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Algeria Ready for Oil and Gas Return

Algeria announced the launch of a bidding round for more than 30 oil and gas fields in the OPEC member's territory. The solicitation comes a year after terrorists attacked the In Amenas gas complex, and less than four months before presidential elections, showing Algeria is weathering a regional storm intact.

The Algerian government said 17 fields in the south of the country, five in the north and the remaining central fields up for auction have an Aug. 6 deadline for companies to submit their bids. Contracts for the winners will be signed in September.

Algeria is the largest natural gas producer in Africa, though a lack of foreign investment has plagued development.  Only two contracts were awarded during the last auction round in 2011.

 Related article: Algeria: The Dynamic Threat

In terms of oil, the Organization of Petroleum Exporting Countries said in its market report for January production from Algeria averaged 1.15 million barrels per day last month, an increase from November but more than 4 percent off the production level from 2012.

Algeria relies on production from maturing oil and natural gas fields and wants to bring foreign investors in to help exploit new resource deposits. Laws passed last year offer tax incentives for foreign companies and the government said there may be opportunities for shale oil and natural gas.

The bidding round comes nearly a year after terrorists affiliated with al-Qaida stormed the In Amenas natural gas facility, leaving dozens of oil workers dead.  Norwegian energy company Statoil, which manages the facility along with BP and state-owned Sonatrach, said last year's attack was "unprecedented" and highlighted weaknesses in its security strategies.

Nevertheless, Statoil and its partners announced limited operations at the desert facility resumed less than two months after the attack. The facility has the capacity to produce as much as 300 billion cubic feet of natural gas per year and Statoil, whose stock has been treading water in recent trading, said it was gearing up to send foreign workers back to Algeria.

Related article: Prospects Grim for Libyan Oil Recovery

For energy companies focused on Middle East and North Africa, Algeria may be emerging as a bright spot for investment. Oil production from Libya has nearly doubled since December, but its output is far below the 1.6 million bpd from before the civil war. Frontier areas off the coast of West Africa, meanwhile, are generating attention, but development there is years away.

Algerian President Abdelaziz Bouteflika, who steered his country through civil war and the Arab Spring relatively unscathed, said last week presidential elections are scheduled for April. Former Prime Minister Ali Benflis announced he was challenging the ailing incumbent, who suffered a stroke last year, vowing to take a legacy of corporate and political corruption head on.

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If the 76-year-old incumbent chooses to run, he'd almost certainly be handed a fourth term in office. If he doesn't, political transition should be relatively smooth nonetheless. Unlike its neighbors, Algeria experienced its own turmoil decades ago and the political elite can't risk another back slide. For foreign energy companies waiting in the wings, Algeria's evolution may be the best option for an otherwise questionable regional market.

By. Daniel J. Graeber of Oilprice.com


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