Algeria to explore for resources in the Mediterranean
Beirut - Algerian state-owned oil firm Sonatrach has announced plans for a $50 billion investment programme to increase energy production.
Plans call for adding 220 gigawatts of renewable power capacity by the year 2030 and for the development of shale resources. The US Geological Survey estimates that Algeria has some of the largest shale reserves among Mediterranean countries.
However, Sonatrach is not expected to be able to carry out the ambitious renewable energy programme on schedule. Meanwhile, shale exploration is encountering domestic obstacles, mainly opposition from public opinion in southern Algeria, where most of the shale reserves are located. Local inhabitants are concerned about the pollution of scarce water resources due to fracking that shale exploration requires.
The main programme that is expected to take off is offshore exploration.
Sonatrach is also looking offshore to find more resources and has contracted Western oil service firms to carry out seismic tests and drill an offshore exploration well.
The African offshore has proven to be a promising hydrocarbon area. Oil and gas are produced from Nigeria’s offshore; Angola’s approximately 2.2 million barrels per day (bpd) of oil is produced offshore; natural gas is produced offshore in Egypt, Libya and Tunisia; and large gas reserves have been discovered in East Africa, particularly off Tanzania and Mozambique.
Algeria has not found it necessary yet to explore offshore as the Sahara Desert remains largely unexplored. Crude oil production has hovered around 1 million-1.1 million bpd since 1970. Organisation of the Petroleum Exporting Countries (OPEC) statistics indicate that production averaged 1.029 million bpd in 1970, compared to 1.167 million bpd in 2015. Domestic consumption has increased however, so crude oil exports have declined.
Sonatrach is negotiating with Italy’s Eni, US independent Anadarko and the US giant Exxon Mobil for exploring Algeria’s offshore potential. Eni has large investments in Egypt’s offshore operations. The Italian firm discovered the giant Zohr gas field in Egyptian waters, the largest offshore field found in the Mediterranean.
Exxon Mobil, in partnership with Qatar Petroleum, was granted an exploration and production licence in Cypriot waters. The US firm has also been short-listed for the first Lebanese bidding round. Anadarko is also on the Lebanese short list.
Sonatrach, similar to many public institutions in Algeria, has been sailing in stormy weather. Due to the health problems of 80-year-old Algerian President Abdelaziz Bouteflika, decision-making has reverted to one of compromises between the presidential clan on one hand and the military and intelligence apparatus on the other. In March, Sonatrach’s board appointed its sixth chief executive officer (CEO) in seven years.
Corruption is widespread. A former Sonatrach CEO and Energy minister has been charged with bribery. An Algerian criminal court has sentenced six people to jail and sanctioned companies for corruption tied to contracts with Sonatrach. The defendants were charged with offences including embezzling public funds and money laundering to inflate the price of contracts and accepting bribes.
A report on Algerian corruption by GAN Integrity in March 2016 said: “Algerian natural resources and extractive industries carry a high corruption risk and this is particularly true for the energy sector.”
Sonatrach’s experience is not unique. National oil companies in crisis-ridden countries such as Iraq and Nigeria suffer immensely from infighting among contesting parties and corruption due to lack of transparency and accountability.