Tag Archives: Algeria

Northern Mali Threat Continues to Cast Shadow Over Algerian Energy

ImageDespite the apparent success of a French-led military force in ridding Northern Mali from an armed separatist movement, recent violence has suggested that significant challenges remain to both that country and the energy sectors of its neighbors.

As recently as this past weekend, a car bomb and violence were reported in Timbuktu, once again highlighting the uncertainty of the region and the challenges of those in the region in need of a more stable business environment.

As much of North Africa has struggled with wide-ranging political opposition movements, resulting in the collapse of long-standing governments, Algeria has remained unchallenged by protest efforts. Rather, threats to the country’s stability have come from outside, with substantial pressure coming from a stretch of Mali along the country’s southern border. The country has struggled with an armed separatist movement for months, which seized authority from national troops late last year.

This pressure boiled over into Algeria in January with a coordinated raid on a BP gas site, spurring a messy government response and ending with the death of 38 foreign workers. The impact was immediate, with foreign firms suggesting delays to protect their personnel and neighboring Libya promising swift action against any similar events.  

More than just an unfortunate turn of events for a country that relies heavily on energy revenues for just about every aspect of government spending, the event presented a real threat to vital foreign investment needed to strengthen and expand the country’s infrastructure.  Algeria currently boasts access to about 12.2 billion barrels in oil reserves and 159 tcf of natural gas, with the U.S. as one of their largest trading partners.

However, a recent decline in local production and a push to tap into the country’s sizable shale potential have highlighted the role of foreign investment in the country’s immediate energy growth plans. To reach new output goals, Algeria will contribute billions from their own coffers towards boosting downstream capacity, but they will also need to partner with foreign partners who can offer the investment support and technical know-how needed to boost production exploit shale reserves in the near future.

Algeria has promoted substantial shale potential, attracting a number of necessary foreign firms to their shores, each providing the equipment and experience needed for the introduction of shale to the region. Keeping them in place may prove a little more difficult unless Algeria can provide a more stable working environment, making the kind of flare-ups seen this week all the more damaging.  

Originally Posted: Newsbase’s MEA Downstream Monitor

Photo: Mem.algeria.com

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North African Energy Targeted by Labor Concerns

746884-aus-bus-pix-libya-refineryAfter nearly two years of widespread political and social transitions across North Africa, protest and labor movements have continued to expand in hopes of making the most of the new political environment. While motivations may vary, these groups are increasingly targeting the region’s energy sector in Libya, Tunisia and Algeria, commonly aiming their ire at foreign firms and their local subsidiaries.

Against a backdrop of regional unrest, these energy-aimed efforts are to continuing to increase and beginning to threaten what many feel is North Africa’s quickest and surest route to recovery and post-Arab Spring stability.

In many cases, protests and labor strikes have taken issue with what is felt to be a lack of common benefit from the region’s rich oil and gas production. From Tunis to Benghazi, this has centered on the complaint that far too little of the region’s oil and gas wealth and revenue is reaching local communities.

A Post Arab Spring Analysis

In Tunisia, critics have taken issue with what they feel is a lack of work opportunities for local workers offered by the country’s most prominent energy outfit, BG and their local subsidiary BG Tunisia. Facing a 17.6 percent post-revolution unemployment rate, Tunisia has been unable to keep up with and absorb the growth in increasingly skilled young workers, according to a World Bank report.

Facing a similar demand for more work opportunities, but without the spike in skilled labor, Libya has seen protest movements target oil and gas facilities across the country, including a December strike at one of the country’s busiest oil and gas ports, Ras Lanuf. Protestors began the New Year with a strike at the Zueitina oil terminal, situated just east of Tripoli. According to the country’s Oil and Gas Minister, Abdul Bari Laroussi, the shutdown has come with a demand to employ 1,500 local residents and cost the country an estimated $1 million a day in lost revenue.

Additionally, Libya has seen protest groups use energy facilities to voice concerns about a variety of issues, most notably political representation. Shortly before the country’s first post-revolution election, armed militias occupied refineries in El-Sider, Ras Lanuf and Brega, shutting down half of the country’s export capacity. Their actions were aimed at increasing the number of seats reserved for the country’s oil-rich eastern provinces and shifting more authority over energy issues to the city of Benghazi.

Despite having largely escaped the kind of public protests that led to political transitions across the region, Algeria has faced its own share of protests aimed at the incredibly valuable oil and gas sector. Even before the Arab Spring protests began, Algeria faced a pushback from the country’s large number of unemployed for what they felt to be a lack of opportunities for local workers. Undoubtedly the country’s largest economic force, Algeria’s oil and gas production accounts for 98 percent of their export revenue and a large percentage of government funding. State efforts to curb these protests through increasing government incentives spending and a tighter security environment have worked in the short term. However, protests have continued to flare up as resentment builds around a lack of benefits seen across the country as well as wider uncertainty about what will follow the expected retirement of President Abdelaziz Bouteflika before scheduled elections in 2014.

According to a Bloomberg report, dwindling oil reserves and uncertainty have made the country’s relative calm difficult to sustain.

“Pacification through finance can’t go on forever,” Azzedine Layachi, a professor of international and Middle East affairs at St. John’s University in New York and Rome, told Bloomberg. “Everything is in shutdown mode until 2014 and that’s when we’ll see what direction Algeria takes.”

An Uncertain Landscape for Foreign Investors

In all three national cases, further labor unrest and protests aimed at energy sector actors could have a significant effect on the ability to attract much-needed investment and interest from foreign firms. In Libya, this means the ability to promote the full return of companies that halted operations in the midst of the civil violence that brought down the government of Muammar Gadaffi and move beyond pre-conflict levels to ensure future growth. While Tunisia is putting less emphasis on energy reserves as a means of economic recovery, continuing unrest does threaten to put off further investment from companies like BG, which provides over half of the country’s natural gas demand.

Last year, sit-ins at processing plants spurred talks between the company and local leaders, concluding in pledges for greater attention to local hires, including training options. Recently the company has said that while they would not consider leaving the county as a result of the sit-ins, they did not see themselves in a wider labor role.

“We continue to work in Tunisia and to explore new opportunities. Although the phenomenon of sit-ins and strikes is annoying, the group will not leave the country for all that,” Sami Iskander, Executive Vice-President and Managing Director of BG, Africa, Middle East and Asia told the Tunisian News Agency, but added, “the main purpose of the group is the production and supply of gas in the country and not creating jobs.”

Currently BG provides about 60 percent of Tunisia’s natural gas demand and employs about 1,000 employees.

Finally, further unrest in Algeria could prove troubling to the government’s recent push towards introducing unconventional shale exploration efforts to the country. Boasting significant domestic potential, Algeria will have to first deal with significant foundational investments associated with the shale excavation process in terms of both machinery and technical expertise. To help cope with these early expenses, the national government and the state-backed Sonatrach have unveiled new revenue sharing agreements and taxing schemes aimed at appealing to foreign investors with shale experience. Already known as a risky investment in the region, Algeria could prove even more uninviting if protests and strikes continue to expand.

So far, these protests have elicited little more from state officials than targeted actions according to each, specific case. However, according to the Agence France-Presse, Libya’s Prime Minister Ali Zeidan has threatened to impose “order by force” in to address those actions that threaten the country’s energy sector.

“Oil is our only source of revenue,” he said, according to the AFP report. “We will not allow any (armed) force to confront the people and threaten national security. I warn families, tribes and regions that we will take decisive measures.”

While Tripoli’s hard line may prove effective in garnering local support, it is far less clear whether it will provide the sense of stability needed for foreign firms to return to the region.

Image: The Australian

Originally Posted in Newsbase’s AfrOil Monitor

 

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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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Algeria Revises Hydrocarbon Law But Real Sector Changes Remain Unclear

After months of speculation, Algeria’s Council of Ministers finally announced that they had passed a revised hydrocarbon law, erasing the outdated 2005 legislation in hopes of reversing the country’s waning production levels. However, lacking precise details and missing expected reforms for existing projects, the new law ‘s impact on the country’s weakened production efforts may not have the impact they hoped for.

Passed earlier this month, the legislation was accompanied by an announcement from the national government outlining a plan that focuses on creating a more inviting investment environment for potential development partners who can help Algeria make the most of their potential shale reserves. However, the revisions appear to have little effect on existing or more traditional efforts, which have seen a steady decline in recent years.

According to a Bloomberg report, Algeria is sitting on an expected 2 trillion cubic meters of shale gas which they base on tests carried out in three provinces over 180,000 sq. km. However, reaching the country’s reserves remains a challenge for the government and its state-backed firm Sonatrach because of high initial production costs and a lack of domestic experience and equipment.  The shale push figures into the country’s wider $80 billion energy sector investment plan over the next five years, with 60 percent of funds dedicated to excavation and production efforts, including “150 exploratory wells and expand crude-processing capacity at three oil refineries.”

To meet the requirements of launching a local shale effort, Algeria has turned to foreign partners to help guide the process and provide needed technical experience, including Italy’s Eni, Royal Dutch Shell and Exxon Mobil. The new legislation was meant to appeal to these firms, opening up significant new streams of revenue to a country heavily dependent on hydrocarbon exports to meet government spending needs.

An Uncertain Energy Landscape

Almost exclusively dependent on oil and natural gas revenue to fund government spending and operations, Algeria has long realized known that the secret to keeping the country politically and socially calm is a strong energy sector. However, in recent years, sector uncertainty and misuse helped create a working environment seen as hostile to a number of necessary foreign firms, leading to both cancellation of existing projects and dwindling interest in new ones. The most glaring example of the country’s waning attractiveness to outside investors came with a round of ten possible licenses which attracted only two bids, one of which came from the country’s state-backed energy firm, Sonatrach.

The decline began with the adoption of new revenue sharing laws and taxes in 2005, including a new policy in 2006 that would impose heavy costs on revenue when oil climbed over $30 a barrel. Interest continued to waver, spurring a decline in the country’s output, which dropped more 5 percent in 2009 alone. Algeria’s production environment grew more and more unattractive to foreign investors, spurring threats from international firms that they would leave if conditions did not improve.

This process began with a wide-reaching corruption investigation at Sonatrach, resulting in an overhaul of the company’s leadership. Accused of selling exploration rights and claims to family members and friends, the Sonatrach leadership was shown the door in a way Algiers hoped would rebuild some level of confidence among international investors.

The energy sector leadership in Algiers continued this process with new support for novel avenues of local exploration, including new natural gas efforts and adopting unconventional strategies, including seeking out the kind of deep-set shale reserves that have transformed energy markets in North America, China and potentially Argentina. However, Algeria realized that to diversify, they must seek out ways to appeal to wary funding partners abroad.

In order to appeal to necessary foreign production partners, Algerian officials announced a revision earlier this summer, noting that an overhaul was necessary because the 2005 law was passed when pricing and technology required a very different approach to excavation and production strategies.

Now passed and announced by the government, the legislation has fallen short of analyst expectations, including keeping a 51-49 percent ownership requirement for Sonatrach in place. Additionally, the new laws will not apply on existing excavation projects, giving little relief to those companies already operating in country. Instead, government officials announced only that undefined tax incentives would be offered to foreign partners to encourage unconventional efforts, which require significant investments in technology and personnel.

An Wider Expansion Effort

Algeria’s move into unconventional exploration efforts comes as the country tries to broaden their energy base, for the benefit of both growing domestic demand and vital revenue streams. In addition to supporting the development of shale projects, Algeria has also begun appealing to development partners for renewable projects to the tune of $60 billion, according to a Bloomberg report. The push is intended to move the country towards a 40 percent adoption of renewable power by 2030, easing domestic demand and increasing the amount of domestic hydrocarbon reserves available for export.

Image: Sweet Crude Report

Originally Posted: Newsbase’s Afroil Monitor

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Algeria Explores Downstream Investment Plans

Saddled by increasing energy demand and public spending, as well as steadily declining production levels, Algeria and its state-backed firm Sonatrach have outlined an increased budget for the next five years, with much dedicated to improving downstream efforts.

Algeria recently announced a $12 billion increase in their budget dedicated to the energy sector over the next five years, adding to the $68 billion already set aside for infrastructure and downstream efforts. Much of the additional funds have been set aside for increasing Algeria’s refining capabilities and investing in non-traditional efforts, both of which will require high initial investments but are intended to decrease the country’s dependence on imports.

The importance of improving the country’s most important revenue stream has become increasingly important in recent months as the new Algerian leaders seeks out ways to avoid the kind of public protests that led to the collapse of governments in Tunisia and Libya. Like Morocco, Algeria stepped up public spending to quell growing opposition but now face pressure in sustaining such spending. Algeria currently looks to oil and gas revenue for the majority of their export revenue and much of their government spending.

Algeria’s need for greater refining capabilities has become especially clear in recent weeks as purchases of gasoline and other refined goods spiked amid increased demand and in anticipation of a six-month closure of one of the country’s largest plants. Currently responsible for nearly 335,000 bpd, the Skikda refinery will be closed over the next six months for planned repairs. Overall, planned refurbishments to Algerian downstream efforts are predicted to increase output from 1.2 million bpd to 1.5 million bpd within five years.

To help fund the effort, Sonatrach have announced their plans to return to exploration and production efforts in neighboring Libya and increase foreign investment through a revision of the country’s energy policies. The country has recently seen a decline in international interest in energy efforts due to what has been called a hostile investment environment. According to Reuters, the amendments to Algeria’s energy law will introduce “tax incentives that aim to boost offshore exploration and attract foreign companies that can bring technology know-how for the development of unconventional reserves.”

Cross Posted with Newsbase’s MENA Downstream Observer

Image: Energy D-V

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Spanish Economy and Transport Limitations Keep Medgaz Low

After a year of delivering Algerian natural gas to Spain, the Medgaz pipeline continues to face significant challenges to full capacity, with traffic running lower than expected due to a number of factors in Spain and beyond.

The pipeline connecting Algeria with Almeria has the capacity to transport “8 billion cubic meters annually, or 22 percent of Spain’s gas needs,” according to a Reuters report. Sonatrach currently owns 36 percent of Medgaz, with Iberdrola, Abu Dhabi’s Cepsa, Enel’s Endesa and Gaz de France on as project partners.

Algeria’s role as one of the largest natural gas importers in the world has been hurt recently thanks to the country’s sustained economic downturn, which shows little sign of improving in the near future. Even after announcing an EU-level bailout for Spain’s ailing banking system this past weekend, Prime Minister Mariano Rajoy warned that the country’s economy faced a difficult year ahead, suggesting further economic contraction and a longer path to recovery.

Such sentiment gives little confidence to the country’s natural gas actors who are dealing with a decrease in demand so significant that Spain’s newest LNG plant will be hibernated as soon as it is completed in December. Complicating the matter further, Spain’s limited connection to other European natural gas customers has hindered the country’s ability to off-load excess supply. Spain’s minimal pipeline network to France is likely to remain limited due to long-standing political opposition to new transport lines from France.

Still, Medgaz appears confident that Spain’s increased dependence on natural gas will continue beyond the country’s current economic woes, with company reports pointing to steady growth despite recent financial troubles.

For their part, Algeria and their state-backed firm Sonatrach have been working to increase their natural gas efforts, announcing an $80 billion euro plan to expand their resource base over the next five years.

Image: Arabian Oil and Gas

Originally Published in Newsbase’s Afr Downstream Monitor – All Rights Reserved

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Algeria Eyes Expanded Position Thanks to Relative Stability

After a steady decline in foreign interest thanks to fluctuating development terms and volatile tax agreements, Algeria is eyeing their relative stability in the region as key to both encouraging a return of international partners and a strengthening of their position in energy marketplace.

Currently the seventh largest provider to the US and the third largest provider of natural gas to the European market, behind just Russia and Norway, Algeria has witnessed a significant decrease in interest in foreign investment and partnerships in the last few years thanks to a steady flow of new government regulations and financial demands on the part of the state and its official energy arm Sonatrach. The result has been viewed as increasingly hostile to firms from outside Algeria, despite the country hosting the third largest proven oil reserves in Africa, behind Libya and Nigeria, with about 12.2 billion barrels.

According to a report released by the Eurasia review, the decline in interest and overall production has arisen from, “the frequent delays involved in Algerian projects, stringent financial terms, and a windfall tax on foreign oil producers whenever the price of oil exceeds $30 per barrel have dampened international companies’ interest in bidding rounds.” Last March, Algeria awarded just 2 of 10 oil and gas permits in a licensing round that marked a third such decline and further hindering the country’s overall production levels.

However, as much of the North African and Middle Eastern region has suffered from bouts of instability, Algeria has remained relatively stable and calm. The country experience only modest protests from student and labor groups last years as neighboring Libya and Tunisia experienced sweeping shifts in political leadership. Resulting production and output delays in these countries and the lingering threat of further shutdowns of oil and gas deliveries resulting from tensions with Iran have pushed leaders in the United States and Europe to reevaluate the country’s place as an energy actor in the region and as an increased producer for the global market.

Writing in the Financial Times earlier this month, Stephen Snyder of Ergo intelligence services suggested that amid security concerns, Algeria’s growing importance as a provider of natural resources had allowed greater acceptance of the country as a regional energy actor and production partner, even in light of questionable domestic actions. Citing a visit by U.S. Sec. of State Hillary Clinton to Algiers, where she met with President Abdelaziz Bouteflika, Snyder said that the volatility seen across the region and the uncertainty about the Iranian situation and the Gulf of Hormuz allowed for new view on the country’s potential.

For their part, Algeria and their state-backed firm Sonatrach have moved towards greater cooperation with foreign firms, opening up the possibility of repairing existing partnerships and easing the restrictions that kept interested parties at bay over the last few years. In December of last year, the country announced a plan to introduce revisions to their Hydrocarbon law that would amend profit sharing agreements and exceptional profit taxes first introduced in 2006.

Speaking in December, Minister of Energy and Mines, Youcef Yousfi stated that the review was aimed directly at garnering much-needed support from international partners with the experience and technological know-how to adequately exploit the country’s reserves. That technical knowledge will be pivotal to the country’s ability to pursue a planned shale campaign in the coming years. Already linked with Italy’s Eni to explore Algeria’s deep-set, shale potential, the country and Sonatrach must first dedicate significant funds to the costly infrastructure and tools required of shale extraction efforts.

“We hope to develop partnerships with all interested stakeholders who have the required technological expertise to develop these resources in our country,” said Algerian Minister of Energy and Mines, Youcef Yousfi at a shale workshop held in Oran in late February, according to Al Monitor. He added that, “this is why we would like to work with companies that have demonstrated expertise in this field.”

In a more specific example of mending fences, earlier this month, US-based Anadarko, announced an amicable end to a long-standing conflict with Sonatrach stemming from the 2006 tax. With the US company insisting that their existing contract required the Algerian firm to bear the brunt of the tax burden and Sonatrach seeking to restructure profit structures originally agreed upon when crude prices were lower, according to the Wall Street Journal, one of the country’s largest foreign operators found themselves at odds with local officials and their production plans. With arbitration initiated in 2009, the two parties finally came to an agreement this month with a plan that would provide about $4.4 billion in funds over the next few years and include stipulations protecting the US company’s tax and profit sharing status. According to the Financial Times, Anadarko is responsible for about quarter of all oil production in Algeria.

The Algerian government’s push and seemingly new willingness to ease restrictions on profit-sharing and tax regulations with foreign firms appears to be part of a larger push to open the country to international cooperation. This past week saw Algiers open the country’s modest stock exchange to foreign buyers for the first time, though they are still required to partner with local buyers for the purchase.

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Italy’s Pipeline Hopes Dashed by Algeria

After finally winning the support of hesitant Italian authorities, the Galsi pipeline appeared to have been given a new chance at completion with leaders in Rome looked to diversify their vital energy imports. However, opposition is now emerging from the Algerian side of the project, with national officials warning that costs and technical challenges could delay or even halt the transport effort.

Dependent on imports for 90 percent of their natural gas needs, Italy set their sights on broadening their roster of production partners following last year’s political unrest in Tunisia and Libya. Violence and instability in both countries during 2011 led to delays or halts in production and output, threatening to cut Italy’s energy supplies. Libya’s civil war forced an evacuation of the staffs of most foreign firms leading to production shutdowns while Tunisia’s political protests led to a short closure of the pipeline used to ship Algerian natural gas to Italian shores, amounting to 35 percent of the country’s demand.

Eager to avoid such uncertainty again, Italian officials began voicing their support for the completion of the Galsi pipeline, linking Algerian fields with the island of Sardinia and the Italian marketplace. The result of an MOU signed in 2007, bringing to together the interests of Algeria’s state-backed Sonatrach, Euro energy firms Edison, Enel and Hera, the 900km pipeline would mark the second such project linking the North African nation with Italy, via a landing in Sardinia. However, unlike the Trans Mediterranean pipeline, the Galsi would carry an estimated 8 billion cubic meters of gas northwards upon completion directly from country to country, skipping a passage through Tunisia.

In October, Italian political leaders issued an appeal to Algeria to approve and move forward with the pipeline project with haste, allowing for Italian companies to pursue natural gas projects in the country with the assurance that transport lines will be available to them. However, resistance to the project has now begun to emerge in Algeria, with Energy and Mines Minister Youcef Yousfi casting doubt on the viability of the transport line in the near future.

“With regard to the Galsi project, the partners are waiting for technical and economic conditions to be present and also to obtain administrative authorization in Italy to go ahead with the project,” he told a local newspaper, according to Reuters.

Image: Eni

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Shale, Energy and North Africa’s Future

As countries across North Africa work towards rebuilding both customer confidence and hydrocarbon operations following the political and financial instability of 2011, some are looking past traditional options to test the limits of the region’s shale potential.

First initiated in Tunisia in the Spring of 2010, North Africa’s shale efforts have slowly spread across the region, adopted by both established oil and gas producers and those who see little potential for traditional measures. The push towards exploring the area’s deep-set shale reserves came as the success of such efforts in the United States and studies showing widespread potential across the globe began to spur investor excitement. As time allowed closer inspection of the geological variances of the Maghreb states and their true shale potential, a clearer picture of what shale deposits could mean for the region has emerged.

These efforts come just as similar efforts in more mature shale markets are running into often debilitating challenges. Building on environmental worries related to the practice of fracking, public and political movements have successfully stalled efforts in the United Kingdom, France and parts of Germany as the uncertainty about the effects of the practice have added to concerns about project costs. This environment led European Union Energy Chief Gunther Ottenger to suggest the possibility of a community–wide regulatory system on shale efforts, inviting a pledge to veto any such legislation from Poland’s government, who has led the way towards introducing shale projects to the European marketplace. Meanwhile, in the birthplace of the fracking process, US President Barack Obama accompanied his support for further shale projects with an appeal for energy companies to disclose the ingredients of fracturing fluids, which have been protected information until now. However, these worries and protest movements have done little to damper enthusiasm among North African actors, as they continue to move shale projects forward.

Building on the region’s first shale effort in March 2010, Tunisia are continuing to work with early partners France’s Perenco and Canada’s Cygam in their exploration efforts, though last year’s political transition slowed the effort’s momentum. While both firms have worked to assure their Tunisian partners of their intent to stay put, lingering questions of instability, including the recent kidnapping of a mayor near the vital Ghadames Basin do little to help calm project partners.

Hailed as the country with the most shale potential thanks to the accessibility and quantity of reserves in the Ghadames Basin it shares with Tunisia and the Illizi Basin, Algeria has moved to attract foreign partners for shale efforts. According to Reuters, estimates suggest up to 1,000 trillion cubic feet of natural gas, trapped in shale rock about 1000 meters beneath the ground.  Facing a steady decline in the production levels of more mature oil and gas options, Algeria’s actions suggest a long-term approach to energy alternatives that included a heavy dependence on non-traditional resources such as shale.

Algeria and their state-backed firm Sonatrach have worked to secure working partnerships to help move their shale efforts forward, beginning with the signing of a MOU with Italy’s Eni last year. The Spanish giant has also looked to expand their resource base after Libya’s production all but halted amid political violence last year. Eni’s MOU with Sonatrach is meant to both lend the company’s shale extraction expertise to Algeria and help the company ensure a more dependable natural gas source for export-heavy Italy. After investing billions in hopes of solidifying Libya as a consistent source of oil and gas for the domestically barren Italy, the country lost nearly a third of their energy imports as political protests turned into violent conflict earlier this year. While Eni stands as Algeria’s largest shale partner, Sonatrach have announced that they will continue seeking shale partnerships with other international firms.

Even in Morocco, where domestic energy resources have remained elusive to the leadership of King Mohammad VI, one company has bet that the company’s true potential lies far deeper. Following four years of testing and coming in the latter half of a 3 year Memorandum of Understanding with the government of Morocco, London-based San Leon announced this month that they were ready to begin production at a site in the southern part of the country. Hoping to replicate their efforts in Poland, San Leon entered the northwest African nation five years ago to begin initial testing in the Tarfaya Oil Shale Field Pilot Project. San Leon recently announced that they had achieved “connectivity” between two wells in their Tarfaya oil shale project, suggesting progress in the country, though the Irish firm’s pace has worried some as their share price shrunk 59 percent over the last year. Despite overlapping basins deemed positive, Libya is the only country in the region to receive little attention by shale actors, as alternative efforts have been overshadowed by the substantial promise of traditional energy projects.

The Obstacles that Remain

For all the interest in the region’s predicted shale potential, a number of obstacles towards profitable operations remain, which have undoubtedly increased with the political instability of the last year. In addition to countries now faced with re-building confidence among foreign investors following the ousting of long-standing governments in 2011, many face significant funding deficits needed to support the high infrastructure costs associated with shale efforts. Largely lacking the access to the equipment, technology and personnel needed to reach and exploit shale projects, North African states will need the support of international partners to move these projects forward. In addition to signing cooperation agreements with firms from across Europe, some states are looking to the US State Department’s Global Shale Gas Initiative for guidance and aid, though political divisions and uncertainty about regional stability have kept that support

Image: Arabian Oil and Gas

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