Sector News

Algerian Oil and Gas show signs of life

June 29, 2016

Showing signs of recovery after a lengthy and sustained downturn in oil and gas production, Algeria’s energy sector is finally providing some relief at a time when it needs it most.

According to media reports, the North African nation’s oil and gas output is moving towards recovery thanks largely to increased production at existing facilities.

Over the last several years, Algeria has struggled to sustain and increase oil and gas production amid an ongoing corruption investigation, management shake-ups at the state-backed Sonatrach, collapsing global pricing and fading confidence among vital foreign production partners.

While the country largely escaped the sort of political and security unrest that left neighboring Libya struggling, it has faced some spill-over from regional incidents and questions about its long-term political leadership.

While this sort of decline would pack a punch in any producing country, Algeria’s government depends heavily on energy revenues, which make up about 60 percent of its operating budget. Last year alone, revenue fell by nearly 50%.

To help reverse this trend, Algeria has worked to amend its energy laws to make it more appealing to foreign energy firms and recently held a summit with European Union officials to explore how to attract needed investment and increase involvement in the global marketplace.

Showing some signs of recovery, the country’s estimated oil output for the year increased from 69 million tons of oil equivalent from 67 million tonnes in 205, according to a Reuters report. Looking ahead, the government expects that output to rise to 75 million tonnes in 2017 and climb to 82 million tonnes by 2020.

Meanwhile, the country’s natural gas output bounced back from a dip last year to reach 132.2 billion cubic meters for 2016.

“The era of stagnation is behind us and we are now in a phase of growth,” Sonatrach chief Amine Mazouzi said this week, according to the news agency.

Despite the recovery, energy producers in the region still face significant challenges, including persistently low crude prices and the risk of waning demand, both of which could be further complicated by the threat of an economic slowdown in Europe.

While a number of European producers are currently operating in Algeria, the country has failed to successfully roll out recent licensing rounds due to a lack of interest.

By Christopher Coats

Source: Forbes

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