World Report

ith booming oil exports and rising prospects of increased gas deliveries to Europe, Algeria is on course to secure further economic growth this year. The North African country has one of the world’s largest proven gas reserves and is set to become the main supplier to Spain.

It may be one of Opec’s smaller oil producers but Algeria has averaged oil exports of 485,000 barrels per day (bpd) in the past year, and this volume has often been exceeded. With domestic consumption around 470,000 bpd, total oil production is estimated at around one million bpd. The country hopes to raise output to 1.5 million bpd by 2005.

Meanwhile, Energy Minister Chakib Khelil is campaigning for a greater Opec export quota for Algeria. The upstream industry has grown enormously in the past few years, with multinationals bringing successive new fields onstream ahead of schedule. By mid-summer, the US company Andarko Petroleum Corp’s new Ourhoud field is expected to be producing 230,000 bpd.

Gas is already a major source of income and holds yet further revenue potential

Bottlenecks at Algeria’s ports are being cleared as infrastructure is upgraded. New units are being installed to enable all ports to handle one-million-barrel capacity tankers. Eventually, some ports may also be expanded to handle very large crude oil carriers, which would make it viable to export to the US the low-sulphur light Sahara blend of crude, favoured by petroleum companies, in economic shipments of two-million barrels.

Algeria’s oil and gas giant Sonatrach, which attracts more than a billion dollars a year in investment from the multinationals, is one of the largest companies on the African continent. It is ranked the 12th largest petroleum company in the world, as well as being the world’s second largest exporter of liquid petroleum gas (LPG) and the third largest exporter of natural gas.

Medgaz pipeline will connect Algeria with Spain

The state-owned company’s oil production is estimated to reach 73 million tonnes of oil equivalent (toe) next year, up from 24 million toe in 2000. Turnover is more than £14 billion a year.

Europe’s energy firms have been quick to spot the opportunities. The UK’s BP entered into an equal partnership agreement last November with Sonatrach to develop the In Amenas gas fields in southeast Algeria. The development will involve a total investment of £688 million over 20 years and stands to boost Algerian gas exports by 15 per cent. In December, Spanish energy company Cepsa signed a deal with Sonatrach to create the
Medgaz gas pipeline running directly from Beni Saf in Algeria to the Spanish coast. Spain, which has been importing gas from Algeria since 1996, regards Algeria as a major partner in North Africa, and the deal is to secure her long-term gas supplies. When the Medgaz pipeline is built, Spain will get 60 per cent of her gas requirements from Algeria.

No less significant is the plan to double the volume of gas transported from Algeria to Italy via the Transmed pipeline, which has been in operation since 1983. The 1,460-mile pipeline crossing the Mediterranean, which also supplies Tunisia and Slovenia, currently transports about 460 billion cubic feet of gas a year.

Last November, Algeria and the US also signed an accord supporting Algeria’s plans to develop and export liquefied natural gas (LNG) to the US. President Abdelaziz Bouteflika is anxious to channel significant new American investment into his country.

Recently tendered was the massive £1.3 billion integrated Gassi Touil gas project, aimed at developing seven trillion cubic feet of reserves from six Berkine Basin fields as feedstock for a new LNG export terminal, mainly directed at the US.

Much hangs on Algeria’s new hydrocarbon law which, among other things, would allow foreign companies to invest upstream without the need to form a partnership with Sonatrach.

Mr Khelil places great store by the new law. He says it will “open the sector to direct investment and allow foreign companies to build their own gas pipelines and liquefaction plants”.