Algeria invites Gazprom, Lukoil to jointly develop oil and gas

Algeria, with Africa’s second biggest gas reserves, has asked Russia’s Gazprom and Lukoil to tender for the joint development and exploration of some of the 30 fields that make up a fifth of the country, says Gazprom International.

Both Russian oil and gas majors signed an agreement to cooperate with Algerian state-owned Sonatrach in August 2006, but so far no joint projects have been agreed, Vedomosti newspaper said.

Sonatrach is the largest Algerian and African company and the 11th largest oil consortium in the world. It has a huge potential in terms of oil and gas reserves, a representative from Gazprom International told the newspaper.

Algeria has Africa’s second biggest gas reserves behind Nigeria, and are estimated at 4.2 trillion cubic meters.

Valery Nesterov from Sberbank CIB says the discovered reserves have remained unchanged for the past decade, while domestic consumption is growing. This has eaten into Algerian exports to the rest of the world, with supplies to Europe falling 18.5 percent in 2013 to 37.9 billion cubic metres.

So, to meet its export obligations, Algeria needs investment in exploration and an increase in its resource base and extraction, Aleksey Grivach, deputy director at Russia’s National Energy Security Fund explained. Sonatrach currently holds a monopoly in gas exports, so Gazprom may just bid for some service contracts, he added.

Algeria needs bigger extraction volumes not just to increase its exports to Europe but also to have more supplies of liquefied natural gas (LNG) available for Asia, which could become a point of cooperation with Gazprom, Grivach said.

Also, cooperation with Algeria’s Sonatrach would give Gazprom information about Algeria’s resource base and the potential for export growth, he added. On top of that, it’s important for Gazprom to keep an eye on Sonatrach, its main African rival, Nesterov said.