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Algeria opens new territory to oil drilling

Energy companies remain wary, though, after deadly 2013 attack on natural gas facility.

Last updated: 28 Jan 2014 06:56
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Algeria has the second-largest gas reserves in Africa [Reuters]

One year ago, a terrorist attack on a natural gas facility in southern Algeria led to the deaths of 67 people after Algerian troops tried to rescue hundreds of hostages taken by an al-Qaeda-linked group.

Now, for the first time in three years, Algeria has opened a new set of potential oil and gas fields to international bidders. The bidding round was launched on January 21 by Algeria's state-owned oil licensing body, Alnaft.

"The tender covers 31 concessions, including 17 in the southwest and five in the north," Sid Ali Betata, the head of Alnaft, announced at a press conference. The bid round also includes 17 shale gas concessions, and seven on which discoveries have already been made by the state energy company, Sonatrach, said Betata. 

Hesitance

But just a year after the attack at In Amenas, one of the country's most important gas projects, international companies may hesitate before participating. Mokhtar Belmokhtar, the leader of an al-Qaeda-linked group, claimed responsibility for the January 2013 attack. 

The two companies investing in the In Amenas project, the UK's BP and Norway's Statoil, have still not returned expatriate workers to the plant, which is located deep in the Sahara desert, citing ongoing security concerns. "There are still some sensitivities on security," said Robert Wine, a spokesperson for BP. "We've made good progress with the authorities, but I don't think we're 100 percent there yet." 

"We're in the process of implementing and verifying security measures at In Amenas and In Salah," said a spokesperson for Statoil.

We still don't know how 40 terrorists managed to cross a heavily militarised zone undetected, or how the 200 or so gendarmes that were supposed to be in the camp didn't manage to fend off the attack.

- Family member of In Amenas attack victim

No BP workers have returned to In Amenas, according to a family member of one of those who lost their lives in the attack.

An airstrip is currently under development at In Amenas that, once completed, would allow workers to make daily trips to the In Amenas site. But this will not take place without further assurances on security. According to a security expert close to the negotiations, BP has expressed a willingness to return workers to In Amenas, while Statoil remains reluctant to do so in view of ongoing security risks. 

The Algerian government's unwillingness to relax legal provisions prohibiting companies from providing their own armed security remains a major sticking point, say security sources, but this is unlikely to change. 

How did it happen?

The families of some of the British victims of the attack have also expressed concern that insufficient measures have been taken to establish the causes of the attack. "We still don't know how 40 terrorists managed to cross a heavily militarised zone undetected, or how the 200 or so gendarmes that were supposed to be in the camp didn't manage to fend off the attack," said one family member, speaking on condition of anonymity. 

In response to the attacks, the government has increased security on the border with Libya, and claims to have improved co-ordination between military and police operating in the Sahara. 

On January 9, Algeria's justice minister, Tayeb Louh, announced that a "specialist judge" had been assigned to lead a state investigation into the attacks, although there is little transparency over the process. 

An announcement by the French government on January 6 that it is carrying out its own investigation angered the Algerian government, which stated that the case was an issue of national sovereignty. An inquest is meanwhile under way in the UK into the deaths of six British nationals in the attack, but the case is likely to be postponed until 2015 to allow time for the gathering of evidence, according to a source close to the process. 

The return of expatriate workers to In Amenas would help to restore investors’ confidence in the oil and gas sector, and to stimulate the country's economy. Algeria is highly dependent on this industry, which generates 97 percent of its export revenue. 

The In Amenas field is one of the largest in the country, accounting for about 11 percent of Algeria's gas exports. In the first half of 2013, lost output from the plant contributed to a 10 percent fall in the country's hydrocarbons production. The plant is currently operating at two-thirds of its capacity, according to a recent statement by Algeria's energy minister, Youcef Yousfi. 

In the absence of expatriate workers, further projects to develop the field have been postponed, according to an announcement by BP chief executive Bob Dudley in October. Development work on the In Salah field, another major gas project operated by BP and Statoil, has also been put on hold. 

Big ambitions

A new round of exploration work by international companies is critical to Algeria's ambitions to increase oil and gas production, which have been in decline for the past 10 years. Yousfi announced on January 16 that the country plans to double gas production and raise oil output by 50 percent in the coming decade. 

A number of upstream developments are already under way, including several unconventional gas projects in the southwest of the country, but further exploration work will be required if the government is to come close to its targets. 

The three licensing rounds held by Alnaft since its creation in 2005, were hugely disappointing. In the latest round, in September 2010, just two of the 10 concessions on offer were awarded. 

Algeria has the fourth-largest oil reserves in Africa, with 12.2 billion barrels, and the second-largest gas reserves, with 159.1 trillion cubic feet, according to BP's latest statistical review of world energy, published in June 2013. The In Amenas field has a capacity of 9 billion cubic metres of gas per year. 

The Algerian government estimates that the country has shale gas reserves of 17 trillion cubic metres. The UK/Dutch Shell Corporation, Italy's Eni and Canada's Talisman Energy have all signed headline agreements for the development of the resource - but it is likely to be many years before commercial production begins.

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Source:
Al Jazeera
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