Algeria plays a critical role in the international oil and gas market. It is the third largest natural gas producer in the Arab world after Qatar and Saudi Arabia, the leading gas exporter in Africa and an energy supplier to France, Spain, Italy, Turkey, US and China.
The EIA estimates Algerian proven crude oil reserves at 12.2 billion barrels but its real geological prize is its 160 trillion cubic feet reserves of natural gas. Opec economists in the Vienna secretariat estimate that Algeria could well double its oil and gas production in the next decade, since its Saharan hinterland is largely unexplored. The end of the civil war, the highest oil and LNG prices in world history, $90 billion in foreign exchange reserves and the moderate, pro-market policies of President Abdel Aziz Bouteflika have ignited an economic boom in Algeria.
With four refineries pipelines to Tunisia and Morocco, the production of 1.2 MBD in low sulphur content crude oil (second only to Nigeria in Africa), 280,000 barrels of condensates and 340,000 barrels of gas to liquids, Algeria is the Arab world’s energy superpower in the Maghreb. Algeria’s Hassi Massoud oilfield, near the Libyan border, has proven reserves of 6.4 million barrels alone and produces 600,000 barrels a day. Algeria oil engineers played a crucial role in the development of Abu Dhabi’s Adnoc Qatar’s Qatargas and Kuwait’s KPC. Algeria fascinates me because the discovery of oil in 1958 happened during the bloodiest anti–colonial revolt of national liberation in Arab history.
Algeria was colonised by France as far back in time as 1830 under the reign of Charles X, the last Bourbon king of France and brother of the Louis XVI guillotined by the Jacobins in the revolution. Algeria’s colonial struggle tasted eight years and cost the lives of one million Algerians, out of a population of nine million Arabs and Berbers. Charles de Gaulle only signed the Evian Accords with the nationalist FLN, once French oil interests were guaranteed by President Ben Bella who was overthrown in a military coup d’etat by Colonel Houari Boumédiènne after only two years in power. Almost 700,000 European descent settlers (the pid noire) fled Algeria , an economic nightmare for the new Republic. However, French oil and gas interests financed Colonel Boumédiènne’s socialist, Tito style, one party state, with its secret police and “revolutionary centralism”. Still, Algeria was the first Arab oil exporter to electrify all its villages, establish a petrochemical industry and finally nationalise French oil and gas interests after the Elysee Palace refused to negotiate prices. Algeria inspired later nationalisation of foreign oil concessions in Iraq, Libya and Kuwait. The Algerian state owns Sonatrach, Africa’s largest gas producer.
The collapse of oil and gas prices in 1986 led to an economic and foreign debt crisis in Algeria, an uprising by students, Islamists and Berber tribesman, an Arab spring revolt twenty years before the uprisings that overthrew Hosni Mubarak, Ben Ali and Gaddafi. The Algerian National Popular Army shot and killed 500 rioters. Chadli Bendjedid was unable to liberalize the economy and his successor Mohammad Boudiaf was assassinated after a mere one month in office. The final act in Algeria’s economic crisis was a brutal civil war between le pouvoir or the military/ intelligence “deep state” backed by France under General Zeroval, Boudiaf’s successor, and the FIS/ GIA terror network. Algeria’s tragic civil war cost 200,000 lives in the 1990’s and devastated its economy.
Algeria is entirely dependent on oil and gas which accounts for 95 per cent of export earnings and one third of the national GDP. Oil economists, diplomats and international bankers estimate that Algeria has the highest budget break even oil price at $120 Brent. So any major fall in oil prices could be catastrophic for Algeria’s economic, social and political stability in the past Bouteflika era, exactly as happened in the 1980’s. The recent Al Qaeda terrorist attack on the Statoil/BP natural gas complex in Amernas in the Sahara has raised serious concern for the security of foreign oil workers at a time when Algerian output is the lowest in five years. Only North Sea oil output has declined more than Algeria since 2008. Algeria’s oilfields are all mature in relative decline and recent offshore exploration block auctions attracted few foreign bidders.
Algerian oil royalties and taxes are unattractive for foreign exploration companies who negotiate vastly better terms in offshore Mozambique and Tanzania.
The militia unrest and tribal violence in Libya also threatens Algeria’s energy infrastructure. Sonatrach also witnessed several corruption scandals and led to the ouster of successive CEO’s. Algerian gas clients Tunisia, Morocco, Mali and Niger also face deep economic and social crises that will limit oil demand growth. However, the greatest long term threat to Algerian LNG exports is the US shale oil revolution. About 61 years after the Evian Accords and independence from France, Algeria’s future is still hostage to world oil and gas markets.
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