The criteria for entering Algerian mining are changing. As of now, one must propose to Sonatrach an international partnership – preferably in Africa and in natural gas deposits.

By Ihsane El Kadi, Algiers

Responsible for evaluating hydrocarbon, the Alnaft Agency issued a “historic” call for tenders to obtain a research permit for 45 blocks in Algerian mining zones. The recipients will be known in December 2008. Foreign company access to Algerian natural gas deposits had been suspended since 2004. It was then reopened at the start of 2008 with an initial call for tenders for 10 blocks, issued by the new agency, one of the two established by the April 2005 law, amended in July 2006.

The resumption of the exploration effort, in partnership with foreign companies, presented the opportunity to apply Algeria’s new mining policies. The oil companies selected will have to make their technical and financial offers match with a partnership offer to Sonatrach to access other oil mining areas around the world. This new orientation already outlined last January by the Algerian minister of energy and mining, Mr. Chekib Khelil, was further defined in July. The quality of the international partnership offer made to Sonatrach will be the determining factor in the choice of the entity to access Algerian natural gas reserves. Between 2001 and 2004, this is the financial criterion (franchise fees) which decided the outcome of seven calls to competitors to obtain an oil exploration permit in Algeria. With 59 billion dollars in energy profits in 2007, the government therefore decided to change the approach in the selection of groups granted access to Algerian reserves. The president of Sonatrach, Mr. Mohamed Meziane now refers to “crossed partners” with the foreign companies intervening in Algeria.

Natural gas: a priority in Africa

Yet, Sonatrach has no intention of having the international oil source collide with the amendment. In what Alnaft devoted to sub-missionaries selected to enter on the mining blocks in Algeria, geographic preferences would be proposed on countries where Sonatrach wishes to be accompanied. An authorised source confirmed to Les Afriques that five countries will be given priority by Alnaft and that selected countries that propose a partnership with Sonatrach for exploration will be prioritised as well. These five countries are Egypt, Libya, Nigeria, Trinidad and Tobago and Venezuela. In this context the potential of natural gas and that of Africa become apparent. Sonatrach wishes to be a world leader in liquefied natural gas (LNG), committed with its client to export 85 billion m3 of natural gas in 2010. The minister of energy and mining speaks about achieving 25% of Sonatrach’s earnings on foreign markets in 2015. This prognostic, considered by serious industry executives to be seasoned with just a pinch of propaganda, calls for oil and natural gas discoveries outside of Algeria. Sonatrach has already received a research permit in Libya but it wants to be partnered with a major international company to make a significant breakthrough to Egyptian and Nigerian reserves. Trinidad and Tobago is known for its immense potential in natural gas deposits (offshore) and the entrance of Venezuela is deemed possible, particularly in light of sound political relations between Algiers and Caracas.

The short list will get shorter

Of these five destinations, the country with which Algeria is going to develop the strongest energy relations is of course Nigeria. A gas pipeline of more than 4,500 km, trans-Saharan pipeline gas, will convey between 15 and 20 billion cubic meters of natural gas from the southern fields of Nigeria to the southern market of Europe. Though the technical feasibility of the project has been recognised by an independent study, the commercialisation modalities of natural gas are not yet clear. Algeria wishes to buy Nigerian natural gas at the entrance of its southern border. In addition, Sonatrach wishes to produce a portion of the potential natural gas deposits in Nigeria and is looking for a partner to help deliver a research permit.