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  • SEPT 12: Middle East oil producers will spend $94 billion in the oil and natural gas industries by 2011 to help meet future demands for energy, Saudi Arabia oil minister Ali al- Naimi said.

    Producers must carefully gauge future demand for crude when committing to long-term investments, Naimi told an Organisation of Petroleum Exporting Countries seminar in Vienna. Boosting Opec output capacity by 1 million barrels a day by 2010 requires $8 billion in spending, Naimi said.

    ‘‘By 2011, the countries of the Middle East will invest some $94 billion in their oil and gas upstream sectors, more than half of which will go to expand oil-production capacity,’’ Naimi said. ‘‘The assessment of market demand for our oil’’ is a key factor guiding expansion plans, he said.

    The seminar, held in Vienna’s Hofburg Palace, was attended by ministers from the world’s top oil producers, including Venezuela and the United Arab Emirates. It followed an Opec meeting Monday where Opec agreed to maintain the group’s production target of 28 million barrels a day, brushing aside concern by Nigeria, Algeria and others that weaker demand could soon force prices lower.

    Oil futures in New York have declined 16% from a high July 14 of $78.40 a barrel as fuel stockpiles in the US, the world’s largest energy consumer, remain above seasonal averages.

    Naimi said he was happy with overall market conditions and called the recent slide in prices a ‘blip.’

    Mideast oil nations to spend $94 billion

    Comment


    • LIMA -(Dow Jones)- U.S.-based Hunt Oil Chairman Ray Hunt said Tuesday he was "pleased" with progress at the Peru LNG project that aims to export liquefied natural gas from Peru as of 2010.

      "We are very pleased with the progress that is being made at this project that uses excess gas, gas that would otherwise stay in the ground and not be used," Hunt told journalists after a meeting with President Alan Garcia in Lima.

      A Hunt Oil-led consortium known as Peru LNG has started work on a gas liquefaction plant on Peru's Pacific coast at Pampa Melchorita. The LNG plant will have the capacity to produce an initial four million metric tons a year or 625 million cubic feet a day. It is due to enter into operation in 2010.

      If the project meets its goal of exporting LNG as of January 2010, "Peru will take a strategic leap in its economic capacity," said Garcia after the meeting. "I have given Mr. Hunt all of the government's support," the president added.

      For his part, Carlos del Solar, general manager of Hunt Oil in Peru, said the project will require approximately $3 billion of investment. Previously, officials have said that project has a $2.5 billion price tag. Del Solar said it would create 35,000 direct and indirect jobs in the construction phase and generate more than $200 million annually in royalties and income tax.

      Hunt Oil is the operator of the Peru LNG project with a 50% stake. South Korea's SK Corp. holds 30%, while Spanish-Argentine company Repsol YPF SA has a 20% stake.

      The plant will use natural gas coming from block 56 in Peru's southeastern jungle region near the Camisea natural gas project.

      Gas from Camisea's block 88 is currently supplying Peru's fledgling domestic market.

      Both blocks are being developed by a consortium led by Argentina's Pluspetrol Peru Corp., alongside Hunt Oil Peru, SK Corp., Tecpetrol, a unit of the Techint Group and Sonatrach of Algeria.

      Del Solar also reiterated that Repsol YPF will be the sole offtaker of the plant's production.

      "Peru LNG has a commitment with Repsol YPF to sell it 4 million metric tons of LNG on the Peruvian coast. The commercial part and the transportation is the responsibility of Repsol," he said.

      During a recent trip to Lima, Mexican Foreign Relations Minister Luis Ernesto Derbez said that Mexico remains keenly interested in buying Peru's gas.

      Peru LNG gas export project on track - Officials

      Comment


      • MOSCOW, September 13 (RIA Novosti) - Gazprom and BP have signed a contract to supply liquefied natural gas to the Atlantic region, the Russian energy giant said Wednesday.

        BP, one the of the world's biggest independent oil and gas producers, will supply LNG provided by Gazprom Marketing & Trading Ltd, Gazprom's subsidiary operating in the United Kingdom, in 2006 and early 2007.

        "The contract is a further step by Gazprom Marketing & Trading toward expanding its LNG contract portfolio," Alexander Medvedev, deputy board chairman of Gazprom, is quoted as saying. "An alliance with BP will advance the company's strategy on the LNG market."

        The Russian subsidiary will determine delivery points depending on market demand, Gazprom said in a news release.

        The first batch of 135,000 cubic meters of LNG was loaded Wednesday onto a BP tanker in Point Fortin port in Trinidad and Tobago for delivery to the United States terminal in Cove Point, Maryland.

        In August 2005, Gazprom Marketing signed deals with Shell Western BV and the UK-based energy producer and distributor BG Group on LNG supplies to the U.S. market. The first tanker under the contract arrived in Cove Point in September the same year.

        In November 2005, the company signed similar contracts with Gaz de France, MED LNG & GAS, a joint venture between Gaz de France and Algeria's state-owned Sonatrach, and Shell. A consignment of LNG was sold to Shell Western LNG and supplied to Cove Point for re-gasification in early December 2005.

        The Gazprom subsidiary sold its first consignment of about 140,000 cubic meters of liquefied gas (about 85 million cubic meters of natural gas) it had acquired from Gaz de France to BP in April 2006, delivering it to the Isle of Grain terminal in the UK.

        Liquefied natural gas is becoming increasingly important for Gazprom, and the share of LNG in the energy giant's operations is increasing as production at natural gas deposits stagnates.

        In Russia, Gazprom plans to build an LNG plant on the Baltic Sea coast near St. Petersburg to produce 5 million tons of LNG a year by 2009, and it is looking for a partner with relevant expertise. Italy's Eni and Algeria's Sonatrach are among Gazprom's possible choices.

        Gazprom also controls a project to develop the giant Shtokman field, which holds an estimated 3.2 trillion cubic meters of natural gas and 31 million metric tons of gas condensate in the Barents Sea, and to build an LNG plant there. The concern has yet to finalize its choice of partners.

        The company is also reportedly looking to gain at least 25% of shares in the Sakhalin II project in Russia's Far East, which is run by a consortium of foreign companies, in return for a stake in the massive West Siberian Zapolyarnoye-Neocomian project.

        The construction of what will be one of the world's largest LNG plants, with a capacity of about 10 million tons of LNG a year, is being completed on Sakhalin.

        Gazprom, BP sign Atlantic LNG deal

        Comment


        • Sept. 13 (Bloomberg) -- PT Medco Energi Internasional, Indonesia's largest publicly traded oil company, said it will explore in Iraq and Algeria as opportunities at home "diminish.''

          Medco is also bidding for drilling rights in Yemen, Egypt, Algeria and the U.S., said Hilmi Panigoro, the company's president director. Openings for low-risk exploration and development in Indonesia are limited for companies the scale of Medco, which has a market capitalization 0.6 percent the size of PetroChina Co., he said in a Sept. 8 interview.

          Medco will explore overseas to meet its target of expanding output 15 percent a year. In Indonesia, which is trying to reverse a decline in production, untapped deposits are mostly located in deep sea areas and in the east of the country, where a lack of roads and ports makes drilling expensive.

          "It's high risk, high return exploration and doesn't fit our risk profile,'' Panigoro said in Jakarta. "We are not looking for opportunities where we have to compete head to head with the majors.''

          In Iraq, Medco plans to bid for drilling rights in Kurdistan, the northern part of the country largely free from the insurgency that faces U.S. and Iraqi troops elsewhere, Panigoro said. The region around Kirkuk in northern Iraq holds some of the country's largest fields.

          "It's about being in the right place at the right time,'' Panigoro said. ``When the competition is not severe, you're there already.''

          Outside Indonesia, the company currently has concession areas in Libya and the U.S. Gulf. In Oman, Medco has won a service contract to boost output at 18 oil fields that were operated by Royal Dutch Shell Plc.

          Libya, which holds Africa's biggest oil reserves, last year awarded drilling rights in its first auction for 40 years. Exploration in the country, led since 1969 by Muammar al Qaddafi, had been hampered by U.S., United Nations and European sanctions, imposed because of Libya's alleged involvement in terrorism. The sanctions were lifted from 2003.

          Medco and its partner Verenex Energy Inc. won the right to drill in the country's Ghadames Basin and signed an agreement in March last year to explore and produce oil there for 30 years.

          The area has existing discoveries with initial estimates of 120 million barrels of oil, Panigoro said. Medco will start developing the deposits from the first quarter of next year upon completing a required exploration program and expects production to commence one year later. The venture will get 13.7 percent of output while the Libyan government will take the rest.

          Medco shares have fallen 2.9 percent this year, compared with a 22 percent gain in the benchmark Jakarta Composite Index. The company has a market capitalization of $1.2 billion. Petrochina, Asia's largest oil company, is valued at $190 billion.

          Medco's share fell as much 3 percent to 3,200 rupiah in Jakarta today. They traded at 3,225 rupiah at 11:54 a.m.

          Indonesia, the second-smallest member of the Organization of Petroleum Exporting Countries, is inviting bids for 41 oil and gas areas to raise its dwindling petroleum reserves and production.

          The government is offering oil explorers including Exxon Mobil Corp., ConocoPhillips, and Chevron Corp. as much as 35 percent of oil revenue in deep sea areas and the eastern part of the country to attract drilling. The typical share is 15 percent.

          One well in these areas may cost as much as $40 million, equal to Medco's annual drilling expenditure, Panigoro said. Medco will continue to look for opportunities in Indonesia, particularly in onshore mature fields, he said.

          The Jakarta-based company has interests in 21 oil and gas areas across the archipelago. Medco sold 58,661 barrels of oil a day in the first half of the year, a 7.4 percent increase from a year earlier. Gas output in the period was 7 percent lower at 134.9 million standard cubic feet a day.

          Medco to seek oil in Iraq and Algeria as Indonesia gets expensive

          Comment


          • LONDON, UNITED KINGDOM--(CCNMatthews - Sept. 14, 2006) - Petro-Canada today announced that it has signed drilling rig contracts for its operated international exploration program for the next 18 months.

            "We're delighted to have achieved a full complement of rigs in such an intensely competitive environment for drilling resources," said Nick Maden, Vice-President of Exploration. "With all of these projects being operated by Petro-Canada, it's an important step in delivering a balanced exploration program - one of the cornerstones of our international strategy."

            "We will begin a multi-well exploration and field development program in the North Sea towards the end of this year, and we will also begin drilling in Trinidad and Tobago in 2007," commented Maden on the phasing of activity. "Work in the Zotti block in Algeria will start in the fourth quarter of this year, and we now expect drilling on Block II in Syria to commence early in the first quarter of 2007."

            In the U.K., Petro-Canada has signed a one-year contract for the Global Santa Fe Arctic III rig. The rig will undertake a program that includes the development of the Saxon field, in-fill drilling in the Guillemot field and three exploration wells, two of which were recently awarded to Petro-Canada in the 23rd round.

            In Trinidad and Tobago, Diamond's Ocean Worker semi-submersible rig will arrive in the second half of 2007 to start a six-month, multi-well program on Block 22. At the same time, the Rowan Gorilla III jack-up rig will arrive in Trinidad and Tobago for a six-month, four-well program in Blocks 1a and Block 1b, with an option to extend the contract to an additional two wells.

            With operations currently focused in three core regions: Northwest Europe, North Africa/Near East and Northern Latin America, Petro-Canada is building a significant balanced exploration program in its International business. Together with an increasing land base in Alaska and the Mackenzie Corridor, Petro-Canada is developing a quality exploration portfolio...

            Petro-Canada secures rig contracts for international exploration

            Comment


            • LONDON, UNITED KINGDOM--(CCNMatthews - Sept. 14, 2006) - Petro-Canada today announced that it has signed drilling rig contracts for its operated international exploration program for the next 18 months.

              "We're delighted to have achieved a full complement of rigs in such an intensely competitive environment for drilling resources," said Nick Maden, Vice-President of Exploration. "With all of these projects being operated by Petro-Canada, it's an important step in delivering a balanced exploration program - one of the cornerstones of our international strategy."

              "We will begin a multi-well exploration and field development program in the North Sea towards the end of this year, and we will also begin drilling in Trinidad and Tobago in 2007," commented Maden on the phasing of activity. "Work in the Zotti block in Algeria will start in the fourth quarter of this year, and we now expect drilling on Block II in Syria to commence early in the first quarter of 2007."

              In the U.K., Petro-Canada has signed a one-year contract for the Global Santa Fe Arctic III rig. The rig will undertake a program that includes the development of the Saxon field, in-fill drilling in the Guillemot field and three exploration wells, two of which were recently awarded to Petro-Canada in the 23rd round.

              In Trinidad and Tobago, Diamond's Ocean Worker semi-submersible rig will arrive in the second half of 2007 to start a six-month, multi-well program on Block 22. At the same time, the Rowan Gorilla III jack-up rig will arrive in Trinidad and Tobago for a six-month, four-well program in Blocks 1a and Block 1b, with an option to extend the contract to an additional two wells.

              With operations currently focused in three core regions: Northwest Europe, North Africa/Near East and Northern Latin America, Petro-Canada is building a significant balanced exploration program in its International business. Together with an increasing land base in Alaska and the Mackenzie Corridor, Petro-Canada is developing a quality exploration portfolio...

              Petro-Canada secures rig contracts for international exploration

              Comment


              • New Delhi, Sept 14: After seeking more crude and gas from Nigeria and Qatar, India has now sought liquefied natural gas (LNG) from Algeria and has also evinced interest in upstream activities in that country.

                Petroleum Minister Murli Deora, who was in Vienna for the third OPEC conference, met Algerian Minister for Energy and Mines Chakib Khelil on the sidelines yesterday.

                "During the meeting, the minister expressed interest for purchasing LNG from Algeria," a Petroleum Ministry official said.

                Algeria, an OPEC member, is in the process of developing its LNG capacity, which is currently 26.5 bcm/year.

                India on the other hand has been scouting for new gas sources to satisfy its power plant requirements.

                India and Algeria have signed a memorandum of understanding (MoU) to study the possibility for joint exploration and development of oil and gas block 242 in the Illizi basin in the south east of Algeria.

                India is also trying to corner some LNG that may be available from Sonatrach in the 2007-09 period.

                Deora also said ONGC Videsh Ltd (OVL), the overseas arm of ONGC, in partnership with state-owned Sonatrach will bid in the proposed offering of exploration blocks in Algeria.

                OVL had teamed up with Sonatrach for exploring oil blocks in Algeria as well as third world countries.

                Algeria is to launch its seventh round of bidding for 15 prospective blocks in the fourth quarter of 2006. Taking advantage of the MoU, OVL is likely to ask Sonatrach to team up with it to bid for the blocks.

                Over the last few years, significant oil and gas discoveries have been made in Algeria, largely by foreign companies in partnership with state-owned Sonatrach. India too can benefit from the under utilised oil and gas resources in the Arab country.

                Earlier, Deora held bilateral talks with Nigerian Minister of State for Petroleum Resources Edmund Daukoru, Qatar Deputy Prime Minister and Energy Minister Hamad al Attiyah and Iraq Oil Minister Hussain al-Shahristani on the sidelines of the third OPEC international seminar in Vienna.

                In the meetings, Deora pitched for getting more crude on a term-contract basis and additional liquefied natural gas.

                India seeks LNG from Algeria

                Comment


                • VIENNA, Sept 15 (KUNA) -- Algerian oil minister Chakib Khalil Friday said there was an initiative to tackle differences between Iran and Kuwait, both pushing hard for their candidates for the Opec secretary general's post, by offering a third candidate.

                  Khalil, in remarks to KUNA, said Kuwait and Iran has been tabling names of their candidates for three years but no one was elected because the secretary general, according to Opec's regulations, has to be elected by a consensus.

                  However, added Khalil, some progress was achieved. "It is expected that a compromise will be achieved by which a third candidate, Dr. Abdullah Salem Al-Badri who was the former Libyan oil minister during 1998 until 2001, will be introduced." Al-Badri served as secretary general for the Organization of Petroleum Exporting Countries (Opec) in July-December 1994.

                  Khalil ruled out that the nomination of Al-Badri would further complicate the matter.

                  He said the member states were awaiting official answers about the nomination of Al-Badri.

                  Khalil said the secretary general's post issue might be agreed upon during the next regular meeting of Opec oil ministers, slated for next March in the Nigerian capital, Abuja.

                  Algeria reveals initiative to end Opec SG's post race between Iran, Kuwait

                  Comment


                  • VIENNA, Sept 15 (KUNA) -- Algerian oil minister Chekib Khalil on Friday said global demand on oil produced by Opec would be less next year because non-Opec countries would take the burden of meeting growing oil demands.

                    "We have overcome the transitional period and started a normal and new phase in which Opec should carry out a leading role which is balancing between global supply and demand on oil," Khalil told KUNA on the sidelines of an international energy forum.

                    He noted that the transitional period witnessed fluctuations of prices, which sometimes neared US$75 per barrel.

                    Khalil called for considering the negative consequences of geopolitical circumstances, which triggered oil prices.

                    Khalil, however, said the international energy forum aimed at boosting dialogue and exchanging views over oil and gas reserves, as well as investments in the energy sector.

                    He said the Opec members were second to the non-Opec oil producing countries in terms of meeting global demands. But he warned that this challenge aimed at undermining Opec as a global power although the oil cartel has some 65 percent of global oil reserve.

                    Algeria says world will ask less from Opec in 2007

                    Comment


                    • Washington -- In its need for more fuel to supply an expanding economy, China is pursuing a dynamic "holistic" approach to energy partnerships in Africa that has surprised many Western competitors, says South African Warrick Davies-Webb.

                      Davies-Webb, political analyst at Executive Research Associates, a risk-management consulting firm headquartered in Pretoria, South Africa, spoke at a September 13 briefing sponsored by the African Center for Strategic Studies (ACSS), a U.S. government agency located at Fort McNair near downtown Washington.

                      Established in 1999, ACSS sponsors seminars and training sessions for African midlevel military officers and defense officials. It recently opened an office in Addis Ababa, Ethiopia, to oversee programs on the continent aimed at increasing the professional skill of African militaries while building closer ties with U.S. counterparts in the defense community.

                      With oil, gas and coal use far outstripping its productive capacity, "China faces a growing energy deficit that has great implications for Africa," Davies-Webb told his ACSS audience. Africa has become a "new terrain for energy battles" in which Chinese state oil companies seek "to lock in energy supplies throughout the continent."

                      Their approach has become surprisingly sophisticated over the past 10 years, leading to partnerships with African state oil companies that now account for more than 10 percent of China's total oil imports, Davies-Webb said. During that period, China invested more than $4 billion in Sudan alone, he said.

                      As late as 2000, China's only energy presence was in Sudan, but today its involvement on the continent includes refineries in Algeria and Libya, pipeline construction in Sudan and Nigeria, oil production in Angola and exploration rights in Guinea-Bissau, as well as a number of other sub-Saharan African nations, Davies-Webb said.

                      In 2006 alone, China paid $2.2 billion for exploration rights in a field off Nigeria's coast, and is "aggressively" expanding exploration of offshore fields in Angola, he added.

                      China's new "holistic approach" - offering exploration, development and financing packages to its African partners - is an "attractive competitive alternative to traditional Western companies" who do not have a similar "integrated package of carrots to offer," the analyst said.

                      For African nations in financial trouble or unwilling to meet the transparency and accountability requirements of the World Bank and other international lenders, a Chinese deal literally can mean an "alternative economic lifeline."

                      In 2003, when Angola "found itself facing a severe cash crisis, China stepped in with a $2 billion loan the next year that bailed that country out.” In Chad, where international lenders threatened to withdraw support from its new pipeline, "the Chinese were willing to offer an alternative package of technical assistance, if World Bank discussions broke off," Davies-Webb added.

                      Unlike U.S. government development agencies like the Millennium Challenge Corporation (MCC), the Chinese do not focus on human rights, anti-corruption or economic reform as requirements for their support, the analyst explained. This is a distinct draw to nations like Zimbabwe and Sudan, against whom the U.S. government, the European Union and the United Nations have imposed sanctions because of human rights violations.

                      At the same time, U.S. law has tightened up rules against corruption for American businesses operating overseas. The day Davies-Webb spoke, a former executive for the Houston-based energy company, Willbros Group Incorporated, pleaded guilty to violating the U.S. Foreign Corrupt Practices Act by conspiring to bribe officials in Nigeria and Ecuador and might face prison time.

                      On the macroeconomic level, "since all major economic decisions in China are made on a political level by the government and Communist Party, all deals are backed by them. Therefore, Chinese companies enjoy risk-free access to African markets; an advantage Western companies just don't have," the analyst added.

                      Entry into Chad's fledgling oil sector is a good example of the overall Chinese approach, where "you have had massive [Chinese] institutional support that includes trade, foreign aid packages," Davies-Webb said.

                      In addition, the Chinese also have fostered "strategic linkages" with small African oil companies that have political influence in places like Nigeria, for example, and with companies and banks in Portugal that have connections in countries like Angola.

                      Davies-Webb said the Chinese also have "piggybacked" on Nigerian oil companies going into Sao Tome and Principe offshore oil fields, while they have employed South African businessmen with influence in Angola "as useful Trojan horses to gain access to key political players" in that oil-rich country.

                      Portugal has played a "critical but very underestimated role" in facilitating oil deals for the Chinese, who regard the European nation as "their back door into the African oil sector," the analyst remarked.

                      China also has gone out of its way to cultivate relations with France, Davies-Webb said, because of that nation's traditional business relationship with many African nations and the belief that the French pose "a counterweight to U.S. influence" on the continent.

                      China has sophisticated energy strategy for Africa, expert says

                      Comment


                      • ALGIERS (Reuters) - Five workers were hurt and two went missing when fire erupted at an oil well being drilled in Algeria's southern desert, state energy firm Sonatrach was quoted as saying on Saturday by the official APS news agency.

                        Sonatrach said the "uncontrolled" fire broke out on Friday at the Nezla well in the Gassi Touil region, injuring five members of the drilling team including two seriously.

                        APS quoted Sonatrach as saying that Sonatrach and operator Repsol YPF of Spain had taken measures to control the situation at the well but were continuing to search for the two missing workers.

                        Sonatrach describe the fire as a "technical incident" but said it was working with Repsol to try to uncover the cause.

                        "This incident has no impact on production," it said.

                        Oil and gas conglomerate Sonatrach, Africa's biggest company in terms of revenues, produces between 1.4 million and 1.5 million barrels per day (bpd) of oil. It exports about 62 billion cubic meters of gas per year.

                        Five hurt in fire at Algerian oil well

                        Comment


                        • Algeria's enviable external liquidity position derives from its thriving hydrocarbon sector.

                          The Algerian government recently announced that it had repaid over half of its USD 763mn debt owed to Germany ahead of schedule. Algeria has concluded similar agreements with 15 other creditor nations, members of the Paris Club. Italy and France, Algeria's largest creditors, were among the countries repaid in full, getting back USD 1.7bn and USD 1.6bn respectively. Algeria has now reimbursed nearly 90% of its USD 7.9bn Paris Club debt. Algeria's external debt has now fallen to less than USD 10bn as at end H1- 06 from USD 16.4bn at end 2005. The Finance Ministry even estimates that the level of external debt will be slashed to USD 5bn by the end of the year. We find this forecast to be credible given the government's visible commitment in paying down its debt, the absence of any new external borrowing since 2005, but especially due to the country's buoyant external liquidity.

                          Algeria's oil bonanza

                          Algeria's enviable external liquidity position is tightly intertwined with its thriving hydrocarbon sector. Algeria currently produces around 1.3m barrels of oil per day and has around 11.4bn barrels of proven oil reserves, the second largest in Africa behind Nigeria. Algeria exports over 80% of its oil and gas and hydrocarbon revenues account for over 95% of the country's foreign reserves. Given the size of its oil reserves, the government has announced a production target of 2m barrels of oil per day and 85 cubic metres of gas per year by 2010. In May, oil revenues stood at USD 66bn at an annual rate from only USD 17bn in 2001 and FX reserves have increased to USD 66bn, equivalent to three years of import cover. The increase in hydrocarbon exports also accounted for Algeria's 15.3bn trade surplus in H1-06, up 41 %y/y.

                          Algeria's debt prepayment will go down well with international investors

                          In 2006, we expect the oil sector to boost output further, maintaining trend growth at over 5%. Growth will also benefit from the government's USD 80bn investment programme which is improving construction activity. Port activity, a bellwether for the country's economic performance, has grown over 250% in the last decade. We expect this momentum to continue with port activity growing by over 20% in 2006 as exports continue to accelerate. Despite this increase in economic activity, policymakers will be pleased that price pressures remain tame. Although reported inflation in H1-06 came in at 1.0% y/y, we still expect strong demand to push consumer prices nearer to x4% in the medium term.

                          One area that is benefiting from the combination of strong external liquidity and an improving economy is the local currency. Earlier this year, the central bank suggested, uncharacteristically, that the value of the dinar could benefit from Algeria's strong balance of payments position. Despite remaining fairly stable since the start of the year, the dinar has adopted a mild appreciating bias and could temporarily break past its year-to-date high of DZD68 to the USD before the end of the year. It is our view that although the dinar will benefit from Algeria's strong balance of payments position, longer term there will be a need for a more flexible currency. Algeria's accession into the Association Agreement and the subsequent liberalisation of its economy to trade with European and Mediterranean countries should give rise to a more competitive position.

                          Another positive development on the currency market deriving from Algeria's improving economic profile is the narrowing of the spread between the parallel and the official exchange rate. The Algerian Association of Banks and Financial Institutions reports that the parallel market spread over the official rate has decreased from 25% in September 2003 to 1% currently and sometimes even to zero. The erosion of parallel market spreads is likely to increase the volume of hard currency passing through official channels and should further boost currency reserves. Additionally, new government regulations that importers hold a minimum of DZD 20mn (USD 270,000) and the ban on the import of second hand cars have contributed to a decline in dollar demand on the informal market.

                          Structural problems persist

                          In spite of these successes, Algeria still has some way to go in redressing the structural imbalances that exist in the economy. Despite fairly strong economic output, recent figures released by the central bank suggest disappointing growth outside the hydrocarbon sector. The agriculture sector has been the worst affected, growing only 1.3% in 2005 from 3.4% in 2004.Agriculture now accounts for only 7% of the economy down from 10% in 2004, in spite of the fact that over 25% of the population is engaged in agriculture in either full-time or part-time employment.

                          Efforts to revamp the domestic economy are unlikely to be immediately palpable.

                          Unemployment is also a major concern for policymakers. Currently, official unemployment is reported at 15.3% from 17.7% in 2004. Whilst this is a decline in the unemployed rate, anecdotal evidence suggests that the actual rate is much higher partly due to the fact that the labour force is not fully accounted for by official statistics. Of even greater concern is the high level of unemployment among those under - 30 estimated at around 75%. The Algerian authorities are keen to improve youth employment given how easily this can increase social tensions. In July, the government unveiled a USD 13bn supplementary budget to fund public sector wage rises and development projects after an outcry of deepening poverty from unions. This is in addition to an ongoing 5-year investment plan to revamp and expand Algeria's transport links and social infrastructure including schools and hospitals.

                          The government is also attempting to channel some of the hydrocarbon sector's resources into other parts of the economy. Against this backdrop, the authorities have introduced a windfall tax on extraordinary profits 'to meet the needs of national development'. This tax will be applied to profits generated by oil prices above USD 30 per barrel. The government admits this move has been prompted by Algeria's failure to diversify its economy beyond the energy sector. Whilst it is true that Algeria's development needs are immense, the government's application and use of income generated from this new tax still has to be proven. So far, Algeria has taken the right steps towards improving its external creditworthiness and its debt prepayment to the Paris Club will go down well with international investors. The emphasis on domestic investment and development shows that authorities would like to improve the domestic economy. However, the scale of the imbalances within the economy suggests that public efforts are unlikely to be immediately palpable.

                          Structural problems dampen Algeria's oil bonanza

                          Comment


                          • ALGERIA (Reuters) - Oil prices are expected to stay above $50 a barrel in coming months, but producers are watching the U.S. economy closely as the possibility of a recession there cannot be ruled out, Algeria's energy minister said on Sunday.

                            Asked by reporters for his price outlook for coming months, Energy and Mines Minister Chakib Khelil replied: "I think prices will still remain above $50. The indications on the futures market are above $50 for the coming years."

                            But he added: "Now everything depends on world economic growth. If there really is a recession in the U.S., at that moment demand could be affected fairly rapidly. We would find a lot of supply on the market and a lot of crude in competition."

                            "We cannot exclude this possibility. We count a lot on the wisdom of the chairman of the Federal Reserve to take good decisions on interest rates, as well as on the European Central Bank, to encourage economic growth."

                            Khelil reiterated that OPEC President Edmund Daukoru had the authority to convene another meeting in advance of its next scheduled gathering in Nigeria in December to enable OPEC to stabilise the market if he felt it necessary.

                            "We are coming into a period where there is the possibility of recession in the U.S. economy," said Khelil, who becomes alternate president of the oil exporting club from Jan 1, 2007.

                            "There are signs of recession. It's not clear that there will be a recession. But we are watching that," he added.

                            "We are following this (U.S. economic growth) with a lot of attention, because this element is critical for petroleum demand in the next few years."

                            Algeria sees oil over $50 but watching US growth

                            Comment


                            • ALGIERS -(Dow Jones)- Algerian oil minister Chakib Khelil said Sunday that an explosion in the Gassi gas fields won't affect Algeria's gas supplies.

                              Speaking to reporters on the sidelines of an electricity event in Algiers, Khelil said "The field is an exploration and development area, and not linked to the production flow line." He added, "Algeria's gas exports are not going to be affected by the blast and will be conducted in (the) regular way."

                              Khelili said two workers missing in the Gassi gas field blast likely perished in the explosion. They presumably burned in the drilling facility that was destroyed by the blaze, he said.

                              Algerian authorities are investigating the cause of the incident while efforts to extinguish the fire are being conducted by the Sonatrach and its partners in the Gassi Touil field as well as a U.S. company specialized in oil field fires.
                              The operation will last two weeks, according to the minister, after which the exploration and development work is to be resumed.

                              Regarding oil prices, Khelil said he expects a "barrel to remain above $50 for the coming years."

                              International demand has slowed but is expected to increase in the next period. "In OPEC, we decided to maintain the ceiling, however we mandated the president to convene an extraordinary meeting for emergency decisions," he said.

                              The OPEC president is to pay a visit to Algeria Monday to follow up on the pipeline project linking Algeria to Nigeria, Khelil said.

                              Algerian oil minister: Gassi gas field blast won't affect output

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