ALGERIA - Focusing On The Non-Oil Sector - Part 2.

After nearly a decade of violence, Algeria is gradually entering a phase where the phenomenon of Islamist extremism is being pushed to the margins and stability is being consolidated. The focus is shifting back to conventional politics, with economic reform and social welfare increasingly on the agenda. Algeria has been one of the beneficiaries of the US war on terror, in terms of its improved relations with the Washington - which saw the regime in Algiers as a reliable ally against radical Islam - and in terms of its related benefits in aid to combat the problem.

In the meantime, the Algerian hydrocarbon sector has been seeing a boom-like situation. Algeria has gained much from high oil prices since 1999 and for foreign investors, in Algeria's hydrocarbon sector, the situation keeps improving. The country's capacity to produce OPEC-quota oil has risen to 1.2 million b/d and should exceed 1.5 million b/d by 2005. With the number of foreign exploration and production operators in the country set to rise from 20 to 80 in this decade, the capacity would reach more than 2 million b/d before 2010.

As a hydrocarbon province, Algeria is under-explored with its Sahara still being virgin territory. Less than ten wildcats have been drilled per 10,000 sq km in Algeria. By comparison, in North America there are 500 wells per 10,000 sq km. According to the state hydrocarbons concern Sonatrach, there have been about 40 oil and gas discoveries since 1997. Thus, the energy base in Algeria keeps expanding, and the shift to natural gas in local consumption has been rapid thus allowing a greater amount of oil to be exported than would otherwise be the case.

The country's proven oil reserves are estimated independently at less than 10 billion barrels. In addition, there are about 7 bn barrels found in the past 12 years to be tapped. Algeria's proven gas reserves exceed 4.5 TCM. Sonatrach estimates the ultimate gas potential at about 5.8 TCM.

Algerian exports of high quality oils, condensates and refined products will be rise steadily in the decade ahead. A continuous increase in the export of natural gas, by huge pipelines to Europe and in LNG form, will accelerate in the coming years with two more pipelines to Europe to be built.

The hydrocarbons sector is the backbone of the Algerian economy, accounting for roughly 52% of budget revenues, 25% of GDP, and over 95% of export earnings. Algeria has the fifth-largest reserves of natural gas in the world and is the second largest gas exporter; it ranks fourteenth for oil reserves.