Algerian Gas’ Challenges after the Attack on In Amenas

Notes internacionals CIDOB, núm. 70

Algeria faces three challenges, of which terrorism is not the most important: a regulatory environment which has led to little foreign investment in development of new oil and gas resources; runaway domestic demand for oil and particularly gas, which threaten to push local consumption higher than external sales by the middle of next decade; and the need to improve security of its major oil and gas fields.

The attack on In Amenas and the conflict in Mali increase the risk profile of Algeria and the broader North African region which includes Libya, Tunisia and Egypt. In 2011 this region produced 4.4mn b/d of liquids including crude oil, condensates and NGLs, nearly half of which were exported. It exported 6.2 bcf/day of liquefied natural gas (LNG) and pipeline gas, essentially to Europe.

The decline in European need for more gas and the ample room for more throughput in the two pipelines which carry Algerian gas to Spain, one directly and the other to the Iberian peninsula via Morocco, strongly suggest there is no need at present for a new pipeline linking Algeria to Europe.

Unless the current decline in oil and gas production is halted by important new discoveries, Algeria might, according to one pessimistic scenario be exporting only half its current volume of oil and gas by 2030. That suggests the decline will average 2% a year between 2015 and 4% between 2020 and 2025, accelerating to 7% thereafter. Other scenarios are less pessimistic but all point to the need to develop solar energy and conserve gas resources.

Whether the recent attack, and the broader deterioration of security in neighboring countries prompts any wider public debate of these issues is anybody’s guess. Algeria may be failing to engage in a more open debate on these complex issues, but think-tanks and multinational companies elsewhere in the world are hard at work as they recognize its importance in north-west Africa.