Download: Centurion’s Algeria Spotlight

Algeria is Africa’s third largest oil producer after Nigeria and Angola, and 60% of its budget comes from hydrocarbons revenues. Oil production has been slowly declining however, from almost 1.4 million bopd in 2008 to a current average of 1 million bopd. Coupled with increasing domestic consumption, declining output is putting pressure on the need to discover new fields. Following a lack of appetite from international investors, the country completely replaced and modernised its legal framework with a new Hydrocarbons Code at the end of 2019.

Investors in Algeria’s oil & gas sector are amongst the most diverse in Africa, coming from the US, Europe, Russia, Turkey, the Middle East, East Asia, South East Asia and China with recent investment interests picking up over the past two years. Following the adoption of the new Hydrocarons Code, Sonatrach and Chevron signed an Mou in March 2020 to explore opportunities in exploration and production of hydrocarbon.

The move could potentially see the entry of the American major into the country. But the real story of Algeria’s hydrocarbons sector is gas. The country is Europe’s largest gas supplier, especially via the Maghreb-Europe Gas Pipeline, run by Medgaz. Over the past two years, Algeria has signed and renewed most of its gas sales and export agreements to Europe including the renewing of its contract with Gas Natural Fenosa in Spain until 2030, the renewing in 2019 of its three gas sales agreements with Eni and Enel in Italy and with Galp Energia in Portugal for another ten years, the renewing in 2019 of its gas sales agreement with Edison in Italy for another eight years, and the signing in 2019 of a gas sales agreement with Engie in France. Finally, it has opened new export markets, with the signing of an agreement with Turkey’s Ronesans Holding in 2018 for the supply of 550,000 tonnes of propane a year.

As Algeria secures gas export markets, it is also an African leader in gas monetisation and consumption at home, with most of its power generation fuelled by gas and a piped natural gas penetration rate of 60%.