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Oil production in Algeria

With an average production of 1,348,361 barrels a day in 2016, Algeria is ranked 18th in the world for oil production. While this is a considerable amount, Algeria may well have much more potential, so much so that it is sometimes referred to as Africa’s forgotten oil giant.

OPEC lists Algeria’s proven oil reserves at just over 12 billion barrels, well below heavyweights like Venezuela and Saudi Arabia, but much of this vast country, which is the largest in Africa, remains unexplored, such as the Saharan hinterlands. Some analysts think the country may double its oil and gas output in the coming decade.

The country’s real wealth lies in its 4.5 trillion cubic metres of natural gas reserves. It is the number-three producer of natural gas after Saudi Arabia and Qatar. Thanks to the country’s location on the Mediterranean basin, the country also has relatively convenient access to European markets. It currently uses three transcontinental pipelines for natural gas exports: one to Spain via Morocco, another to Spain via the Mediterranean, and one to Italy via Tunisia. Two further pipelines are planned, another to Italy and one to Nigeria, but both projects are facing issues. Algeria was also the first producer of liquefied natural gas (LNG) in the world and currently has four liquefaction units located along its Mediterranean coastline.

Algeria lacks transcontinental oil pipelines, but a domestic network links production to several coastal terminals, from where crude oil and other refined products are exported.

Algeria has been experiencing a decline in oil production since 2008 because of project delays and slow government approval, but Algeria’s national oil company, Sonatech, is aiming to reverse this trend by raising output by 14% over the next four years. Through to 2021, it plans to drill 100 new wells each year, and it will invest $9 billion in exploration. Algeria’s government relies on oil exports for more than half of its annual revenue, and it has had to make significant budget cuts since the oil price crash that began in 2015. While the government is keen to raise production in the long term, it is also a firm supporter of OPEC’s production cuts, seeing stable oil prices as essential to the country.

Sonatrach is also keen to explore offshore areas for new oil and gas resources. Earlier this year, it entered into talks with the Italian-based oil and gas company Eni and ExxonMobil, the maker of the Mobil DTE Oil Heavy Medium, with a view to participating in offshore exploration and drilling.

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