ALGERIA: OPEC Prepares For Oil Price Roller Coaster In 2001.

ALGERIA's Energy Minister Shakib Khelil believes world crude oil prices would fall steeply from March and would rise rapidly in the fourth quarter of 2001. He maintains a moderate position in OPEC.

For foreign investors in Algeria's oil and gas, the situation has improved further and its oil/condensate production capacity keeps expanding, having reached 1.55m b/d. The capacity would rise to 1.75m b/d by 2005, compared to 850,000 b/d in early 1997. Foreign firms have been responsible for the rapid expansion and, eventually, will account for more than half of Algeria's oil and condensate output. Algeria's output of OPEC quota oil is averaging about 900,000 b/d, slightly over the OPEC target from Oct. 30.

Algeria remains under-explored, with the Western Sahara still being virgin territory. Only seven wildcat exploration wells have been drilled per 10,000 sq km in Algeria. In North America there are 500 wells per 10,000 sq km. The number of foreign oil companies operating in Algeria has risen to 25. Under a programme launched in 1996, about 300 exploration wells were to be drilled by 2000 with about half of them to be drilled by foreign companies.

The state concern Sonatrach is auctioning oil and gas exploration licences for six prospective blocks in an open bidding round. On Nov. 6-8 it presented technical information and the main contractual terms to a number of foreign companies. Data packages and a data room for the blocks are to be available between Nov. 20 and Dec. 20. Bidding would close on Feb. 14, 2001. The contracts would be signed by the beginning of March. The areas on offer are as follows:

-Block 406b, 2,781 sq km, in the Berkine Basin in the south-west. -Block 237a, 2,063 sq km, in the Berkine Basin in the south-west. -Block 348, 8,254 sq km, in the Timimoun Basin in the south-west. -Block 245, 6,412 sq km, in the southern part of the Illizi Basin. -Block 332, 7,674 sq km, in the Ahnet Basin in the south. -Block 126, 8,317 sq km, in South-East Constantine Basin in the east.

Sonatrach on Oct. 3 made its first-ever award of an exploration contract under open bidding procedures. On Oct. 23, Western Geophysical began seismic work on the eastern offshore, as part of a seven-year contract signed with Sonatrach on May 23 this year. Western Geophysical is to acquire and process 5,000 km of 2D seismic data at the cost of $5m, which it will finance. The US company will be repaid through sales of the collected technical data.

Sonatrach is expanding overseas. It has a 40% stake in ENI's Block 3 in Yemen and an oilfield development venture in Iraq to be activated in partner-ship with Indian companies when the UN sanctions have been eased. It is considering development of an oilfield in Iran, but it is awaiting new legislation which would allow upstream ventures to be on the basis of long-term partnership with Tehran's state concern NIOC (see below).

With Spanish speaking Minister Khelil having worked for the World Bank in Latin America and developed good friendships there, Sonatrach recently entered into a mid-stream gas venture in Peru. This involves transportation of natural gas and liquids from the Camisea gas field, in eastern Peru, to the western coastal cities of Lima and Callao. The venture would market and distribute gas and liquids in the two cities, with twin pipelines to be built from the field across the Andes mountains within 44 months. The gasline, 697 km, will initially have a capacity of 6.5 MCM/day and this will eventually be doubled. The 575-km liquids pipeline will have a capacity of 7,250 tons/day. The venture is owned by two Argentinean firms Techint (30%) and Pluspetrol (19.2%), Hunt Oil of the US (19.2%), Grana y Montero of Peru (12%), Sonatrach (10%), and SK Corp of South Korea (9.6%). Techint is the operator and Sonatrach is the engineering advisor. Sonatrach now is also negotiating participation in the field's development

Sonatrach's downstream investments abroad include a European gas marketing venture in partnership with Gaz de France, an LNG receiving terminal in the northern Spanish city of Ferrol in partnership with Spanish companies, a stake in a venture to build and operate a propylene plant near Tarragona in Spain, and a planned stake in an oil refining venture in Canada in partnership with Ultramar Diamond Shamrock.