Algeria – part one
Algeria is important to world energy markets because it is a significant oil and gas producer and exporter. Algeria also is a member of OPEC and an important energy source for Europe. Note: Information contained in this report is the best available as of January 2001 and can change.
Following years of civil war and low oil prices, Algeria now is experiencing a significant economic upturn. Real gross domestic product (GDP) growth is expected to reach 5.1 percent in 2001, about the same as the 5.2 percent growth experienced in 2000.
With oil revenues pouring in due to sharply higher world oil prices since early 1999, foreign reserves have rebounded sharply, external debt has fallen (down nearly $2 billion from 1999, to around $26.5 billion by the end of 2000), the current account balance has improved dramatically (to around $9.2 billion), and pressures on government finances have been reduced.
Problems include: high unemployment (around 30 percent, and apparently rising), continued low-level political violence (claiming around 100-200 lives per month), labor unrest, a large black market (possibly 20 percent of the country's GDP), and continued weakness in the non-oil economy (a severe drought hurt the agricultural sector in 2000).
Oil and gas continue to account for more than 90 percent of Algerian export earnings, and about 30 percent of GDP.
In September 2000, the International Monetary Fund (IMF) issued its assessment of the Algerian economy, urging that the government proceed with privatization and banking reform, while lowering tariffs aimed at protecting domestic industry and reducing dependence on hydrocarbons.
The IMF praised the Algerian government for its strong fiscal discipline (and careful monetary policy as well), and for allowing the dinar to depreciate against the dollar. Finally, the IMF pointed out that high oil prices give Algeria an opportunity to make progress on implementing reforms and addressing the country's many problems.
President Abdelaziz Bouteflika, elected President on April 15, 1999 for a 5-year term, has attempted to implement plans for national reconciliation and economic reforms (i.e., deregulation, privatization).
More than 100,000 rebels, soldiers and civilians have died in Algeria's civil war, which began in 1992 following the military's nullification of a national election won by the Islamic Salvation Party.
On July 13, 1999, President Bouteflika offered amnesty to rebel groups, and on September 16 a national referendum was held in which voters approved the offer.
Although the government claims that nearly 80 percent of rebels (including members of the Islamic Salvation Army) accepted amnesty, the level of violence now appears to be rising once again, with the most violent groups apparently stepping up attacks.
In August 2000, President Bouteflika replaced Prime Minister Ahmed Benbitour with Ali Benflis, a close ally.
Although oil was first discovered in Algeria at the Hassi Messaoud oil field in 1956, Algeria is considered to be under-explored.
Algeria's National Council of Energy believes that the country still contains vast hydrocarbon potential. Over the last few years, significant oil and gas discoveries have been made, largely by foreign companies (in partnership with state-owned Sonatrach, as required by current Algerian law).
Sonatrach and its foreign partners hope to increase Algeria's crude oil production capacity significantly over the next few years.
In order to accomplish this, Algeria will require significant amounts of foreign capital and expertise. Energy Minister Chakib Khelil has stated that his goal is "to double the number of companies operating in Algeria over the next five years."
Khelil also has expressed his view that the industry needs to be restructured in order to survive, and that new regulatory bodies independent of the Energy and Mining Ministry might be needed as well.
In January 2001, Algeria's oil and gas industry labor unions announced their opposition to any government plans to open up the country's hydrocarbon sector to foreign investors, and threatened a strike.
Official estimates of Algeria's proven oil reserves remain at 9.2 billion barrels. However, with the recent oil discoveries, plans for more exploration drilling, improved data on existing fields, and use of enhanced oil recovery (EOR) systems, proven oil reserve estimates are expected to be revised upward in coming years.
Algeria should also see a sharp increase in crude oil exports over the next few years due to a rapid shift towards domestic natural gas consumption and planned increases in oil production by Sonatrach and its foreign partners.
Approximately 90 percent of Algeria's crude oil exports go to Western Europe, with Italy as the main market followed by Germany and France. The Netherlands, Spain and Britain are other important European markets.
Algeria's Saharan Blend oil, 45o API with 0.05 percent sulfur and negligible metal content, is among the best in the world.
Algeria's Minister of Energy, Chakib Khelil, recently indicated that the government is considering restructuring the state oil company, Sonatrach, and Sonelgas, the state utility, in order to attract private international investment.
The major impending change Khelil outlined was to have the Energy Ministry take on Sonatrach's regulatory and negotiating roles. Sonatrach would remain the national oil company but eventually would be forced to compete for new projects.
Khelil also raised the idea of privatizing non-core subsidiaries of Sonatrach, in the context of discussing the government's broader privatization efforts - which extend to banks and utilities.
It is believed that new legislation now pending would help these state corporations attract foreign investment.
Algeria's average crude oil production in 2000 was 802,000 bbl/d.
Together with 430,000 bbl/d of lease condensate and 155,000 bbl/d of natural gas plant liquids, Algeria produced 1.39 million bbl/d of total oil in 2000. Algeria's crude oil production quota was set at 805,000 bbl/d as of February 1, 2001, down 48,000 bbl/d from its previous quota, in effect since October 31, 2000.
Algeria has net exports around 1.15 million bbl/d, most of which goes to Europe and the United States.
The largest oil field in Algeria is Hassi Messaoud, which produces about 400,000 bbl/d of 46o API crude, down from 550,000 bbl/d in the 1970s, but up from 300,000 bbl/d in 1989.
The Hassi Messaoud area contains an estimated 6.4 billion barrels, or about 70 percent of the country's proven oil reserves.
Sonatrach operates Algeria's other major oil fields, including Rhourde el-Baguel (Algeria's second largest oil field), Tin Fouye Tabankort Ordo, Zarzaitine, Haoud Berkaoui/Ben Kahla, el-Gassi el-Agreb and Ait Kheir.
The Hassi R'Mel gas field also produces around 18,000 bbl/d of 46.1o API crude. In April 2000, Amerada Hess announced that it had acquired (for $55 million) the Gassi el-Agreb Redevelopment Project from Sonatrach.
Amerada Hess will form a joint operating company with Sonatrach, to be called Sonahess, and will invest $500 million over the next 5 years to enhance recovery from the el-Gassi, el-Agreb, and Zotti fields.
Currently, the three fields produce around 30,000 bbl/d, and the redevelopment project aims to increase production to 45,000 bbl/d by late 2003.
Algeria's oil sector, unlike that of most OPEC producers, has been open to foreign investors for more than a decade. Around 25 foreign firms from approximately 20 countries currently are operating in Algeria.
One of the largest joint ventures in Algeria is the partnership between Anadarko, Lasmo and Denmark's Maersk Oile to develop the Hassi Berkine South oil field. Oil from the field's Block 404 was first produced in May 1998; the field is currently producing approximately 65,000 bbl/d.
It is estimated that the field will be producing 285,000 bbl/d by 2002. In June 2000, BHP announced that it would spend $833 million on oil field development in the Berkine Basin, with production beginning in the first half of 2003.
Also in June 2000, First Calgary Petroleums Ltd. announced that it would explore Block 406a (Rhourde Yacoub) in Berkine, and in July 2000, several companies (Burlington Resources, Talisman, and Sonatrach) announced that they would develop the MLN field in Block 405a.
Exploration success rates in the Berkine Basin have been high, and several billion barrels of oil may lie within 15 miles or so of the area.
Spain's CEPSA has announced a $1.3-billion plan to develop its 1-billion barrel Ourhoud oil field in conjunction with Sonatrach.
The field, which is slated for eventual production of 230,000 bbl/d, is divided into three blocks operated by Anadarko, Cepsa, and Burlington Resources.
Work on a 500,000-b/d oil pipeline to service the field already has been completed by an Anadarko-led consortium.
Although Algeria has experienced a significant influx of foreign investment in recent years, it still has many oil fields in need of additional foreign capital and EOR investment.
Halliburton has an eight-year contract to provide EOR services and boost production at Hassi Messaoud, for instance, which saw production fall sharply beginning in the mid-1980s.
Algeria's second largest oil field, Rhourde El Baguel, has already received foreign investment to boost its production capacity. Rhourde El Baguel contains about three billion barrels of 42.6o API oil, of which less than 450 million barrels has been produced since 1963.
In February 1996, Atlantic Richfield (Arco) signed a $1.3-billion production sharing agreement (PSA) with Sonatrach to increase production at the field. Arco expects to raise the field's output from 27,000 bbl/d to 125,000 bbl/d by 2002.
Seourc: United States Energy Information Administration
© 2001 Mena Report (www.menareport.com)