Algeria Seeks Exploration Bids to End Oil, Gas Output Drop

Algeria announced plans to hold its biggest auction of oil and natural-gas exploration rights as the nation tries to check declining fuel production.

Africa’s largest gas producer set Aug. 6 as the deadline for companies to bid for permits to seek oil and gas in 31 plots making up a total area the size of Sweden. Bids will be opened that day in a public ceremony to choose the winners and contracts will be signed Sept. 5, according to an announcement on the website of petroleum regulator Alnaft.

“The plots on offer are located in different sedimentary basins that have a high potential in petroleum resources,” Alnaft said. The acreage totals about 450,000 square kilometers (173,746 square miles) in area. Algeria is the largest African and Arab country by size at 2.4 million square kilometers.

The ninth-largest producer of the 12-member Organization of Petroleum Exporting Countries saw its output decline last year to 1.1 million barrels a day, the lowest since 2003. Exploration slowed in the last decade because of higher company taxation and a corruption probe at state-owned oil producer Sonatrach. A terror attack on a BP Plc-operated gas field a year ago further delayed projects to bring new fuel on stream, including the latest bidding round, initially planned for early 2013.

Mandatory Partner

The new round is being held under tax breaks introduced last year to promote exploration in remote areas and tapping of unconventional reserves such as so-called tight gas that’s trapped in rock and harder to extract than supplies in conventional fields. Sonatrach remains a mandatory partner in all exploration projects, with a minimum stake of 51 percent.

The blocks may contain conventional and unconventional reserves, Alnaft Chairman Sid Ali Betata said yesterday.

Algeria, a country of 38 million people that depends on oil and gas sales for two-thirds of government revenue, awarded exploration permits for nine of 36 areas on offer in the prior three bidding rounds from 2008 to 2011. Cia. Espanola de Petroleos SA, or Cepsa, was the only foreign company to bid in the previous round, winning one of 10 blocks offered.

Six blocks in the new bidding round are located in Algeria’s north, seven in the center, six in the east and 12 in the west, according to Alnaft’s announcement. Southern and western Algeria are the least-explored parts of the nation, a map on the regulator’s website showed.

Gas exports from Algeria dropped 11 percent on the year in 2013 to 45 billion cubic meters, according to Societe Generale SA estimates. The nation’s shipments peaked in 2005 at 65 billion cubic meters and have declined since as local consumption increased 40 percent while production fell 12 percent.

Before it's here, it's on the Bloomberg Terminal.