Algeria Gives the OK for Shale Gas Development, Investors

By Abdelghani Henni 3 Jun 2014

The Algerian cabinet has officially approved the exploration and the exploitation of shale gas in the country following the consent of Algerian President Abdelaziz Bouteflika. Bouteflika has also approved the rollout of procedures required to set joint ventures with foreign companies interested in investing in shale gas to facilitate technology transfer. 

Algeria is now hoping that foreign partners will begin to show interest in its unconventional resources after the Council of Ministers launched the necessary procedures. Seismic surveys area also being planned, and 11 wells are expected to be drilled over the next seven to 13 years.

The CEO of Algerian energy giant Sonatrach, Abdelhamid Zerguine, said that his company started the evaluation of unconventional resource in 2009, and that initial data showed important geological reserves. “Despite the importance of our conventional gas reserves, we have launched as a first step several studies covering specific areas to evaluate this type of resource, which needs specific technologies and very strict environmental and ecological measures to preserve the ecology,” Zerguine said.

The company has also launched four studies to evaluate the potential of shale gas and liquids in partnership with Eni, Talisman, Shell, and Anadarko. “All these studies will go through a pilot project either in partnership or with our efforts,” Zerguine said. “We are waiting for the results of these studies, which are due in 18 months. The results will allow the evaluation of the deliverability of these wells, and consequently, the recoverable reserves. The recovery factor for the exploitation of these types of resources can be very low compared to conventional reserves.”

Using its own efforts, Sonatrach finished drilling the first shale gas well in the central part of the Sahara. “The initial interpretation of the data of this well showed that the potential for gas is similar to such basins known around the world,” Zerguine said. “The well has been completed, and we will be conducting a simulation test by (the end of) 2014. A second drilling is currently under way.”

According to a 2013 report by the U.S. Energy Information Administration, Algeria is third globally after China and Argentina in technically recoverable shale gas reserves, with 707 trillion cubic feet (20 trillion cubic meters) of reserves.

Algeria has also recently embarked on relaxing its strict investment laws, including amendments of its oil and gas laws, to create an incentive for shale gas developments.

Algerian energy minister Youcef Yousfi said that the new legislations will help boost the hydrocarbon reserves of the country, adding that the Algerian government views shale oil and natural gas as a way to add diversity to its energy sector.

"We are currently evaluating the potential for shale oil and gas, attempting to determine the quality of the rock while studying all potential environmental impact," Yousfi said. "It is absolutely vital for us to use all possible resources to achieve energy security."

The energy minister was speaking on the sideline of his meeting with U.S. Energy Secretary Ernest Moniz in Algiers, who said that U.S. companies experiencing success in the shale sector were interested in tapping into the Algerian energy market. "Our companies are interested in the Algerian market because they have an extensive experience in the exploitation of shale gas and oil, which enabled us to achieve and economic boom and energy independence. I hope that the expertise acquired over the past years will be also used in Algeria," Moniz said.

Moniz also underlined the "huge investment opportunities in the sector of energy in Algeria for American businessmen," saying that offshore oil and gas exploration shouldn’t be neglected. Many firms are operating in this field, especially in the Gulf of Mexico, and their experience can be beneficial in Algeria where the water depth is similar, he said. 

Abdelghani Henni is a Middle East Staff Writer for the Journal of Petroleum Technology.