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Algeria has reported another marginal increase in its crude output, reporting 1.04m b/d in July, up from 1.027m b/d in June. This rise finally puts Algerian production in line with its Opec+ quota, which also stood at 1.04m b/d in July (AE 465/32).

Algeria's 4.5bcm/yr Touat gas processing plant is expected to resume production “shortly”, in Q3 2022, having been shut-in due to mechanical problems since last November. The unit “remained shut-in throughout the second quarter as repairs and clean-up operations continued”, operator Neptune Energy said in its 11 August Q2 22 results presentation.

Sonatrach’s new production-sharing contract with Eni, TotalEnergies and Occidental Petroleum for a 100-well campaign to restore and boost output in Berkine Basin blocks 404 and 208 points to a further upturn of activity in Algeria, where the national oil company’s head envisages ‘three or four’ more big upstream contracts by end-2022, writes Dominic Dudley.

Algerian leaders have been enjoying the extent to which markets have shifted since Russia’s invasion of Ukraine, allowing Sonatrach to deflect any downside from the Maghreb-Europe Gas Pipeline (GME)’s closure as it redirects gas away from Spain to other more favoured European partners – all the while maintaining the regime’s traditionally strong strategic relationship with Russia. As widely predicted, Italy is the major initial beneficiary.

President Abdelmadjid Tebboune on 14 July named a new finance minister to replace Abderrahmane Raouya, who was sacked.

The Russian invasion of Ukraine has overturned global calculations about natural gas supply, especially in Europe, meaning projects previously thought unfeasible are now making progress. One possible beneficiary is the Nigeria-Morocco Gas Pipeline, strongly pushed by King Mohammed VI and supported by his friend President Muhammadu Buhari, which could now undergo a radical change to supply the European network.

Nigerian petroleum minister Timipre Sylva has called on all parties to fast-track the African Union (AU)-endorsed Trans-Saharan Gas Pipeline (TSGP) from Nigeria to Algeria via Niger. The move follows federal government backing earlier this month for Nigerian National Petroleum Company (NNPC) to enter an agreement with the Economic Community of West African States (Ecowas) to build the ambitious Nigeria-Morocco Gas Pipeline (NMGP).

Nigeria and Angola are responsible for the vast majority of the Organisation of the Petroleum Exporting Countries (Opec) supply shortfall that is helping to sustain high global oil prices. Above-ground issues including theft and sabotage continue to contribute to a large deficit from the two sub-Saharan oil giants.

Wintershall Dea has agreed to acquire another 11.25% participating interest in the Reggane Nord natural gas project in a deal with Italy’s Edison SPA. The Germany company already holds a 19.5% stake in the concession.

President Abdelmajid Tebboune has created a new version of the Conseil National de l’Energie (CNE), a body first created in 1995 to bring together senior military/security, energy and other officials to advise the head of state on critical sector issues.

Eni confirmed its ability to bring years of co-operation and strong government relations to bear with an agreement signed on 11 April for state giant Sonatrach to supply up to 9 bcm/yr more gas through the under-used Trans-Mediterranean Pipeline (TMP), which runs to Italy via Tunisia.

Both BP and Eni have been looking to offload their stakes in major Russian energy assets in the wake of the invasion of Ukraine, with Algeria mooted as a potential buyer for one key project.

Algiers will adhere to its contracts with existing clients regardless of other political or commercial pressures. Sonatrach’s relationship with Public Gas Corporation of Greece (Deoa) goes back to 1991. In February the two companies agreed additional LNG cargoes which will be delivered. Likewise, TotalEnergies, with a much longer history has worked hard to overcome the influence of the chequered history of Algero-French relations. As Spanish relations enter the deep freeze, Repsol’s interests and gas exports via the Medgaz pipeline will run according to the existing contracts.

Algeria may be earning more money in the new high oil and gas price environment but with major calls on state revenues from every quarter, Sonatrach is not in line for significant new funds to help it address falls in output. Some politically favoured projects may go ahead regardless of commercial logic, but a lot of expectation rests on the 20 memoranda of understanding signed by PDG Toufik Hakkar during his tenure even though most have not yet led to new investment commitments. 

European powers are lobbying Algeria to provide far more gas and to shift its position in Opec to encourage higher oil output, but production shortfalls and political considerations mean a shift away from its historic alignment with Russia is unlikely. Relations with Europe are made more complex by tensions with regional rival Morocco, but years of underinvestment and poor governance in Algeria’s energy sector mean it is in any case not well placed to respond to calls for higher output, writes Jon Marks