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Algeria to Tap ‘Big Potential’ for Shale Gas With Incentives

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May 3 (Bloomberg) -- Algeria sees “big potential” for shale gas and plans incentives to encourage exploration as extraction of so-called unconventional resources becomes economically feasible, according to an Oil Ministry official.

Algeria will introduce new legislation to spur investment in exploration this year, including tax incentives that “take account of the production difficulties of this kind of fuel,” said Ali Hached, an adviser to Energy and Mines Minister Youcef Yousfi. “There is big potential,” he said at a Paris summit.

Countries from the U.S. to Poland are exploring for natural gas in shale, which requires the injection of water, sand and chemicals into sedimentary rock at high pressure to extract the fuel. Energy producers have stepped up the search for such unconventional resources as rising energy prices and advances in technology have made such developments profitable.

“Non-conventional resources are important in Algeria,” Abdelhamid Zerguine, chief executive officer of state-run energy company Sonatrach Group, said at today’s summit. Tests in three provinces over 180,000 square kilometers (69,500 square miles) have uncovered a possible 2 trillion cubic meters of gas, he said, adding that “partnerships will be necessary.”

Sonatrach has said it intends to invest $80 billion over five years, with more than 60 percent dedicated to exploration and production. The company plans to drill 150 exploratory wells and expand crude-processing capacity at three oil refineries.

Development of unconventional gas resources outside North America will “take time,” Yves-Louis Darricarrere, head of exploration and production at French oil company Total SA, said in Paris. Total, which is producing shale gas in the U.S. with Chesapeake Energy Corp., is developing the Timimoun and Ahnet gas projects in Algeria and pursuing projects in China.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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