Algeria plans to reignite oil investment
By Sara El-Gammal
GENEVA, Nov 1 - Riding a wave of exploration successes and a spate of peace after years of violence, Algeria is pushing hard to get foreign investors interested in vast underexplored and virgin petroleum basins.
Algeria's ambition is to sign agreements for 11 oil and gas blocks within six months, including the award to U.S. Amerada Hess of the development of El Gassi field before the end of the year, said Sonatrach vice-president for exploration Ahmed Mecheraoui at an industry conference.
Companies have complained that tougher fiscal terms have slowed investment in recent years after a number of deals in the late 1980s and early 1990s.
Now state-owned oil and gas company Sonatrach appears prepared to sweeten production sharing terms and is studying production sharing law to make it more transparent.
Energy Minister Youssef Yousfi said Algeria's vast northern, southern, southwestern regions as well as offshore areas were crying out to be explored.
"I see the future of my country in an intensification of exploration in other parts of the country," he said in a plea to foreign investors after Algeria's President Abdelaziz Bouteflika won a referendum.
Seismic surveys showed promising results, particularly for gas in the southwest, with equally positive signs in the north. Offshore areas were virtually untouched, he said.
FOREIGN INVESTORS SEE GREATER FLEXIBILITY
Foreign participants and potential new entrants emerged from the two-day conference showing a fresh appetite for Algerian projects.
"The Algerians are not the same as four to five years ago. They're much more open, more flexible," said one delegate with a European oil company looking for exploration acreage.
"There's a lot of investment opportunities. It's been an interesting conference. We'll chew on what we've seen and heard and take it from there," said another with an oil major.
Almost 100 discoveries have been made in the North African country since 1986, but as yet an overall area of 1.5 million square km remains greatly unexplored.
The Berkine basin alone holds more than 28 percent of the country's oil reserves with close to 44 billion barrels of oil and gas recoverable reserves, signalling potential for enhanced oil recovery projects.
Sonatrach and its partners need more than $20 billion between now and 2003 to meet a heavy drilling programme and expand existing production facilities.
U.S. major Chevron continues to shop around for a good-sized field and British independent Lasmo (LSE: LSMR.L - news) is extending its operatorship after a merger with Monument Oil and the imminent transfer of its El Ouar and In Amedjen North acreage in the oil-rich Ghadames basin.
Elf Aquitaine has returned to the country after a 30-year absence, taking a 40 percent stake in U.S. Arco - operated Rhourde El Baguel, Algeria's second largest oil field.
Amerada Hess secured its first acreage with an enhanced oil recovery field El Gassi and BHP has also clinched a deal to develop Ohanet field, both of which were due to be signed by the end of the year.
BP Amoco (LSE: BPA.L - news) and Houston-based Anadarko , with billions of dollars invested respectively in giant gas project In Salah and two billion barrel Hassi Berkine, have clearly declared their intention to stay for the long term.
Anadarko's commitment despite ongoing litigation with Sonatrach over reserve splits in four fields is a sign that despite problems, Algeria was still a place to do business.
"Do we have differences? Yes. Are they significant? I'm afraid so. Insurmountable? Absolutely not," Anadarko Vice-President Bill Sullivan said, referring to the company's relationship with Sonatrach and each parties' desire to resolve differences amicably.
BETTER SECURITY ANOTHER PLUS
An added incentive to investment in Algeria is a significant improvement in security following the overwhelming endorsement by voters in September of a peace plan aimed at ending a seven-year Islamic guerrilla uprising.
This means oil companies will shortly review costly security arrangements, releasing more funds for exploration.
Sonatrach vice-president for exploration Ahmed Mecheraoui said more than 34 blocks were being studied or were under negotiation.
Yousfi said he wanted to see more exploration in gas, less exports of hydrocarbons and increased foreign investment in the country's refining, petrochemicals, power and mining sectors.
Algeria currently has a crude production capacity of 900,000 barrels per day which it would like to boost to 1.5 million bpd by 2003. Its ambition is to double its refining capacity from a current 450,000 bpd during the next decade.
The North African country is also expanding exploration abroad and has agreed a deal with Iraq for two blocks which could be signed immediately provided United Nations sanctions against Baghdad are lifted.
Other areas of interest include two blocks in Yemen, Libya, Angola, Mozambique and Gabon.
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