Algeria - Part 1 - The Prospects Are Improving.

For foreign investors in Algeria's hydrocarbon sector, the situation has improved. The country's oil production capacity keeps expanding and could reach 1.4 million b/d before end-1999, compared to 850,000 b/d in early 1997. The foreign companies have been responsible for the rapid expansion and, eventually will account for more than half of Algeria's oil output. The country 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. According to the state concern Sonatrach, there were more than 15 new oil and gas discoveries in 1998 as Algeria reaped the rewards of its revised E&P legislation (see Gas Market Trends). The number of foreign oil companies operating in Algeria has risen to 20 and Sonatrach hopes to sign seven E&P agreements this year. 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 (see profiles of Algeria's oil & gas fields and of the operators in Part 2). Despite a civil strife raging since 1992, the energy base in Algeria has been expanding. The shift to natural gas in domestic consumption has been rapid. Economic reforms launched under IMF guidance since 1994 have begun to take effect and the macro-economic indicators now are much better than in recent years (see Downstream Trends). The country's proven oil reserves are estimated at 11.2 bn barrels. More than 40 discoveries made since early 1994 have resulted in about 5.4 bn barrels of oil in place, of which recoverable volumes are yet to be added to the official reserves estimate. As a result of improved data on existing fields and the installation of enhanced oil recovery (EOR) systems, Algeria's proven oil reserves should be revised upwards in the coming years. According to a report by Wood Mackenzie in March 1998, Algeria's proven gas reserves had grown 15% to about 130 TCF since 1990. Exports of high quality crude oils and petroleum products will be rising steadily. Exports of natural gas, by two huge pipelines to Europe and in LNG form, will reach 60 BCM/year in 2000. Exports of condensates and LPG will be rising considerably (see Part 3). The government is investing in market share assets in Europe and the US. To secure additional markets for its oil and gas, Sonatrach is to invest in other areas (see Part 4). The green light for all this was given in 1997 by the National Council of Energy (CNE), now the top decision maker for the hydrocarbon sector. The CNE is chaired by the country's ruler, President Liamine Zeroual, who is expected to retire shortly. Presidential elections are scheduled for April 1999. But there will be no major change in oil policy, according to Sonatrach sources (see who's who in DT and Gas Market Trends No. 8).