After Nigeria and Angola, Algeria is the third largest oil producer in Africa and the continent’s largest natural gas producer. However, the EIA has said that production in both oil and natural gas has fallen over the last 10 years. Declining production has led to the Algerian government amending its laws regarding foreign investment in hydrocarbons in an attempt to attract the investment and technology improvements needed to help stop production declines. Last year, Sonatrach, the country’s national oil and gas company, offered 33 blocks located in four sedimentary basis with high shale gas and oil potential. This auction resulted in Sonatrach signing five contracts with Repsol, Shell, Statoil and Dragon Oil-Enel. By law, Sonatrach takes a mandatory majority share of any resulting projects.
Also in May last year, the Algerian Council of Ministers gave formal approval for foreign partners to join the company in the exploration and development of shale gas resources.
Algeria is home to large proved crude oil and natural gas reserves and abundant resources that are already connected to world markets through an extensive natural gas pipeline network. Also, the country has a large shipping fleet that sends LNG from several liquefaction plants to customers in Europe. Proved crude oil reserves totaled 12.2 billion bbls last year, with an additional 9.8 bbls of undiscovered oil and NGLs estimated by the US GS, and close to 6 billion bbls of technically recoverable shale oil resources estimated by the EIA and Advanced Resources International. Proved natural gas reserves totaled 159 trillion ft3 last year, with an additional 49 trillion ft3 of undiscovered natural gas resources estimated by USGS and more than 700 trillion ft3 of technically recoverable shale gas resources estimated by EIA/ARI.
At the start of the year, Sonatrach announced plans to spend US$64 billion, or 70% of its total investment program from 2015 – 2018, in upstream activities to reverse the decline in crude oil and natural gas production. Sonatrach set a target to increase gross hydrocarbon output from 1429 million bbls of oil equivalent in 2014 to 1649 million bbls of oil equivalent by 2019.
Over the last three years, the company has intensified its exploration activities by drilling 275 oil and natural gas wells and by seismically mapping large areas of the country, with an estimated investment of US$30 billion. Sonatrach also conducted its own shale resource assessment and started exploration activities. The company's first two vertical shale exploratory wells drilled in 2012 confirmed the potential for shale gas. Since 2014, Sonatrach has been engaged in a pilot project in the shale gas rich Ahnet basin to drill, hydraulically fracture, and analyse three horizontal wells with up to 14 hydraulic fracturing stages.
Even though the government seeks to reduce the country’s dependence on oil and natural gas revenue, it has also made repeated calls for more investment in the sector. However, civil unrest and some opposition to the government’s commercialisation of shale resources may present obstacles to attracting foreign investment. Security is also a major concern, particularly following the attacks that took place at the Tigantourine natural gas processing plant in January 2013 in Illizi Province, near Algeria’s eastern border with Libya.
Edited from press release by Claira Lloyd