The market for oil and gas in Algeria is expected to grow at a CAGR of more than 1.5% during the forecast period of 2020 – 2025. Factors such as increasing natural gas pipeline, increasing refining capacity, and plans to improve oil production are expected to increase the growth for the Algeria oil and gas market during the forecast period. However, competition in the European gas market with large producers like Russia and the United States is expected to restrain the market.
- The upstream sector is the largest segment of the Algeria oil and gas industry. Major changes in legislation regarding the oil and gas industry are expected to attract multinational and local companies to compete further and increase market growth.
- Large crude oil discoveries have been made, in 2019, in southeastern Algeria that is expected to yield 500 million barrels of crude oil. This could become an opportunity for the new refineries that are expected to process the heavy crude oil.
- Investments in Algeria's oil and gas industry are expected to drive the market in the forecast period. An increase in the consumption of oil and gas is also expected to provide a positive stimulus to the market.
Key Market Trends
Upstream Sector to Dominate the Market
- Algeria held an estimated 12.2 billion barrels of proved crude oil reserves, as of 2018. Most of the country's proved oil reserves are held onshore because offshore exploration has been limited. Algerian oil fields produce high quality, light crude oil with very low sulfur content. The quality of oil increases the demand as it does not require specific refinery to refine the oil.
- Algeria is expected to increase exploration activity together with international partners following the implementation of a new hydrocarbon law in January 2020, which offers a more favorable tax regime to potential investors. This can be seen in April 2020, when Sonatrach signed a memorandum of understanding with both TPAO and Zarubezhneft that is expected to allow for talks on opportunities in the Algerian upstream.
- Production of gas in Algeria decreased by 0.7%, year on year, to 79.4 Million tonnes oil equivalent, in 2018 from 79.9 Million tonnes oil equivalent, in 2015. Consumption of natural gas increased in the country, by 9.9% from 36.7 million ton oil equivalent, in 2018 from 33.4 million tonnes of oil equivalent, in 2017. Increasing of the consumption of gas is expected to aid the market.
- Hence, the upstream sector is expected to dominate the market due to the increase in the consumption of oil and gas and changes in the regulations in the tax regime of the country.
Increase in Investments to Drive the Market
- Production of oil in the country decreased, by 2.0%, from 66.6 million tonnes, in 2017 to 65.3 million tonnes in 2018. The consumption of oil in the country increased, by 1.2%, to 19.6 million tonnes, in 2018 from 19.4 Million tonnes in 2017. Increasing consumption is expected to provide a boost to the market.
- PT Pertamina (Persero) is, in 2020, in negotiation with the Algerian government regarding its plan to expand its oil and gas holding in Algeria. The company is expected to further invest in the oil and gas sector of the country in the forecast period.
- The national oil company Sonatrach and Chinese group China Petroleum Engineering and Construction (CPECC) have signed a contract for the restoration of Sidi R'zine Refinery in Baraki, in 2018. The refinery is expected to increase its gas and oil production capacity from 737,000 tons to 1.18 million tons, and the capacity of super gasoline is also expected to increase.
- Hence, an increase in the investments in the industry are expected to drive the Algeria oil and gas market as more oil and gas production, and refining capacity are likely to grow further.
The Algerian oil and gas market is moderately consolidated. The major companies include Eni S.p.A., Sonatrach S.p.A., China National Petroleum Corporation, Equinor ASA, and BP p.l.c.
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