Algeria’s Energy Growth

According to reports last received, Algeria has over 12 billion barrels of proven oil reserves. Exploration over the past few years has led to the discovery of more oilfields and the proven oil reserve estimates could increase in coming years. This will provide a great thrust to the economy more so as the fall in domestic oil consumption in Algeria is being substituted by natural gas.

This will lead to a further rise in crude oil exports of Algeria. In 2005 Algeria had exported1.68 million bbl/d. of crude oil, including all liquids. Approximately 90% of Algeria’s crude oil exports go to Western Europe. From the time oil was discovered in Algeria, exports have been a major motivating factor, particularly with Italy and Spain seeking to expand natural gas consumption. Projects to export Algerian gas via pipeline or by ship across the Mediterranean Sea were mooted. Today Italy is the main importer, followed by Germany and France.

Even though Algeria has produced oil since 1956, Algeria’s National Council of Energy believes there is still a vast untapped hydrocarbon potential. Algeria’s oil sector has been open to foreign investors in partnership with Sonatrach, Algeria’s state-owned oil and Gas Company for over a decade. Through its subsidiaries, Sonatrach monopolizes oil production, refining and transportation in Algeria. However the share of foreign investors in Algerian production has steadily increased and foreign companies control over 45% of Algeria’s crude oil production.

Hassi Messaoud in the center of the country is the largest oil field in Algeria with less than 60% of the country’s proven oil reserves. Sonatrach hopes to double production at the field to 700,000-750,000 bbl/d within 5-7 years. A couple of years ago the company discovered a new oilfield near Rhourde El Baguel, east of Hassi Messaoud, with possible oil reserves of 360 million barrels.

President Boutaflika introduced an important hydrocarbons reform bill to reform Sonatrach along corporate lines and allow foreign operators to act independently. Algeria hopes to increase its crude oil production capacity significantly over the next few years by attracting more foreign investment. The government hopes to double the number of companies operating in Algeria. Restructuring of the Algerian oil industry with regulatory bodies independent of the Energy and Mining Ministry is proposed.