HomeIndustry SectorsGenerationAlgeria a major gas producer, but struggles to meet domestic electricity demand

Algeria a major gas producer, but struggles to meet domestic electricity demand

22 August 2013 – Algeria’s role as a gas-producer made the headlines in early 2013 when militants attacked a gas site in the desert, near the border with Libya. The attack, and highly controversial response by the Algerian government, left many dead, reminding oil and gas firms of the risks associated with the country. Firms have to attempt to strike a balance between these risks, and the considerable opportunities presented in a nation with significant natural resources. In April 2013, Spain’s Repsol was the latest firm to announce a natural gas discovery in the country.

In terms of electricity consumption, domestic capacity, which is practically entirely from thermal sources, struggles to meet demand, and as such, the government has launched several tenders in a plan to boost electricity generating capacity by 2016. But it is unclear who will be keen to invest. National laws inhibit international investment, and require firms to have a majority Algerian partner; this limits opportunities in the country. Spain has been the latest country to request that this restriction be lifted.

Business Monitor International’s 2013 Algeria power report forecasts that the country’s power consumption will increase from an estimated 48.6 terawatt hours (TWh) in 2012 to 78.8 TWh by the end of 2022, assuming 4.9% average annual growth. Conventional thermal sources are expected to remain the dominant fuel for electricity generation over the coming years, with many power projects under construction, or planned, that will use natural gas. Thermal generation, comprising coal, gas and oil, is expected to grow by 4.6% per annum during the period to 2017, but growth looks set to slow later in the decade. Renewables will also contribute to a rise in electricity generation over the forecast period, although they will grow from a much smaller base.

Algeria is in a strong position as an energy exporter. Already a key source of gas for the EU, 2013 sees the country negotiating potential ties with India and Pakistan, as well as reinforcing the development of its renewable energy industry through agreements with Spain. But despite its rich natural resources, disturbances in 2013 have undermined Algeria’s international profile, and have reminded potential investors of the inherent risks of investing in the country.