Spain’s Repsol SA (REP) has made a second major gas discovery in its Sud-Est Illizi block in southeast Algeria, close to the Libyan border and not far from the hostage-taking incident at the BP-operated gas facility in January.
Repsol said on Tuesday it had encountered a 50-meter column of gas in its TGE-1 well and successfully tested the well at a flow rate of 235,000 cubic meters of gas a day, according to the Financial Times.
In November, Repsol made its first discovery in the Sud-Est Illizi block, which it operates with a 25.7% stake along with Italy’s Eni SpA (13.5%), France’s GDF Suez (9.8%) and state-run Sonatrach (51%).
The newest discovery shows twice the test flow rate of the November find.
This is great news for Algeria, which is has the 10th largest natural gas deposits in the world and is a major supplier to Europe, but nonetheless continues to struggle to lure in foreign investment. That could be about to change.
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Algeria has made pains to restore investor confidence in the wake of the January attack on the Amenas gas facility in which 60 people were killed.
In February, Algeria passed new laws governing foreign investment in the country’s shale gas, easing the tax regime in hopes of courting more foreign investors to its unconventional offerings.
Algeria’s unconventional reserves are largely in the country’s south, and so far hasn’t attracted as much attention from investors as was hoped.
While Algeria has built up its status as an oil and gas exporter based on its conventional reserves, these reserves have already reached peak output.
Algeria’s main gas field, Hassi R’mel has already reached peak output, and so has production at its main oilfield, Hassi Mesaoud. New exploration projects have not been started.
Algeria has more untapped shale gas than it has conventional resources.
In February, Algiers removed the windfall tax with a new hydrocarbons law. Royalty fees will now be adjusted based on production levels, and taxes on revenues will take into consideration exploration difficulty and risk.
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Under the new laws, state-owned Sonatrach still maintains a majority stake in all JVs.
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Since Algeria began talking about easing its tax regime late last year, Exxon Mobil Corp. (XOM) has been in talks with Algiers, while Eni SPA (ENI), Royal Dutch Shell Plc (RDSA) and Talisman Energy Inc. (TLM) have all signed shale exploration agreements.
Eni has begun exploratory fracking, while both Shell and Talisman are planning to drill their first wells.
According to geologists, there is vast unconventional potential in Algeria and it has a lot of source rock. The International Energy Agency estimates that Algeria has around 231 trillion cubic feet of recoverable shale gas.
By. Charles Kennedy of Oilprice.com
