Mozambique
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While most of Europe fixated on the result of the UK General Election on 12 December 2019, Algerians also went to the polls in an equally hard-fought election resulting in President Abdelmadjid Tebboune coming to power with over 58% of the popular vote. 

With a key message to “separate money from politics,” it was a campaign that has largely been well received by international market commenters and investors. 

This week, [5 February] President Tebboune appointed Toufik Hakkar as the new head of the state-owned energy firm Sonatrach.

The new President enters office at a time where gas, Algeria’s biggest foreign export, is under immense pressure from geo-political and market forces. 

As witnessed in the recent European Gas Conference in Vienna last month, Europe’s gas markets are evolving and becoming more interconnected. 

A perfect storm of secure Russian supplies and additional US LNG has contributed to as much as a $2.5/mmbtu difference in NW Europe price in comparison with Algerians three gas pipelines to southern Europe. 

Read more about gas-to-power

A response to the new normal

In early 2020, as an immediate response, new legislation came into force that allows overseas entities to own majority stakes in “non-strategic” upstream and midstream sectors in Algeria.

This was partly driven by a recognition that many obstacles to inward investment have been institutional. 

Sonatrach and the government have publicly acknowledged that muted interest in unconventional, southwestern and offshore Mediterranean exploration was a direct result of terms not being as attractive to foreign frontier firms as other countries in Africa and beyond. 

The appointment of Toufik Hakkar at the helm will only intensify efforts to reform and attract additional investment according to most market commentators.  

As early as 2012, Algeria saw the potential of shale – much earlier than any other African country. The country has some of the largest proven reserves in the world, with as much as 707 Tcf being technically recoverable.

Progress has been slow due to local protests and previous terms being perceived as being restrictive to foreign firms who have experience and important intellectual property in shale gas development. 

On the face of it, Algeria’s new hydrocarbon law will make such investment far more attractive and could usher in a new era of international investment from those O&G companies looking for low below ground risk E&P plays in Africa. 

Similar opportunities are presenting themselves in downstream. Like Nigeria, the country has the unfortunate label of importing the majority of its products while being a huge exporter of hydrocarbons.  

A consortium made up of Spain’s Tecnicas Reunidas and South Korea’s Samsung Engineering signed off an $3.7 billion new refinery. This could significantly help wean the country off imported fuel and protect important foreign reserves that have been hit by as much as $10.6 billion in the past nine months.  

A decade of dominance

Despite the rise of renewables in Europe, the association of EU transmission system operators Entsog still sees natural gas and LNG dominating for the next 10 years as part of their recent network development plan. 

This offers a real opportunity for Algeria, which currently has underutilised LNG terminals and pipeline infrastructure. Opportunities exist outside of Europe and Algeria has built a world-class reputation for the security of supply despite domestic changes. 

At the upcoming Oil & Gas Council APAC Assembly in Singapore, North Africa is seen as a viable choice for LNG and inwards investment from SE Asia in particular.

Work clearly still needs to be done. Last July Greek Oil & Gas Company of the Year recipient Energean agreed to buy Italy-based Edison’s E&P assets which initially included Algeria.

Edison owns an 11% stake in the Reggane Nord gas project and had recently renewed a supply contract running through to 2027. However, in January Energean confirmed that they now expect the sale “to exclude the Algerian Asset,” due to the required government approvals not currently being issued. 

Though as some commenters point out, this simply highlights a new level of maturity to the country’s prize assets the optics may act as a hindrance to smaller E&P players looking at important future exit strategies. 

Whatever 2020 and the new appointments bring, it is clear that deal flow and not just reservoir flow are important as Algeria looks to become attractive for investors once again.