Algeria: will gas and solar mean new policies?

Investment

 

A lack of investment and relevant expertise, not to mention bureaucracy, affect many industries in Algeria and are especially notable in the oil and gas sector, not least in the case of Sonatrach, whose participation in all projects is mandatory. Ciszuk points out that Sonatrach is far from inept, and that it has worked hard in important areas like technology transfer, but in the case of unconventional gas sources, he says, it will need help. “It’s problematic for them to do it themselves, from a financing point of view from a technology point of view and from a cadre point of view – and especially,” he adds, “if they want to move towards shale gas, because they don’t know anything about that.”

Which means outside involvement. But interest from IOCs in new upstream acreage has been falling in successive licensing rounds and, the most recent round — the ninth — has resulted in only two exploration licence areas out of ten on offer being awarded. But the international interest was even lower than this figure may make it seem: one of the two awarded areas was taken by Sonatrach.

Commenting on the very weak response to the ninth licensing round in a recent research note, IHS says: “IOCs increasingly have found Algerian fiscal terms too tight and its politically driven strong resource-nationalism sentiments unhelpful, in an environment already massively characterised by high levels of red tape and slow-moving bureaucracy”.

Remember that these rounds do not involve the country’s unconventional gas reserves, which will require even more technically complex and demanding exploration and development. The Algerian renewables sector, meanwhile, has barely got off the ground. In both cases, however, there is no obvious sign of the government relaxing its fiscal terms or easing the regulatory environment.

So would-be investors will have to hope for a change of heart. Or, as Ciszuk puts it, “Given that companies are struggling to move forward under the very tough Algerian terms with far less complex projects, the question is 'What terms will the Algerians offer?'”

 

*IHS is a leading source of information and insight in energy, economics, geopolitical risk, sustainability and supply chain management. www.ihs.com

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