After Eni, Talisman and Total, Sonatrach eyes on ExxonMobil and Shell
After signing contracts with ENI from Italy, Talisman Energy (Talisman) and Total from France, Sonatrach is willing to attract ExxonMobil and Shell for the exploration and production of unconventional gas, shale gas and tight gas, in Algeria.
According to recent studies performed by Sonatrach, the recoverable reserves of shale gas and tight gas in Algeria are estimated to 600 trillion cubic feet (tcf).
In 2011, ENI and Sonatrach signed a cooperation agreement for the development of unconventional gas with a focus on the shale gas.
Talisman and Sonatrach signed Production Sharing Contracts (PSC) to explore and develop several fields on eastern Algeria to come in production in 2013.
With Total, Sonatrach is focusing on tight gas fields, Timimoun and Ahnet in the southern Algeria.
Total and Sonatrach share working interest in:
- Timimoun where Sonatrach is the operator with 51% interest, Total 37.5% and Cepsa 11.25%
- Ahnet where Sonatrach is the operator with 51% interest, Total 47% and Partex 2%
In Timimoun, Total and Sonatrach are planning to start operations in 2014 in order to reach 37 wells at plateau production of 18 million cf/d of gas.
For Ahnet, the production is expected in 2015 and the development program is still under study.
Now Sonatrach is willing to attract other Major International Oil Companies (IOCs) such as ExxonMobil and Shell because of their experience in shale gas and tight gas in North America.
Sonatrach holds $4.5 billion downstream projects pending on gas supply
Since the conventional gas reserves are depleting, Algeria is planning to invest $80 billion capital expenditure over the next five years out of which 60% will go the exploration and production.
Sonatrach will drill 150 exploratory wells to develop its massive recoverable reserves of shale gas and tight gas.
At the difference with USA where the shale gass over production has dropped the gas prices to the floor as there are not enough consumers, Algeria is in the need of this gas as feedstock for downstream projects already on shedule in Arzew, on the Mediterranean Sea.
Among the most important projects Sonatrach is planning a:
- $3 billion Arzew Petrochemical complex in joint venture with Total and Qatar Petroleum
- $850 million methanol plant
- $600 million integrated propane dehydrogenation and polypropylene complex.
In addition Sonatrach will expand crude oil processing capacities in its three refineries.
To provide these projects with the necessary feedstock, Sonatrach is planning to produce up to 13.1 billion cubic meter per year of natural gas from four fields, Touat, Ahnet, Timimoun and Reggane North located in Sahara region in the center of Algeria.
These downstream projects to produce added value gas derivatives are equally important for Algeria from economical and social perspective as they will help the trading balance sheet and create thousands permanent jobs.
As a National Oil Company, Sonatrach is developing an integrated upstream-downstream business model where low costs gas supply can only provide competitive advantage on the downstream side.
Algeria to work on incentives for shale gas development
Sonatrach does not take risk to develop its conventional resources, while it may take years to Sonatrach to build up enough expertise to explore and turn in production the unconventional gas.
If Sonatrach‘s integrated upstream-downstream business model should be highly competitive, it requires in counter part to synchronize the upstream projects with the downstream ones.
Having scheduled the Arzew projects, Sonatrach must speed up on the shale gas development.
Therefore Sonatrach and the Algerian Government are working on dedicated incentives to motivate the Majors International Oil Companies (IOCs) to invest in Algerian shale gas.
The scheme should include Production Sharing Contracts (PSC) to share profits, costs and risks, tax break.
Sonatrach could also apply this scheme for offshore projects.
Algeria will also review its mining regulation to adjust it to the unconventional resources, such as shale gas and tight gas.
Since the International Oil Companies (IOCs) such as ENI, ExxonMobil, Shell, Talisman, and Total tends to focus on the exploration and production, their expertise in upstream matches perfectly with Sonatrach‘s integrated upstream-downstream business model based now on its shale gas and tight gas.
