Although Algeria is one of the major oil and gas producing countries of Africa it is still considered to be relatively under-explored. Its hydrocarbon industry is key to its economy. The country is currently experiencing a significant economic upturn, in large part aided by strong oil and natural gas export revenues, this comes after years of political turmoil and civil war within the country. Algeria contains an estimated 11.8 billion barrels of proven oil reserves. The country also plans to increase crude oil exports by increasing natural gas consumption within the country.
In addition to its upstream strength, Algeria has a strong downstream sector that includes refining, distribution and marketing, petrochemicals and lubricants. Algeria’s four refineries meet most of its domestic requirements but capacity under-utilisation has meant that it still has to rely on imported refined products to meet demand.
Algerian oilfields produce high quality light crude oils with very low sulphur and mineral contents. The main areas of exploration for oil and gas are in the east, on the border of Tunisia and Libya and the central area where large gas discoveries have been made. Increased exploration and enhanced oil recovery projects are likely to increase both Algeria’s reserves and production.
The Algerian national oil company is Sonatrach (Entreprise Nationale Sonatrach) and it plays a key role in both upstream and downstream oil and gas industries. It is responsible for exploration and production, transport, refining, processing, marketing and distribution. Through its subsidiaries, the company has a domestic monopoly on oil production, refining, and transportation. Algeria’s oil sector, though, is not completely open to foreign companies. All foreign operators must work in partnership with Sonatrach, with Sonatrach usually holding majority ownership in these production-sharing agreements.
During April 2005 it was reported that a proposed new hydrocarbon law had passed through both houses of the Algerian Parliament and was awaiting Presidential approval. The proposed new law will establish a royalty and tax regime to replace the existing production sharing agreements in new exploration bid rounds. A new government department would also be formed to manage exploration bid rounds, a role currently carried out by Sonatrach, the national oil company.
Algeria is a member of OPEC.