2013-02-24 15:19:27 - New Energy research report from Business Monitor International is now available from Fast Market Research
BMI View: Changes to the fiscal regime for international companies operating in the Algerian upstream sector may help attract new names and increased investment. With shale gas potential deemed to be considerable, the authorities seem prepared to compromise in terms of the government take from new projects. The forthcoming licensing round will be the acid test, as the last few bidding rounds have been a disappointment and undermined Algeria's medium-term output potential.
The key trends and developments in Algeria's oil & gas sector are:
* The Algerian Council of Ministers in September 2012 approved a new national hydrocarbons law that reforms some of the more unwelcome policies that were established in 2005. The passing of the new law is a key
prerequisite for gaining the foreign investment required to monetise the country's highly attractive shale reserves.
* One of the most important elements is a revision of previously unattractive tax terms for foreign companies. Although international oil companies (IOCs) will still only be able to hold a maximum stake of 49% (with Algeria's state-owned Sonatrach holding the remaining 51%), the previous 'tax on profits' is now obsolete. The new hydrocarbons law seeks to target unconventional shale reserves. The US-based Energy Information Administration (EIA) estimates that Algeria holds 6,500bn cubic metres (bcm) of technically recoverable resources.
* The government plans to launch a tender for oil and gas blocks during Q113, according to Khelil Ouahmed, the director of gas affairs at the state hydrocarbons regulator ALNAFT. The bidding will take place under the country's new hydrocarbons law that is likely to be ratified by end- 2012. The new law is aimed at attracting foreign investment by ensuring profitability of investments and linking taxes to the size of the find. Algeria plans to start linking taxes for IOCs to profits instead of turnover, according to draft amendments to its hydrocarbons law.
* BMI forecasts that oil production will rise from an estimated 1.89mn barrels per day (b/d) in 2012 to 1.98mn b/d in 2017 as ambitious new projects, mostly located in the Berkine basin, come on-stream. Production will be further boosted by increased output at major fields such as Hassi Messaoud, and by enhanced recovery rates.
* Consumption of crude is forecast to rise steadily at an average annual growth rate of 3.35% between 2011 and 2021. This is partly in line with the expected GDP growth rate, although we expect energy intensity to increase towards the end of our 10-year forecast period. We anticipate that crude consumption will rise from an estimated 417,100b/d in 2012 to 558,600b/d by 2021.
* BMI forecasts that gas production will increase from an estimated 90bcm in 2012 to 142bcm by 2021 as ambitious new projects, mostly located in the Ahnet, Berkine and Illizi basins, come on stream. Production will be further boosted by increased output at major fields such as Hassi R'Mel and by enhanced recovery rates at the In Salah Gas Project.
* Gas demand is set to rise steadily on the back of solid economic growth. BMI forecasts average annual growth of 5.36% to 2021, with consumption forecast to rise from an estimated 32bcm in 2012 to 51bcm in 2021.
* In terms of infrastructure, several upgrades at the Skikda, Arzew and Algiers refineries are expected to come on-stream, with additional capacity from a proposed greenfield refinery expected towards the end of our 10-year forecast period.
Full Report Details at
Algeria's dependence on oil prices leads to high volatility in the country's export revenues. Our assumptions of tight supply due to booming demand in emerging markets is clearly an opportunity for the country. As a result, we forecast OPEC basket oil prices to remain elevated and average US$107.05 per barrel (bbl) in 2012, a figure similar to the 2011 average of US$107.52/bbl.
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