Algeria to explore for resources in the Mediterranean

A view of Krechba gas treatment plant in Algeria. (Reuters)

2017/04/09 Issue: 101 Page: 18

The Arab Weekly
Walid Khadduri

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.

Walid Khadduri is an Iraqi writer on energy affairs based in Beirut.

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