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Algeria
NATURAL RESOURCES AND ENERGY
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Figure 6. Oil and Gas Industry
Hydrocarbons
Algeria's economy was dominated by the hydrocarbon sector, which
in 1990 represented just over 23 percent of GDP and which was
the largest source of its exports (see
table 3, Appendix). In 1990, for example, US$12.3 billion
of the country's total export earnings of US$12.7 billion (i.e.,
97 percent) came from oil, gas, and refined products exports:
crude and condensates (US$6.1 billion), refined products (US$2.7
billion), natural gas (US$2.8 billion), and liquefied petroleum
gas, known as LPG (US$730 million). Algeria's oil, a light variety
with low sulfur content that commanded a premium in international
markets, was the main natural resource on which the government
depended heavily to sustain its economic development programs
through the 1970s. Crude oil production, concentrated in the Hassi
Messaoud field near Haoud el Hamra pumping station, south of Constantine,
and in area of the Zarzaļtine and Edjeleh fields near the Libyan
border, however, has been diminishing steadily; in the early 1990s
it accounted for no more than 1 percent of world production.
Although about fifty oilfields have been producing since 1989,
the peak production level of 1.2 million barrels per day (bpd--see
Glossary) reached in 1978 was reduced to approximately 700,000
bpd in 1990. The government imposed the output restriction to
prolong the life span of the oilfields and to abide by production
quotas of the Organization of the Petroleum Exporting Countries
(OPEC). Algeria's total refining capacity stood at 475,000 bpd
in 1990.
The country's oil reserves were expected to be depleted within
three decades at 1992 rates of production. This alarming assessment,
coupled with slumping world oil prices and diminishing prospects
of growth in crude oil sales, prompted the government to focus
on involving foreign companies in its oil industry by liberalizing
the application of the August 1986 exploration code. When the
parliament amended this law in December 1991, Sonatrach, which
has retained firm control over all oil policies despite the 1980
restructuring of the hydrocarbon industry, was obliged to allow
joint ventures with international companies interested in exploring
low-deposit areas that require high-technology methods to enhance
production. The government also announced that international arbitration
would be allowed in case of dispute.
Algeria's considerable natural gas reserves of about 3,200 billion
cubic meters of proven recoverable gas were expected to last more
than sixty years at 1992 production rates. Natural gas had become
the country's most valuable export as a result of the decline
of oil production and prices--and as an outcome of the government's
diversification strategy. The Hassi R'Mel field south of Algiers
was the largest and contained almost two-thirds of the country's
reserves (see
fig. 6). Other large fields included, in descending order,
Hassi Messaoud, Alrar (in central Algeria, near the Libyan border),
Gassi Touil (southeast of Ouargla), and Rhourd en Nous (in the
center of Algeria).
The four plants that liquefy natural gas are owned by Sonatrach,
which in the early 1990s sought to promote pipeline sales through
the existing trans-Mediterranean pipeline. It was estimated that
Algeria's 1990 sales of 12.5 billion cubic meters of LNG could
be doubled if plans to build a second transMediterranean line
to Spain were to materialize. After an illfated attempt by Sonatrach
to raise LNG prices--at the insistence of politicians clamoring
that Algeria was not getting fair compensation for its natural
resources--the government decided to abandon OPEC fixed prices
and switched to a more realistic market-based pricing policy.
This new approach resulted in contracts extending into the 2000s
with such clients as Gaz de France, Enagas of Spain, Distrigaz
of Belgium, and Panhandle of the United States.
Algeria's condensate reserves, which were extensively used in
the petrochemicals industry and most of which were located at
Hassi R'Mel, were estimated at 400 million tons. Condensate sales
in the 1980s helped to make up for the downturn in oil revenues.
The respite was likely to be short-lived, however, because the
drop in the condensate exports was expected to be accompanied
by a corresponding decrease in output from 1989 to 1995.
Enhancing LPG production has been another government priority
in its diversification strategy. Fortuitously, domestic demand
for LPG in individual households and public transportation has
increased steadily. To meet this constantly growing demand, Sonatrach
reopened its old Arzew plant, west of Algiers, in 1990. It also
renovated the equipment at Hassi Messaoud and planned a construction
program of extraction and processing plants, pumping stations,
1,000 kilometers of pipeline between Alrar and Hassi R'Mel, and,
finally, the long-awaited new massive LPG plant at Arzew. Despite
Sonatrach's successful implementation of its diversification strategy,
the government was well aware of its overdependence on the revenue
from oil and gas exports to finance its ambitious national development
program and service its external debt.
Data as of December 1993
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