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Call for Tender
Thursday, 31 July 2008
ImageThe National Agency for the Development of Hydrocarbon Resources (ALNAFT) launched the first national and international invitation to tender for the granting of 45 blocs of exploration and exploitation of hydrocarbons in 16 areas located in south Algeria on July 13. The oil companies, having met the regulatory agency's requirements beforehand, were invited to confirm their intention to participate. This is the first launch of invitations to tender since the enactment of a new oil law in 2006. The central innovation introduced by the law is the fact that it obliges applicants to go through the system of invitations to tender and to put an end to informal contracting. Indeed, Sonatrach - which at the present time controls approximately 40% of the mining area, in other words an area of approximately 700,000 sq km - will no longer have any say in this kind of operation, which it previously had exclusive rights over. Sonatrach will become a competitor like any other company, complying with transparency rules and equal opportunities. In addition, one of the new measures obliges the national company to take part systematically and to contribute up to a total value of 51% in all the operations, from research to exploitation including transport, whereas before, it had the freedom to choose the extent of its participation in the various contracts.

The selected areas are located in the sedimentary oil basins offering a strong potential in hydrocarbon resources, namely the basins of Berkine, Illizi, Béchar, Hodna, Gourara and Ahnet. Some of these areas, such as the El Ouabed area in the basin of Benoud which covers 15,377 sq km, or the area of Ahnet and of Béchar which covers 17,358 sq km and 13,775 sq km respectively, are currently operated by Sonatrach and will be granted rights to a share of interests.

According to the timetable set by ALNAFT, the companies will have until December 3 to submit their tenders. The public opening of the offers will take place on the same day and the signing of the contracts is earmarked for December 17.

"The official objective is to develop new fields in order to attain a level of gas and oil production of 85bn cubic metres and 2m barrels per day by 2010," Chakib Khelil, minister for energy and mines and current president of Organisation of Petroleum Exporting Countries (OPEC), told OBG.

Although no expert can accurately predict if Algeria's proven reserves will double or triple in the future, the country's subsoil, with an average of 10 wells drilled for every 10,000 sq km per year, remains under-explored, compared to approximately 100 wells drilled on average in the other OPEC countries.

Nevertheless, Algeria's energy potential puts it in a strong position in the Mediterranean region, being the third largest provider of natural gas to the EU and the fourth largest exporter of gas and oil to Europe.

In addition, Khelil said that the inauguration of two new gas pipelines between Algeria and Europe, that of Medgaz connecting Algeria to Spain and that of Galsi connecting Algeria to Italy via Sardinia, would make it possible for Algeria to become a leader in the production and distribution of natural gas.

The main export market for Algerian natural gas is Italy, which buys more than 27bn cubic metres per year, but France is showing an increased desire to catch up.

Indeed, following the completion of the merger between Gaz de France and the Suez group on July 22, the new "energy giant" GDF-Suez has provided a new impetus to the development of an expanding industry within the European-Mediterranean region and further afield.

"Gaz de France signed an agreement with its historical partner, Sonatrach, in order to extend the provisioning of LNG until 2019, for a total investment of 2.5bn euros. Algeria is the biggest provider of LNG to GDF-Suez and plays a significant role in ensuring our long-term gas supply security as well as that of Europe," Jean-François Cirelli, vice president and assistant director general of GDF-Suez, told OBG.

GDF-Suez plans to begin production in the gas field of Touat in 2011. The project is a major step for the group's activities in Algeria. Located in the under-explored zone of South-west Algeria, GDF-Suez is aiming to become a pioneer in the development of this area.

"We are proud to have been chosen to exploit such an important field in partnership with Sonatrach. The challenge is enormous given that it will be necessary to build new installations to transport the production to the gas hub of Hassi R'mel. The quantities produced are expected to peak at 4.5bn cubic metres a year for eight years, a very significant number," Cirelli told OBG.

He added that energy links between Algeria and Europe will be strengthened in the next few years and that France considers Algeria as one of the most important long-term energy providers in terms of reliability and quantity.

Algeria, which exports 94% of its natural gas reserves to the Mediterranean region, is commercially clearly dependent on the energy sector, with exports outside hydrocarbons estimated at only 3% of the national Gross Domestic Product (GDP).
 
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