Algeria’s Downstream Deficit on Display

The impact of Algeria’s downstream deficit became clear this month as a tighter European refining market threatened a series of gasoline deliveries scheduled for mid-October. Despite substantial oil and gas reserves and high export rates to the United States and Europe, Algeria does not currently offer the downstream capacity to meet growing domestic needs. Recent refinery closures and site maintenance in Europe and a sharp increase in car ownership locally have exacerbated the country’s energy challenges by reducing accessibility to refined products, according to a Platts report and comments from Energy Minister Youcef Yousfi.

As of January 2012, Algeria boasted a total crude oil refining capacity of 450,000 bpd at four facilities. This capacity is not on track to meet rising domestic demand for refined materials, promoting an increase reliance on imports, which rose from 1.3 million tones in 2010 to 2.3 million tones in 2011. This situation has hardly been helped this year with the six-month closure of their largest facility, the 335,000 bpd refinery at Skikda in July 2012.

To address this deficit, Algeria has launched a series of renovation efforts at each of the facilities with an aim of being able to increase output to meet domestic demand by 2014. These efforts include the construction of a Liquefied Natural Gas (LNG) plant and three Liquefied Gas Facilities at the Skikda location, an expansion of 20,000 bpd at the Algiers location, an increase of 30,000bpd at the Arzew location and a plan to build three new LNG trains at the Hassi Messaoud site.

In addition to improving sites to meet current demand, Algeria must also prepare for expanded production efforts, including both traditional, unconventional shale and the country’s push into offshore exploration. Recently, the country’s government and state-backed oil and gas firm Sonatrach unveiled an expanded $80 billion energy investment plan, with about $60 billion set aside for exploration efforts. The government also revised the country’s hydrocarbon laws to appeal to foreign firms willing to support investment into shale projects.

According to a Bloomberg report, Sonatrach CEO Abdelhamid Zerguine has stated that the North African country offers an estimated 2 trillion cubic meters of shale gas which they base on tests carried out in three provinces over 180,000 sq. km.

Image: Arabian Oil and Gas

Originally Posted: Newsbase Downstream MEA Monitor

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