Oil and gas discoveries boost Algeria as Europe shuns Russia

Algeria’s state-owned oil company Sonatrach has announced three major oil and gas discoveries in the Sahara desert. 

Since the outbreak of the war in Ukraine, and the need for Europe to end its energy dependency on Russia, Algeria has been intensively drilling to increase its production of oil and gas.

The first discovery is a gas condensate located in two different reservoirs which were found following the drilling of an exploration well in the Illizi Basin, located at the border with Libya.

According to the company, the flow rates recorded by the two reservoirs amounted to 513,000 cubic metres/day of gas during the test phase.

Another discovery of crude oil was made in partnership with Italian oil company Eni in the northern region of the Berkine Basin. “During the production test, the well produced 1,300 barrels/day of oil and 51,000 cm/day of associated gas,” said Sonatrach.

The two discoveries are located close to existing oil and gas facilities.

Significant gas production was also attained during the test of the formation of one reservoir in Bechar Basin, confirming “a gas potential in this untested reservoir and a region considered as an emerging area,” said Sonatrach.

Export expansion 

The discoveries are promising for Sonatrach and Algeria, in which hydrocarbon reserves have not grown significantly since the mid-2000s.

Since the beginning of the year, the North African country has seen ramped up oil and gas exports via pipeline and sea. Algeria has agreed to provide Italy with an additional 4bn cubic metres of gas this year, bringing total supply to 25bn cubic metres, according to Reuters.

On 19 July, a $4bn deal was signed between Occidental (US), Total Energies (France) and Eni (Italy), to develop a site located in the Berkine perimeter and produce 1bn barrels of oil equivalent. A hydrocarbon law passed in 2019 allows for production-sharing agreements between Sonatrach and foreign oil companies, although the legislation prompted some street protests. However, it has created a legal framework for more investment in Algeria.

Russia’s isolation boosts Trans-Saharan Gas Pipeline 

Algeria’s renewed attractiveness as an investment destination amid Russia’s isolation is expected to boost the development of new oil infrastructure, notably in the Hassi R’Mel gas field, which last month underwent one of the largest revaluations of its reserves for 20 years.

Hassi R’Mel is expected to become a hub for the Trans-Saharan Gas Pipeline project (TSGP), a pipeline aimed at delivering Nigerian gas to Algeria through Niger.

Despite more than 10 years of inactivity, a tripartite ministerial meeting between Algeria, Nigeria and Niger on 28 July paved the way for a genuine revival of the project. The three energy ministers have signed a memorandum of understanding after discussions on the technical details of the 4,128km pipeline.

The project has an estimated initial investment of $10bn and an annual capacity of around 30bn cubic metres.