Africa’s economic prospects according to the IMF

Algeria Oil Reserves

Algeria presents one of the largest oil and gas opportunities in Africa. Algeria is extremely reliant on its hydrocarbon sector, as it accounts for almost 40% of GDP, 98% of exports and 70% of fiscal revenues.

According to the US EIA, Algeria had an estimated 12.2 billion barrels of proven oil reserves at the end of 2012 – the third biggest in Africa. That said, Algeria’s full hydrocarbon potential still has to be reliably established.

Stagnating stock of reserves

The fact that Algeria’s stock of reserves has stagnated at close to its current level over the past few years, possibly reflects the fact that tax and investment laws are providing little incentive for oil companies to invest and explore the region.

As a result of the steady decline in oil production, Algeria’s hydrocarbon sector as a whole has contracted in real terms over the past few years. With some fields maturing, oil companies are using enhanced recovery techniques to maintain production levels. At current production levels, reserves would last another 19 years.

Upward potential for oil output

Despite the current trend of declining oil production, there is substantial upward potential for oil output. In fact, some energy analysts are of the view that Algeria’s oil output could be two million BPD by 2015.

Over the first 11 months of 2012, crude oil output averaged 1.21 million BDP, 3.8% down from the same period in 2011. According to the CEO of Sonatrach, Abdelhamid Zerguine, this is due to declining output at foreign oil companies’ maturing fields as well as a drop in demand from Europe.

The long-run decline at these fields is however, expected to be offset by new start-ups. According to Mr Zerguine in a recent statement, the 100,000 BPD El Merk oil field will come on stream “in the coming months”. Production at the field is set to consist of around 100,000 BPD of crude oil, 30,000 BPD of condensate, and 30,000 BPD of natural gas liquids.

Algeria oil production

Algeria produces a high quality light crude oil with a very low sulphur and mineral content. As such, its oil has a relatively high price, with its so- called Sahara Blend trading at a higher price than Brent crude and the OPEC reference basket.

As was the case with Angola and Sonangol, the Alergian oil sector is dominated by the region’s national oil and gas company: Sonatrach. According to Forbes, it is the 12th largest oil and gas company in the world, producing the equivalent of 2.7 million BPD, most of which is in the form of natural gas. All foreign companies with a presence in Algeria must work in partnership with Sonatrach, with the latter always having majority ownership.

What are your views on the role of national oil and gas companies in the sector?

David Okwara

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