The evolution of the algerian strategy in the hydrocarbon ... - AIPN

The evolution of the algerian
strategy in the hydrocarbon
exploration and production

ALGERIA STRATEGIC LOCATION
Algeria, is the second African country
by size (area:2.4 million square Km;
population ~ 30 millions), Algeria has
a strategic position close to the
European market, Algeria has a large
potential of oil and gas reserves.

An important reserves base
Hydrocarbons in place (proved + probable)
= 132.4 Billion bbl Oil Equivalent
Total Hydrocarbons reserves
= 40.3 Billion bbl Oil Equivalent
Crude Oil
28%
Natural Gas
57%
L.P.G.
6%
Condensate
9%
Source Sonatrach

Vast and Underexplored Sedimentary
Basins
Algeria basins compared to similar petroleum
systems worldwide are still underexplored
540
Number of NFW per 10 000 Km 2
of sedimentary surface
Total Area of Algeria’s s Sedimentary basins
= 1.6 Million Km2
= 65% of Algeria’s s area
105
6
9
13
Algeria
110
Africa-Asia-Oceania- Middle East
World
0.1
52
Deep offshore
North America
Russia & China
Western Europe
South America
Source Sonatrach

Sonatrach’s objectives since 1986
• Intensify exploration effort in Algeria to maximise
production
• Appraisal and development of Gas discovered
reserves
• Increase the rate of recovery of the discovered oil
reserves
• using its own means and in association with the
foreign oil companies.

3 phases
• Phase 1: The 1986 regime
• Phase 2: The 1991 regime
• Phase 3: The 2000 regime
• The perspectives

1. The 1986 regime:
Opening of Exploration Only

The Hydrocarbons Status under the
1986 regime.
• Property ==> Nation
• Activity ==> State’s monopoly
• Performance ==> State enterprises

The Hydrocarbons Status under the 1986 regime.
STATE
SONATRACH
FOREIGN COMPANY

Main aspects of the 1986 regime
• Law enacted in August 1986.
• Several enforcment decrees.
• Two laws in 1991 amending the law 1986.
• Forms of contracts:
PSC
RSC
Partnership
Joint stock company

Main Aspects of the 1986 regime
• Obligation to enter into contracts with
Sonatrach
• Only Sonatrach may obtain the mining
licences
• Maximum limit of the partners share : 49 %

Main Aspects of the 1986 regime
• No partnership on the discovered fields
• Entitlement to liquid hydrocarbons (equity)
• No right to gas (no equity)
• Monopoly on transportation by pipelines

Tax aspects under the 1986 regime
• Royalty from 12.5 to 20%
• Income tax from 65 to 85%
• Exemption from VAT and custom duties on
importations

Main Provisions of the PSC under the
1986 regime
• Reimbursement during the year:
transportation costs
operating costs
20 % exploration investments
20% development investments

Main Aspects of the 1986 regime
• Remuneration :a share of the production
remaining after the reimbursement of costs.
• Existence of carry forwards
• Right to Back in of Sonatrach

Contract conclusion Process
• Direct negotiation
• No bid rounds
• Long cycle time to Signature ( average 2
years)

Contracts Signed under the 1986 regime
• Prospection Contracts : 02
• Exploration Contracts : 14

Results
• No EOR contract.
• Focusing on the Oil potential
• Sonatrach supports all the transportation investments
• Insufficient interest of foreign investors,despite the
large potential

Phase Two: The 1991 regime
The improvement of the 1986 regime

The 1991 regime:
Improvement of the 1986 regime
• Access to Gas discoveries
• Acces to Existing oil and gas Reserves
- International Arbitration
- Tax on remuneration/ Tax credit

The 1991 regime:
Improvement of the 1986 regime
- Access to transportation activities
- Joint marketing of the gas or compensation in
liquids.
- Possibility to decrease the rate of the royalty
( to 10%) and the income tax ( to 42%)

Results: More contracts concluded
• Prospection contracts : 03
• Exploration and exploitation contracts : 34
• Appraisal and exploitation contracts : 05
• EOR contracts : 02

Contract conclusion process under the 1991
regime
• Direct negotiation for the exploration
contracts
• Bid round for the existing field contracts
and selection of 2 compagnies for
negotiations
• Still long Cycle time to Signature
• ( average 2 years)

The 2000 regime
Systemization of the Bid Round
Process

Main characteristics of the bid round
Contract
• Tendering process for all the projects (exploration
contracts,appraisal contracts,development contracts and EOR
contracts)
•
• One parameter to bid ( K factor)
• Minimum work program pr-established
• Short Cycle time to Signature (average 3 months)
• Sonatrach participation to all the investments
(average 25%)

Bid round results under the 2000 regime
• Five bid rounds held to date.
• Largest Number of blocks (50)offered and
awarded in such a short time
• New entrants and diversification of foreign
companies
• Opening of new areas

Evolution of the contracts signed in partnership in
exploration since the promulgation of the 86-14 Law
10
9
Contracts
8
7
6
5
4
3
2
1
0
1 2
3
6
4
4
3
4 2
4
10 9
10
1 1 1 1
2
1
2 2 2 2 2 2
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Prospection Research Forecast
Source: Sonatrach

EXPLORATION RESULTS IN PARTNERSHIP
(1986 - 2002)
62 Discoveries
Reserves (in place)
Oil :
Condensate :
Gas :
7.550 Billion Barrels
400 Million Barrels
166 Billion Cubic Meters

Algeria reserves balance
( 1971-2001)
40
34
40
Volume (Billion boe)
30
20
10
20
Reserves
Produced
1971-2000
14
26
New
Reserves
1971-2000
14
0
1971 2001
Source Sonatrach

Main Discoveries (1986 - 2003)
03
-
09
04
05
49
17
-
10
08
13
01
Sonatrach : 57
Partners : 62
Source Sonatrach

New Oppotunities:
Perspectives
• Integrated Projects (including upstream and
downstream activities)
• 6th Bid Round expected by year End

Perspectives
• Clarification of the role of Sonatrach and new
vision for the relationship between:
• Sonatrach and State
• Sonatrach and IOC
•IOC andState
• Elaborate a more simple, transparent and
attractive contractual system.

THANK YOU FOR THE ATTENTION