Oil & Gas Investment needed to unlock Algeria’s gas supplies By Melissa Hancock May 4, 2023 Reuters/ Zohra Bensemra Algeria's state-run Sonatrach plans to develop its gasfields to help offset declining production International oil companies likely to play role in gas production State-owned Sonatrach courts North American majors to invest Algeria is largest supplier of gas to Italy with pipeline exports Algeria has helped to plug Europe’s gas needs following Russia’s invasion of Ukraine, but industry experts say future growth in exports can only be sustained with further investment. Africa’s largest gas exporter saw its share of EU gas imports increase to 44 billion cubic metres last year, accounting for around 12 percent of the total, S&P Global data showed, up from 10 percent in 2021. In total, Algeria produced 102 billion cubic metres of gas. “A lot of Algeria’s production is from legacy fields that have been in production for decades,” Martijn Murphy, principal analyst for North Africa at energy consultancy Wood Mackenzie, told AGBI. One year on, what the war in Ukraine means for the Middle East Gas-rich Algeria struggles to assuage Europe’s energy crisis Emirates boosts Algiers flights as Algeria rebounds from Covid “So, part of the issue is countering the natural decline at these fields. And to that end green fields developed by Sonatrach [Algeria’s state-owned oil and gas company] are planned for the latter half of this year and into next year. “Ain Tsila is the largest among them and could add 600 million cubic feet [16.9 million cubic metres] a day once production ramps up.” Smaller developments in the south-west of the country such as Hassi Ba Hamou, Hassi Mouina and Ahnet will lead to an incremental increase in production. “The ability to bring these projects on schedule in a timely manner so that they’re able to offset declining production from legacy fields will be critical,” said Murphy. International oil companies (IOCs) are also expected to play a bigger role in Algeria’s gas production. Reuters Sonatrach is working with Italian company Eni In February this year Italian oil and gas major Eni acquired BP’s stakes in two key Algerian gas projects – In Amenas and In Salah – which together produced 11.2 billion cubic metres in 2022. In Salah and In Amenas constitute significant gas-producing fields for Algeria, accounting for around 28.3 million cubic metres – or one-tenth of Algeria’s output – according to Wood Mackenzie. Energy analysts have noted that if new licences can be agreed beyond the current term, which ends in 2027, additional investment to stave off decline could be unlocked. Murphy believes “it’s quite likely” that new licences will be agreed. “There seems to have been a step change in Sonatrach’s attitude toward inward investment and the need to retain IOCs,” he said. “We know that Sonatrach is doing its best to court some of the North American majors to invest in unconventional gas. “It has already taken on projects that IOCs have departed from over the last decade because they were unable to agree commercial terms. “It’s now keen to keep some of the big investors and incumbents such as Eni on side, as some of these projects are technically challenging, so they will need IOC investment and expertise if they’re to develop them.” Algeria’s Sonatrach plans to invest over $30bn in hydrocarbons Eni and Snam join forces on Algeria-Italy gas pipelines In April last year Sonatrach and Eni signed an agreement to allow Eni to provide increasing quantities of gas imported through the TransMed/Enrico Mattei pipeline – reaching up to 9 billion cubic metres per year in 2023-24. In July Eni inked a new production sharing contract (PSC) for blocks 404 and 208, located in eastern Algeria’s Berkine basin, with Sonatrach, Oxy and TotalEnergies which will enable the partners to boost investments and extend the fields’ production life by 25 years. Then, in October, Eni started production from two gas fields related to the Berkine South contract in Algeria, stating it plans to double its production capacity to around 2 million standard cubic metres per day of gas. Last year Algeria became the largest supplier of gas into Italy with pipeline exports via the TransMed pipeline.