ALGERIA IN 1998 WAS WELL ON the way to a major revitalization of its oil and gas industry.
The country was host to 18 companies exploring 28 blocks under 21 exploration contracts.
The exploration effort had yielded 30 discoveries in the preceding 10 years, most of them in the Berkine area of the Ghadames basin in east-central Algeria. This activity had made Ghadames the country`s second largest concentration of oil reserves behind Hassi Messaoud field (Fig. 1).
The national oil company Sonatrach was jockeying to develop into a major international oil company. It wanted to become an integrated firm capable of dealing with market risks.
The state company calculated that it and its partners would invest $19.2 billion during 1997-2001. Its goal was to increase oil and gas production in conjunction with an unprecedented technological effort and to become a significant player in refining and petrochemicals as well as in the trading of oil and gas.
Facing realities
Building up the country`s far flung oil and gas operations was not easy.
As a member of the Organization of Petroleum Exporting Countries, Algeria had pledged to cut oil production in an attempt to strengthen crude oil prices.
Another problem was violence by Muslim extremists. U.K. Deputy Prime Minister John Prescott kicked off his 6-month European Union (EU) presidency in mid-1998 with plans to send an EU delegation to Algeria to investigate violence. Oil companies operating in the country welcomed that news.
Press reports described the killing of hundreds of villagers in western Algeria. The vast majority of these incidents took place near the capital, Algiers.
Two of the main foreign petroleum operations-a British Petroleum plc-led gas fields development in south central Algeria and Anadarko Petroleum Corp.`s oil exploration and development program in the northern Ghadames basin-are, respectively, 750 miles south and 400 miles southeast of Algiers and remote from the slayings.
BP in 1998 operated two drilling rigs in the In Salah area of the Sahara desert. Both crews were Algerian. Exploration crews were flown into the oil town of Hassi Messaoud in central Algeria, avoiding entry via the main airport in Algiers.
EU pressure on Algeria was unlikely to take the form of sanctions. About 90% of Algeria`s oil and gas exports went to Europe, particularly Italy, Germany, and France.
Upstream developments
Sonatrach signed 38 exploration contracts with 22 companies during 1989-98. They covered 37% of the country`s 807,291 sq km of working acreage.
Some 57,000 km of 2D seismic data and more than 670 sq km of 3D data had been collected, and more than 100 wells had been drilled by 1998.
Reserves in the 30 discoveries made during the period totaled 5.904 billion bbl of oil, 200 million bbl of condensate, and 71 billion cu m of natural gas.
The 1997-2001 plan included drilling of 300 wells, half of them in association with companies based in other countries.
Algeria`s oil production was expected to exceed 1 million b/d in late 1998 or early 1999 and reach 1.3-1.5 million b/d by 2000 (Fig. 2).
Natural gas production was poised for strong growth. Sonatrach believed Algeria would be able to export 70-100 billion cu m/year of gas, up from 60 billion cu m in 1998.
New gas production could come from condensate-rich fields southeast of supergiant Hassi R`Mel gas field and from the In Salah fields in south-central Algeria. In Salah fields were to be developed under a $3 billion partnership between Sonatrach and BP.
Algeria planned to give priority to domestic gas markets until 2035, but it considered its 1998 gas reserves estimate conservative. Capacities of the country`s two large-diameter gas pipelines to Europe could be increased when needed. Capacities of its gas liquefaction and export facilities at Arzew and Skikda could also be expanded (Fig. 3).
Algeria`s basins
The country`s main sedimentary basins take up much of the northern two thirds of Algeria (Fig. 4).
Almost 100% of 1998 oil and gas production came from three basins: Triassic, Ghadames, and Illizi. Gas discoveries made by Sonatrach in the 1980s in the Timimoun and northern Ahnet basins were just beginning to be appraised in 1998.
The Tindouf, Reggane, Bechar, Chilef, Hodna, and Southeast Constantine basins were lightly explored.
Giant Hassi R`Mel gas field and Hassi Messaoud field and a few dozen smaller fields accounted for most production in the Triassic basin. The main Illizi basin fields are Zarzaitine, Alrar, Mereksen, Tin Fouye Tabankort, Edjeleh, Stah, Al Abed Larache, Ohanet, and Tiguentourine.
The Berkine area of the northern Ghadames basin was the site of numerous discoveries by non-Algerian firms (Fig. 5). Anadarko and others made a string of discoveries trending southwestward from El Borma field on the border with Tunisia.
Anadarko started oil production from its first field on May 4, 1998, about 12 years after its representatives first visited the country (see table).
Investment increasing
Investment continued to grow in Algeria during 1998 despite low oil prices. The U.S. Export-Import Bank issued a credit guarantee in mid-1998 to enable nine U.S. companies to sell up to $56 million in oil and gas development equipment and services to Sonatrach.
Sonatrach planned to buy capital equipment and services from Intermark Inc., Tulsa; General Electric, Schenectady, N.Y.; Ebara International Corp., Sparks, Nev.; M.W. Kellogg Co. and Ava Guiberson, both of Houston; and Holman Boiler Works Inc., Halliburton Co., DeGolyer & MacNaughton, and Dresser Industries Inc., all of Dallas.
More U.S. suppliers were expected to receive orders under the credit facility, the bank said.
Since 1989, Sonatrach had used Ex-Im Bank programs to finance oil well workovers, compressor stations, and oil and gas pipelines. Ex-Im Bank provided two successful credit guarantee facilities for Sonatrach in 1992 for oil and gas field development. In fiscal 1997, Ex-Im Bank authorized $150.4 million in financing to support U.S. exports to Sonatrach.
Sonatrach Pres. and Chief Executive Officer Abdelmadjid Attar said the action showed the bank`s "continued confidence in assisting in the development of Algeria`s hydrocarbon resources."
The credit guarantee facility was provided through Citibank NA, Manama, Bahrain.
Downstream diversification
Expansion into the downstream arena to achieve Sonatrach`s goal of vertical integration also was intended to provide the financial means to sustain upstream expansion and help buffer the risks linked with oil exploration.
Sonatrach noted Algeria`s advantages in this area, such as available raw materials, already operating industrial installations, and experience. Downstream partnerships would follow the pattern of partnerships formed upstream.
Sonatrach has a petrochemical branch involved in olefins and plastics. Called Enip, it is based in Skikda. The company joined with BASF AG to build a 350,000 ton/year propane dehydrogenation plant in Tarragona, Spain.
In 1990, Sonatrach formed a joint venture with Repsol Quimica SA to build a polyethylene plant, but this project had not materialized by 1998.
 |
 |
 |
 |
 |
Algeria exploration timeline
June 1986
Initial visit to review data by Anadarko pathfinders.
December 1989
Production sharing agreement signed with Sonatrach that provided for investment of $100 million in exploration efforts during 10 years.
1990
Partners begin acquiring new 2D seismic data.
1991
First well drilled (a dry hole).
1993
First oil discovery, EMK 1 well, tests 3,700 b/d of oil from two Triassic zones.
March 1995
Discovery of HBNS field. The HBNS 1B tests 16,000 b/d of 42° gravity oil.
July 1996
Authorization by Algerian government for construction of Stage I production facilities at the HBNS field.
September 1996
Signed $177 million engineering, procurement, and construction contract with Brown & Root Condor (BRC).
January 1997
BRC mobilized to HBNS field location in the Sahara Desert about 400 miles south of Algiers.
April 1998
Commissioning and testing phase at HBNS field. Final inspection, pressure, and calibration checks and certification on 45 main process systems and 136 individual subsystems that must be operational for start-up.
Apr. 29-May 3, 1998
Production start-up sequence under way. Review all safety regulations and procedures for plant operations staff; walk-through start-up process for oil separation system, generators, compressors, export pumps, measurement and calibration systems.
May 4, 1998
First oil production.
Source: Anadarko Petroleum Corp.
