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Algeria Oil and Gas Report Q1 2010
Business Monitor International, Dec 2009, Pages: 80
Algeria Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Algeria's oil and gas industry.
The latest Algeria Oil & Gas Report forecasts that the country will account for 8.91% of African regional oil demand by 2014, while providing 19.57% of supply. African regional oil use of 2.98mn barrels per day (b/d) in 2001 rose to an estimated 3.60mn b/d in 2009. It should average 3.66mn b/d in 2010 and then rise to around 4.13mn b/d by 2014. Regional oil production was 7.84mn b/d in 2001, and in 2009 averaged an estimated 9.79mn b/d. It is set to rise to 12.52mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 4.86mn b/d. This total had risen to an estimated 6.19mn b/d in 2009 and is forecast to reach 8.40mn b/d by 2014. Angola has the greatest production growth potential, with Nigerian exports set to soar if it can resolve recent quasi-political issues.
In terms of natural gas, the region consumed an estimated 124bn cubic metres (bcm) in 2009, with demand of 191bcm targeted for 2014. Production of an estimated 248bcm in 2009 should reach 385bcm in 2014, which implies net exports rising from 124bcm in 2009 to 193bcm by the end of the period. In 2009, Algeria’s share of regional gas supply was an estimated 40.40%, easing to 36.39% by 2014. The country’s share of demand in 2009 was an estimated 21.03%, with 17.63% predicted by 2014.
For 2009 as a whole, we have assumed an average OPEC basket price of US$59.00 per barrel (bbl), a 37.3% decline year-on-year (y-o-y). This represents an upgrade from the US$55.00/bbl forecast we were using in the previous quarter. For 2010, we expect to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00/bbl in 2011 and to US$90.00/bbl in 2012 and beyond. For 2009, the authors have assumed a global average gasoline price of US$67.46/bbl, with the fuel having peaked in June at almost US$80.00/bbl. The overall y-o-y fall in 2009 gasoline prices is put at 33.7%. The gasoil forecast is for an average price of US$70.59/bbl, assuming a monthly high above US$94/bbl in December 2009. The full-year outturn represents a 41.8% y-o-y fall. The annual jet price level for 2009 is estimated at US$68.45/bbl. This compares with US$124.95/bbl in 2008.
The 2009 average naphtha price is put at US$52.66/bbl, down 39.7% from the previous year’s level. Algeria’s real GDP is estimated to have risen by 4.4% in 2009, compared with 0.8% growth in 2008. We are assuming average annual growth of 3.9% in 2010-2014.
We therefore expect estimated oil demand of 305,000b/d in 2009 to rise by up to 4.0% per annum to 368,000b/d in 2014. State oil company Sonatrach dominates the industry, operating in partnership with various international oil companies (IOCs), but accounting for 60% of the country’s oil output. Thanks largely to IOC investment, combined oil and gas liquids output is forecast to increase from an estimated 1.90mn b/d in 2009 to 2.45mn b/d in 2014, with exports heading towards 2.08mn b/d. The country’s OPEC membership and assigned production quota could frustrate volume growth ambitions. Gas production of an estimated 100bcm in 2009 should reach 140bcm by 2014. Consumption of an estimated 26bcm in 2009 is expected to rise to 34bcm by the end of the forecast period, providing exports of 106bcm. Between 2009 and 2019, we are forecasting an increase in Algerian oil and gas liquids production of 38.3%, with volumes rising steadily from an estimated 1.90mn b/d in 2009 to 2.62mn b/d by the end of the 10-year forecast period. Oil consumption between 2009 and 2019 is set to increase by 46.6%, with growth slowing to an assumed 4.0% per annum towards the end of the period and the country using 447,000b/d by 2019. Gas production is expected to rise to 185bcm by the end of the period. With demand rising by 63.4% between 2009 and 2019, there should be export potential increasing from 74bcm to 142bcm, in the form of LNG and by pipeline.
Details of the 10-year forecasts can be found in the appendix to this report. Algeria now holds fifth place in the updated Upstream Business Environment rating, and is three points behind regional heavyweight Angola. It has the potential to move higher over the medium term, with Gabon being the next target. The country’s score benefits from healthy oil and gas reserves, a large number of non-state companies active in the upstream sector and decent licensing terms. The country is near the top of the league table in the updated Downstream Business Environment rating, with some high scores but progress further up the rankings unlikely. It is ranked third behind South Africa and Egypt, thanks to high scores for gas consumption, nominal GDP, likely refining capacity expansion and oil demand growth.
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