Keywords : gas exploration, Gas, hydrocarbon, LNG project
Executive summary Based on African Energy's unparalleled track record in following Algeria’s energy sector, with additional originally sourced journalism from both within the country and from global markets, Algeria’s Energy Future features political analyses and insights based on decades of reporting experience in the country. It is essential reading for anyone considering doing business in the Algerian energy sec...
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Executive summary
Based on African Energy's unparalleled track record in following Algeria’s energy sector, with additional originally sourced journalism from both within the country and from global markets, Algeria’s Energy Future features political analyses and insights based on decades of reporting experience in the country.
It is essential reading for anyone considering doing business in the Algerian energy sector.
The report profiles key players in the energy and political spheres and examines in detail – with supporting maps, graphics and project-by-project listings – the prospects for the power and renewables sectors, and upstream and downstream oil and gas operations.
Excerpts from Algeria's Energy Future
Leadership grapples with policy challenges to rebuild social contract and investor confidence
Algeria’s energy industries cannot be understood without a grasp of local political realities and a power structure in which personal connections and entrenched ideological positions play a critical role in shaping policy and business outcomes. Algeria’s Energy Future seeks to provide a rounded view of this complex polity and the energy industry that generates the bulk of its income, with insights into the challenges of maintaining oil and gas production, coping with fast-rising demand for electricity, and into the decision-making processes that underpin them
Overview: Yousfi confronts past errors while setting new policy direction
Following the crisis that beset Sonatrach last year, the new minister is looking to overhaul industry structures and practices to better meet rising domestic demand and accommodate evolving export markets. Meeting the energy industry’s various challenges will require significant policy shifts, which in the Algerian context means winning some heated political battles as well as producing coherent technical arguments
Algeria’s energy sector has yet to regain its sense of purpose in the aftermath of the ‘Sonatrach affair’. The dismissal of president director general (PDG) Mohammed Meziane and almost the entire executive committee in early 2010 – followed some months later by the sacking of energy and mines minister Chakib Khelil – left the sector traumatised and disoriented. Over the past six months, new minister Youcef Yousfi has been putting in place a strategy to both heal the wounds and set a new direction. This is an effort to rectify what many Algerian analysts see as Khelil’s policy errors, but also to reset the way that Sonatrach operates.
The region’s volatile political context appears to have lent the reforms added momentum as the regime looks to its future. Additionally, a range of sources in Algiers and elsewhere believe that the ‘clan’ of President Abdelaziz Bouteflika – which included his friend since childhood Khelil – may have made peace with General Mohammed Tewfik’ Mediene’s powerful Départment du Renseignement et de la Securité (DRS) military intelligence service towards end-2010 (see Policy and Politics).
Who’s who in the energy sector: key players in a hierarchical and often personalised system
In May 2010, everything changed in the energy sector when the entire cast of senior officials and executives was replaced. African Energy profiles the main players, their backgrounds and responsibilities
YOUCEF YOUSFI: Energy and mines minister
ALI HACHED: Ministerial adviser
SID ALI BETATA: Alnaft secretary-general
NOUREDDINE BOUTERFA: Sonelgaz PDG
ABDELHAK BOUHAFS: Technocrat in waiting
NORDINE CHEROUATI: Big return as crisis PDG
SAÏD SAHNOUN: Upstream vice president
ABDELKADER BENCHOUIA: Downstream vice president
ALLAOUA SAÏDAN: Pipelines and transport vice president
YAMINA HAMDI: Marketing vice president
ABDELHAMID ZERGUINE: Subsidiaries and holdings executive director
ABDELMAJID ZEBIRI: Human Resources executive director
YOUNES HEGUEHOUG: Central activities executive director
FATMA-ZOHRA BENOUGHLIS: Strategy, planning and economics executive director
FARID BOUKHALFA: Finance executive director
NAIMA BOUTEMEUR: Health, safety and environment central director
Huge new investment planned to meet rising demand for electricity
The power sector is dominated by a single overwhelming priority – to keep pace with the country’s rapidly increasing and unchecked demand for electricity. But other issues are intruding, such as concerns over the long term viability of Algeria’s current gas reserves and the fact that no one pays a realistic amount for the electricity they consume. Nevertheless, the new energy strategy includes a further massive investment programme ingeneration, transmission and distribution
Renewables development ambitions hinge on large-scale industrial partnerships
The government is more committed to promoting large-scale renewables schemes than was previously the case – when policy-makers were firmly commited to the carbon economy at the expense of everything else. Algiers has ambitious plans for solar development, wedded to a renewables industrialisation drive. The clear message from Algiers is that projects won’t happen unless they are linked to investments that create jobs and transfer technology
Repeated licensing round failures undermine government’s exploration policy
Three recent unsuccessful rounds have severely contracted IOCs’ contribution to new exploration, and a prospective fourth round will have to significantly improve conditions if it is to attract international interest
Lack of gas puts downstream plans into question
The Algerian government and Sonatrach are deciding whether to risk a potentially bruising series of legal challenges if they decide to scrap a number of downstream petrochemicals projects. The general manager of a Sonatrach subsidiary who attended a meeting with energy and mines minister Youcef Yousfi at which the contracts were discussed told African Energy that a number of options were being considered
Algeria holds firm on long-term take or pay
The Algerian authorities are unwilling to compromise on long-term gas supply agreements, in spite of pressure from the market to sell some output at a rate closer to the spot price
Who’s who in Algerian politics
African Energy profiles some of the prominent personalities on the contemporary political scene
Abdelaziz Bouteflika
Mohammed ‘Tewfik’ Mediène
Saïd Bouteflika
Ahmed Ouyahia
Dahou Ould Kablia
Mouloud Hamrouche
Abdelaziz Belkhadem
Abdelmalek Sellal
Mohammed Betchine
WikiLeaks exposes corruption and division at highest level of government
Controversial cables confirm damning assessment of most powerful forces in the land
The publication by Julian Assange’sWikiLeaks organisation of secret US embassy cables in early December exposed the government in Algiers to its fair share of unwanted intrusion. In common with many governments in the Middle East and elsewhere, a significant gap has been demonstrated to exist between what it says and what it actually thinks. The Algerian press eagerly republished cables analysing the presidential succession, the President himself and the security services – topics which could previously have resulted in jail terms or worse for journalists who wrote on them.
The most controversial cables by US ambassador Robert Ford provide a highly critical outline of the Algerian social and political environment and a damning assessment of the most powerful forces in the land, particularly the military and security establishment. Ford knew Algeria well, having held the fort in Algiers during the difficult early 1990s, when he took a deep interest in Islamic radicalism as one of the few expatriates left in the city. His genuine insight into the country lent an undiplomatic edge to his assessments, even when speaking on the record. In his private cables, he describes a deep social malaise; the sense of a country “drifting”; a failure by the regime to tackle systemic economic problems; a weakened president; and a sclerotic and paranoid military intelligence service.
Embarrassingly for both sides, a December 2007 cable by Ford, provides a rare view of what Departement de la Renseignment et du Securité (DRS) chief General Mohammed ‘Tewfik’ Mediène was thinking before the constitutional changes to allow President Bouteflika’s third term.
Economic nationalism continues to drive policy
Revisions to the liberal 2005 hydrocarbons law that effectively restored Sonatrach’s control over the industry proved to be a key indicator of a wider trend in the Algerian economy – towards primacy of the state over private enterprise and the promotion of populist ‘resource nationalist’ policies. This has made life harder for investors
Oil And Gas Energy Industry in Algeria
Algeria’s Energy Future – table of contents
Part I: The context
INTRODUCTION
FOREWORD: Leadership grapples with policy challenges 3
FOCUS
OVERVIEW: Yousfi confronts past errors 5
DATA: Sonatrach projected gas production and sales 5
GAS MARKETING: Minister’s aims still unclear 7
DATA: Algeria’s hydrocarbons reserves 7
GAS PRODUCTION: Hassi R’mel enters long-term decline 8
DATA: Hassi R’mel field production profile 8
DATA: Sonatrach gas production forecast 9
DATA: Sonatrach gas sales forecast 9
GOVERNANCE: New management upgrades bureaucracy 10
GOVERNANCE: Sonatrach’s new watchdog 10
WHO’S WHO: Policy-makers 11
ORGANOGRAM: Sonatrach executives 12
Part II: Energy industries
POWER
GENERATION: Huge new investment planned 14
DEMAND: Domestic scenarios require extra capacity 15
FINANCE: Government saves Sonelgaz 15
SUBSIDIES: Social unrest rules out tariff increase 16
MAP: Generation, transmission and supply 17
GOVERNANCE: Sonelgaz ethics committee 18
RENEWABLES: Large-scale industrial partnerships 18
RENEWABLES: Pilot wind farm project 19
UPDATE: Sonelgaz lines up big project flow 20
UPSTREAM OIL AND GAS
EXPLORATION: Repeated licensing round failures 22
GAS: South-west quickest route to new reserves 23
DATA: Hydrocarbons discoveries 23
DEVELOPMENT: South-east shows promise 24
CORPORATE STRATEGY: BP decides to stay 25
DATA: Geographical distribution of reserves 25
CORPORATE: Petrofac wins In Salah EPC 26
CORPORATE: Gazprom’s North African breakthrough 26
CORPORATE: Petroceltic plans farm-out 27
CORPORATE: El Merk first oil early 2012 27
MAP: Licence areas 28
MAP: Infrastructure and fields 29
MAP: South-east licence areas 30
MAP: South-east infrastructure and fields 31
UPSTREAM UPDATE
TABLE: IOCs await better terms 32
DOWNSTREAM HYDROCARBONS AND MARKETS
SUPPLY: Lack of gas puts plans into question 36
INFRASTRUCTURE: Delays at LNG projects 36
REFINERIES: Policy under review 37
DATA: Sonatrach’s industrial clients 37
MARKETS: Algeria holds firm on take or pay 37
MARKETS: Dispute with Spain continues 38
EXPORT: Libya requests Sonatrach supplies 38
TRANSPORT: International pipelines 39
TRANSPORT: Domestic pipeline delays 40
TRANSPORT: Trans Saharan pipeline 40
DOWNSTREAM UPDATE
TABLE: Tough times for gas projects 41
Part III: The policy and business environment
POLITICS AND POLICY
PRESIDENT AND POUVOIR: System on a knife edge 43
WHO’S WHO: Prominent personalities 44
OFFICIALS: Where are the rest of them? 44
WIKILEAKS: Corruption exposed 46
REGIONAL SECURITY: Insurgency rumbles on 47
REGIONAL SECURITY: Sahel kidnappings 47
REGIONAL SECURITY: Algeria’s buffer zone 47
FINANCE AND BUSINESS
NATIONALISM: Policies drive away investors 48
WINDFALL TAX: Anadarko squares up for fight 48
DATA: Anadarko’s tax and revenue 49
TAX: Eni negotiates 49
GOVERNMENT SPENDING: Oil wealth to buy social peace 50
BUSINESS ENVIRONMENT: Orascom battles government 50
Part IV: The Algeria Oil & Gas Handbook
COMPANIES INDEX
ENERGY SECTOR INSTITUTIONS 52
SONATRACH AND SUBSIDIARIES 52
SONELGAZ AND SUBSIDIARIES 53
INTERNATIONAL OIL COMPANIES 54
ENGINEERING AND CONSTRUCTION COMPANIES 57
