Africa, Energy, News, Oil

Powering Africa: Algeria Faces Dim Oil Production Prospects

Algeria is facing the surging bill of refined products, reaching almost $2.5 billion in 2017 up from 800 million in 2016 as a result of the rise in domestic demand and lack of national refining industry. As the country feels the brunt of an economic and financial crisis triggered by the oil price plunge, Algerian authorities seek to reduce its import bill through time-buying measures including money printing, tax hikes as well as trading crude for refined products.

In this respect, a deal was signed between Algeria’s state-run oil company Sonatrach and the world’s largest oil trader Vitol to trade crude oil for refined products in an attempt to curb the import bill. Vitol would receive as much as 2 million barrels a month of Algeria’s light, sweet crude and would supply gasoline and gasoil in return until the end of this year. Observers have voiced concerns in recent years over Algeria’s falling gas production coupled with a surge in domestic consumption. Since 2007, the country’s consumption of gas and oil has soared more than 50 percent while its production has plummeted by 25 percent. With less oil available for export, the government’s revenues have been hit hard, Statfor consultancy commented.

Algeria’s production and export capacity are facing hard times. Some forecasts suggest that the North African country will be a net gas exporter of LNG in 20 years, as also the former Algerian energy minister Nourdine Ait-Laoussine warned. In May last year, The Oxford Institute for Energy Studies published a report entitled “Algerian Gas: Troubling Trends, Troubled Policies”. The study touched upon the depletion of Algerian gas and the declining export capacity. “Algeria would be left with only 15 bcm/year to export by 2030. In a lower production or high demand scenarios, it will cease exporting all together, therefore importing gas beyond any such a point,” said the report.

 

About the Author