Algeria plans to use an upcoming hydrocarbons bidding round to increase the overseas assets of Sonatrach, the state oil company, as part of a strategy to gain exposure to new markets.
Chakib Khelil, the energy minister, told the Financial Times that Sonatrach – which already has projects in other parts of Africa, Latin America and Portugal – was also looking at potential acquisitions to expand its international operations.
“We are looking at companies that complement what we don’t have, either in petrochemicals, ownership in assets that could provide us exposure in areas we don’t have any activities, to give us access to markets,” he said.
Some 15 oil and gas blocks will be offered at the bidding round, which is scheduled to be launched in the first quarter of this year following a series of delays. The blocks will include areas in the Berkine region and the Ahnet basin in southern parts of the country where there have already been discoveries. Pre-qualification opened earlier this month and Mr Khelil said companies including BP, Total, Shell and Exxon Mobil had shown interest.
He said Algeria would adopt a new approach with the blocks with the highest potential whereby it would seek to “swap assets” with international companies to provide Sonatrach access to development or exploration blocks outside Algeria.
“We are going to be using this process to get Sonatrach more involved in international operations so we will …be looking for those companies to offer us opportunities,” he said. “Of course there will be discussions on those opportunities and in the case where those opportunities are real we will pre-qualify to go to those blocks.”
Experts said Algeria – an important supplier of gas to Europe – was entering uncharted terrain by seeking to swap assets and added that it might complicate and prolong the licensing process. Industry watchers said the round – the country’s seventh – would be an important indicator of investor sentiment following amendments to a 2005 hydrocarbons law, which mean Sonatrach would have a minimum 51 per cent stake in all new projects. The original law, which had been welcomed as investor friendly, had stated that Sonatrach’s stake could have been as low as 20 per cent, but was altered in part due to political and public pressure as oil prices soared to record highs.
Another factor companies will consider is security concerns following the suicide bombing of the United Nations offices in Algiers by an Islamist group affiliated to al-Qaeda in December. Britain issued an updated travel advisory this month warning against all but essential travel to Algiers, while the US embassy told its employees on Friday to avoid non-essential travel around the capital and to avoid places frequented by westerners.
Experts said that while security was a concern it would not prevent those firms operating in Algeria from continuing their work but it could have an impact on the sentiment of new entrants.
Mr Khelil said he expected interest in the bidding round to be strong, and downplayed the impact of the security situation, arguing: “If the rate of return is there, they will be there”.
He also said that the new fiscal regime, which includes taxes on oil revenue and a royalty, would not create “instabilities in the future”.
Algeria provides about 13 per cent of Europe’s total gas consumption and boasts the world’s eighth largest proven gas reserves. It also has areas experts describe as relatively under-explored, and produces about 1.46m barrels of oil per day.
The government has set targets of increasing gas exports from 62bn cubic metres to 85bn-cm by 2010, and Mr Khelil said it should reach those levels by that deadline or 2011 with the expansion of an existing pipeline and the completion of the Medgaz line by 2009, which will link Algeria to Almeria, Spain.
Mr Khelil also confirmed that Sonatrach had taken on the development of Gassi Touil and that the government would not be seeking a new partner for the project. Sonatrach cancelled the contract of Repsol YPF and Gas Natural to develop Gassi Touil – which is to produce 4m tons of liquefied natural gas (LNG) with the option to expand to 8m tons – citing delays and cost overruns for its decision.
The project, which has been delayed by at least three years, is deemed technically challenging, but experts said Sonatrach had the required resources and expertise. “We had the option to say well, let’s look for another partner, and if we had taken that option it would have taken us perhaps another two years and we already have delays of three years,” Mr Khelil said.
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