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Sonatrach, has allocated $65 billion for its five year plan. Oil & Gas Middle East meets North Africa’s most dynamic oil company CEO, Mohamed Meziane
Sonatrach, Algeria’s state-owned oil company is rightly portrayed as a North African behemoth. The firm, by most standard indicators, is the giant continent’s largest company, Europe’s second largest gas supplier, and the third largest LNG exporter worldwide. The company retains control over all oil and gas exploration, production, and refining activities. Its importance to the national economy cannot be overstated.
The hydrocarbon sector is not only the backbone of the economy, but also the country’s engine room, providing the foreign exchange and wealth to fund the ambitious diversification efforts of the government. Oil and gas related activities account for roughly 60% of budget revenues, 30% of the national GDP and a massive 95% of Algeria’s export earnings.
Steering the national ship Sonatrach is chief executive officer Mohammed Meziane. Given the astonishing ambitions he has for the next five years, and the money that will be spent to get the job done, he’s fast gained a reputation as one of the hardest men to get a sit down meeting with in the industry. Oil &Gas Middle East managed just that recently in Abu Dhabi, and discovered February’s reports of a US$60 billion investment chest over the next five years was wrong. It’s now $65 billion, and the upstream business will be the principal benefactor.
“We aim to invest US$65bn on the energy sector in the next five years, with an average of $1.5 billion each year for the next five years on exploration activities alone. It may be higher in some years, but the average is $1.5bn,” reveals Meziane.
Pressed on which fields would be developed first, Mezian revealed that the countries twin giant oil and gas fields will be allotted considerable funding. “We have important development in Hassi Massoud field and we continue the improvement of production in Hassi R’Mal. The other developments will concern all the discoveries we have made within recent years, which is between 70 and 75 discoveries of different sizes.”
The Hassi Messaoud oil field, located 630 kilometres southeast of Algiers, produced around 400,000 bbl/d of crude in 2008, and the Hassi R’Mal giant gas field holds 2.415 trillion cubic metres of natural gas, and probable reserves of around 2.7-3 trillion cubic metres. The annual producing capacity is around 100 billion cubic metres of natural gas.
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Existing projects are also pushing ahead, and Meziane says a raft of deals signed recently will expedite the project development process. “Sonatrach has been already awarded and signed contracts for the Menzel Ledjmet East (MLE) field and Al-Merk field this year with Saipem, Petrofac, ABB and other companies. There are other major projects which are also under way like Haoud Berkaoui phase II, Menzel Ledjmet among others. We will start the development on these projects in the coming weeks and the contracts have been already signed.”
The project development plans are in place to achieve some lofty, but Meziane says, realistic targets. “Our goal is to reach 1.5m bpd by 2005- 2007, we have now capacity of 1.45m bpd, but our real production is around 1.2m bpd, in accordance with the OPEC decision. For gas, real production is 150bn cubic metres per year, condensates 13 to 14 mtpa. For LPG it currently stands at 8.69 mtpa, but these production figures will be increased through the
development plans that I outlined earlier.”
The $65 billion price tag on investment to 2014 may have been born in an extremely high price environment, but the subsequent collapse and stabilisation in 2009 has not forced the figure to be revised. Meziane says that these projects are cornerstones of Algeria’s economy, and will go ahead regardless.
However, when asked for a sensible benchmark for the oil price, Meziane points to the $65 - $75 price range. “This is a fair and reasonable price for oil today.” This would deliver a favourable margin to Algeria. Earlier this year Chakib Khelil told the UK’s Financial Times that Sonatrach needed an oil price of $40-50 a barrel for its investments to pay off.
Going Global
Algeria’s national oil giant has ambitions and goals beyond its own borders. Its oilfield experts have been lending their skills to producers around Africa as well as operations as far away as South America.
“Sonatrach has international investment programs in sub-Saharan countries Mali, Niger, Mauritania, Egypt, Libya and Tunisia, and also in Peru at the Camisea field in the Amazon Rainforest. These investments are ongoing, and seismic works in Mali and Niger have been completed, along with a seismic and drilling project in Libya.”
Sonatrach is operating in two blocks (095 and 096) located in the Ghadamès Basin in neighbouring Libya.
The King is calling for a halt to exploration, but do you agree?
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