Algeria’s Sonatrach eyes gas projects in Iraq as its reserves decline at home

Algeria exports liquefied gas to Europe via pipelines and tankers but low foreign investment has hurt the industry.
Sunday 14/01/2018
Recognised expertise. An employee stands near the headquarters of state energy company Sonatrach in Algiers. (Reuters)

TUNIS - Algerian state energy gi­ant Sonatrach is looking to Iraq for investment in oil and gas ventures as reserves in Algeria shrink and hydrocarbon projects in Libya and Yemen are stalled due to conflicts.

Algerian Energy Minister Musta­pha Guitouni led a delegation to meet Iraqi Oil Minister Jabbar al- Luaibi and other energy officials, who announced they were taking “concrete steps towards sealing (a cooperation agreement),” in gas projects, Algerian state news agen­cy APS reported.

Iraq, OPEC’s second-largest pro­ducer of crude oil, lacks facilities to convert all its gas to fuel for do­mestic consumption or sales abroad and has resorted to flaring some of its crude oil. Algeria, a main gas supplier to Europe, is experienced in processing gas and is looking to build its reserves through oil and gas production in the Arab world.

Iraq produces 4.4 million barrels of crude oil per day and Algeria has an oil output of about 1 million bar­rels per day.

Algeria exports liquefied gas to Europe via pipelines and tankers but low foreign investment has hurt the industry.

“We see that exploration at home is our weak area because we are not successful at filling the hydrocarbon reserves,” said Abdelmadjid Attar, former Sonatrach chief executive of­ficer and chairman, in an interview with the Algerian El Watan daily in December.

“We have to acknowledge the fact that we have been producing less and less liquefied and gaseous hy­drocarbons since 2007,” he said.

Algeria revised its oil and gas leg­islation in 2006 to promote Presi­dent Abdelaziz Bouteflika’s plat­form of “economic nationalism.” The legislation increased taxes on foreign partners and required Sonatrach to own the majority of shares in joint ventures. The move pushed away many foreign inves­tors and left Sonatrach without suf­ficient resources to drill for oil and gas in the country.

With no major energy firms in­vesting over the past decade and oil prices declining since mid-2014, Sonatrach has struggled to meet the government’s exploration and pro­duction objectives, which the com­pany has described as “investing as little as possible and producing as much as possible.”

Algeria has even failed to utilise its huge potential for shale pro­duction due to unrest in southern regions and a lack of modern infra­structure, technology and invest­ment.

Government officials said Al­geria would continue to require Sonatrach to own at least 51% of shares in ventures with foreign partners.

Sonatrach has helped the Yemen Exploration and Production Com­pany, a subsidiary of Yemen Oil and Gas Corporation, operate its Marib- Jawf fields since 2003 but insecurity halted operations there.

Algeria was also in partnership with the Libyan National Oil Corpo­ration to develop its al-Wafa and al- Rar oilfields but recalled its 50 work­ers home in 2014 because of conflict in the neighbouring country.