves,' says one Tunis-based government source. 'But we need more investment to come into our country.'

Although the country holds 2.8 trillion cubic feet of proven reserves, its production has lagged behind others in the region, with new fields slow to develop.

Now, with more than 30 foreign oil companies operating in Tunisia, the development of a host of different fields is giving fresh impetus to the hunt for gas.

Much of the interest in Tunisian gas exploration is down to the success of Miskar, which accounts for almost 80 per cent of total Tunisian gas production.

The other four key fields in production - Baguel, El-Borma, El-Franning and Zinnia - hold much smaller reserves.

With BG committing its future to the country, hopes are high that the Hasdrubal field, seen as having the same potential as Miskar, will take up the slack when Miskar's production begins to decline.

Under its current production plan, BG hopes Hasdrubal will run until the middle of the next decade, and could then be extended through the development of satellite fields.

Other oil majors are also entering the fold. In June, Tunis awarded an oil and gas exploration permit to the UK/Dutch Shell Group under a two-year accord.

Under the production sharing agreement, Shell Tunisia, in partnership with Etap will invest $3 million in drilling and exploration work. The Tunisian government is also understood to be reconsidering the Jugurtha field - which, like Miskar and Hasdrubal, is in the offshore Amilcar permit - as another option for development.

However, no decision has yet been reached on whether domestic or export markets should be targeted.

While the increase in planned gas supply holds plenty of potential for Tunis, the reality is that almost three-quarters of natural gas consumed in Tunisia is burned in the power stations of state power and gas utility Societe Tunisienne de l'Electricite & du Gaz (Steg).

At current production levels, export markets appear far-fetched. Steg plans to have all of its electricity generated by natural gas, with all future thermal power plants to be gas-fired and all oil-fired power stations due to be converted to natural gas.

Adding to the energy crunch, power demand is growing at about 7 per cent a year because of increasing residential and industrial demand.

Despite the apparent bottleneck caused by domestic energy consumption, Tunis recently opened talks with BG and Algerian state energy company Sonatrach to sell Tunisian gas through the Transmed pipeline, buoyed by the prospect of Hasdrubal supplies.

'Recent prospecting activity will put us in a position where we can look at the possibility of exporting some gas,' says Ali Labiadh, chief executive officer of state refining company Stir. 'We have to negotiate with BG and Sonatrach - talks are just starting.'

However, one international oil company (IOC) working in the country says realistically, gas exports remain some way off for political reasons. 'It is certainly an option down the line depending on the production of Hasdrubal but do not forget the enormous demand locally as well.'

Tunisia estimates that its oil and gas demand will grow by an average of 5 per cent a year up to 2030, according to Khaled Becheikh, president and general director of Etap.

Becheikh says Tunisia has improved its fiscal regime and introduced production-sharing agreements to attract foreign investments into its energy sector.

Talk has recently centred on Etap changing its focus to concentrate on more risky exploration, particularly in terms of gas.

Yet another IOC executive working in the country says he expects the government to gradually shift its focus, rather than make a dramatic announcement.

'There is a realisation that Tunisia needs to be more aggressive, but we do not expect a sudden change of direction,' he says.

Ultimately, the success of Tunisia's entry into the gas export market hinges on the results of drilling on Hasdrubal and the determination of the Tunisian government to propel its gas industry forward.

'Tunisia holds a lot of promise in gas,' the executive says.

'Everyone is hoping it can jump to that next stage so all parties can benefit, but much of that will come down to the success of drilling. Another big find could be just around the corner.'