Algerian politic transition vital to transform its energy sector

Algerian politic transition vital to transform its energy sector

The political changes needed to transform Algeria’s economy, and its dominant oil and gas industry remain dormant amid the country’s mass protest movement, which is entering its seventh month without showing any sign of weakening.

According to the report “Algerian Gas in Transition,” from Mostefa Ouki, a senior research fellow of Oxford Energy, no adverse impact has arisen in the operations of Algeria’s hydrocarbon industry despite several months of ongoing political tension.

The report, which focused on natural gas, said this market has been facing increasing difficulties for a long time, and its fundamental problems intensified following the 2014-drop in oil prices. The structural challenges of Algeria’s natural gas balance continue to persist in a politically turbulent climate and an economy with much reduced financial resources and margin of maneuver.

Algeria’s declining or stagnant natural gas production trend is ongoing. The report indicates the urgent need to resume upstream investments with international partners through an enabling framework. New gas supply projects, like the South West gas projects, are finally coming on stream. But these additional volumes of gas will not be sufficient to significantly improve Algeria’s natural gas balance.

The expert said to get the industry back on track; it will require, most importantly, the fast-tracking of the promulgation and implementation of revised hydrocarbons law to streamline permits for hydrocarbon projects.

Ouki outlined that this comprehensive program is much needed as domestic gas demand is set to increase in Algeria over the next ten years.

Algeria’s natural gas balance continues to raise concerns locally and internationally about the country’s ability to maintain its current gas export commitments and potentially develop new export opportunities. Algerian gas needs to be not only cost-competitive but also its export terms and conditions have to be as flexible as its competitors.

According to the Algerian Ministry of Energy, the country exported a total of 51.4 billion cubic meters of natural gas in 2018.

Of this volume, 74% was exported through cross-border gas pipelines and 26% as LNG. Two southern European countries (Italy and Spain) accounted for two-thirds of these exports, while Turkey is also a long-term LNG customer of Algeria.

With the reduction of gas export revenue, the government responded by introducing the revised hydrocarbon laws and a national renewable energy program. In 2015, Algeria launched a national program for the development of renewable energy to increase renewable energy capacity to 22 Gw by 2030, equivalent to around 27% of total forecast energy provision, up from 2% at present.

 

Algeria has been in turmoil since President Abdelaziz Bouteflika stepped down on April 2, after twenty years in power, under pressure from mass protests demanding the removal of the ruling elite and the prosecution of people suspected of corruption.

On September 15, Algeria’s interim president Abdelkader Bensalah said the country would hold a presidential election on December 12.

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Arnaud Lefevre

Arnaud Lefevre is the Chief Executive Officer of Dynatom International. Arnaud is in charge of the international development of the business portfolio.