The market for oil and gas upstream in Algeria is expected to register a CAGR of more than 2.32% during the forecast period, 2020 - 2025. Factors, such as increasing natural gas production and investments in the oil and gas upstream sector, are expected to drive the growth of the Algerian oil and gas market during the forecast period. However, Algeria's natural gas exports to Europe are outcompeted by cheaper Russian supplies, thereby decreasing the profits for companies in Algeria.
· In 2019, exploration and production of oil and gas in the country is primarily from onshore oil and gas fields in the country. Vast reserves of natural gas have been meagerly utilized till 2019. An increase in investment in the sector is expected to drive the market in the coming years.
· Sizeable natural gas field discoveries have been made, in 2019, in southwestern Algeria. These fields have an estimated capacity to produce some 275 cubic meters of gas and approximately 300 liters of condensate per hour. This may become an opportunity for the oil and gas upstream industry in the near future.
· Increasing consumption of oil and gas in the country is expected to drive the market, and it is expected to attract further investments in the onshore gas fields in the country. Increasing demand for natural gas, worldwide, is also expected to positively impact the growth.
Key Market Trends
Onshore Gas Field Production to Witness Growth
· Algeria held an estimated 12.2 billion barrels of proved crude oil reserves as of 2018. 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 low sulfur content. The quality of oil increases the demand for oil, as it does not require specific refinery to refine oil.
· In 2019, a fourth oil field is being developed in the area, by PT Pertamina, with an investment of USD 180 million. Pertamina expects to start the new field in April 2020.
· The new expansion in gas production is taking place in the country, mostly by the government owned, Sonatrach. The company is planning to increase its gas production by producing more than 1 billion cubic feet per day during the forecast period.
· Hence, onshore oilfields are expected to witness growth due to investment in gas basins.
Increasing Consumption of Oil and Gas to Drive the Market
· The country witnessed an increase in the consumption of natural gas and oil during 2017-2018. Continuation of the increase in consumption is expected to drive the market’s growth over the forecast period.
· Production of gas in Algeria decreased by 0.7%, year on year, to 79.4 million metric ton oil equivalent, in 2018, from 79.9 million metric ton oil equivalent, in 2015. Consumption of natural gas increased in the country, by 9.9%, year on year, from 36.7 million metric ton oil equivalent, in 2018, from 33.4 million metric ton of oil equivalent, in 2017. Increasing production increases the profits earned by the company
· Production of oil in the country decreased, by 2.0%, to 66.6 million metric ton, in 2018, from 65.3 million metric ton, in 2017. The consumption of oil in the country increased, by 1.2%, to 19.6 million metric ton, in 2018, from 19.4 million metric ton, in 2017. Increasing consumption is expected to provide a boost to the market.
· In 2018, a large part of the Algerian government's budget was dependent on crude oil, significant scale volatility in the crude oil market is expected to make the country vulnerable in case of a substantial reduction in the price of oil. The government, therefore, is trying to diversify its exports.
· Hence, increasing gas production is expected to drive the market over the forecast period.
The Algerian oil and gas upstream market is moderately consolidated. The major companies include Sonatrach SPA, Engie SA, Total SA, BP PLC, and Petroceltic Ain Tsila Ltd.
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