Algeria moves to bolster oil and gas reserves

Sonatrach plans five new refineries and accelerated gas exploration as part of $80bn spending programme

In early November, Algerian state energy company Sonatrach announced plans to invest $80bn in oil and gas projects over the next five years. The plans include a 50 per cent increase in the firm’s annual spend, to $15bn in 2013 from an estimated $10bn in 2012.

“We want to prepare for the future as an African leader,” said Abdelhamid Zerguine, the president of Sonatrach, at an energy conference in Algiers on 4 November.

The plans are extremely ambitious. The projected investment is almost 20 per cent greater than the $68.2bn spending target announced in late May.

In a country where projects delivery is notoriously slow, it is unlikely that the spending targets will be realised in full. But they are a statement of the government’s intent to overhaul a sector that in recent years has fallen far behind its potential.

“It’s a headline figure,” says Hakim Darbouche, a specialist in Algeria at the Oxford Institute of Energy Studies in the UK. “The question is always whether they will achieve their targets within the timeframe they say, because of the issue of bureaucratic slowness.”

Tackling oil and gas shortfall

The plans will address a growing shortfall in two key products: refined petroleum and natural gas. Algeria has the fourth-largest oil reserves in Africa and exports some 1.5 million barrels a day of oil. But it faces an increasingly large deficit of refined products.

In 2012, imports of refined petroleum are expected to be 2.5 million-3 million tonnes, according to a statement by Yamina Hamdi, Sonatrach’s vice-president for commercial activity. The firm had previously announced that it expected to import 2 million tonnes of gasoil and 300,000 tonnes of gasolene.

The shortfall can be partly explained by the outage of production from the country’s largest refinery, at Skikda, for several months of the year. According to Hamdi, imports of refined products will fall dramatically in 2013. But even with Skikda running at full capacity, there remains a structural shortage in the supply of refined products.

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Richard Nield is a freelance journalist, photographer and filmmaker covering the Middle East and Africa. In 10 years covering the region, he has been published and broadcast by clients including the BBC, Reuters, Al Jazeera, The Economist, The Financial Times, The Independent and Foreign Policy magazine. He has reported from throughout the region, including Algeria, Egypt, Libya, Morocco, Tunisia, South Sudan, Jordan, Lebanon, Syria, Kuwait and Saudi Arabia.