Seventh International Exploration and Production Licensing Round Algeria Results

On 13 December 2008 bids were submitted for the highly anticipated Algerian Seventh Licensing Round. This is the seventh licensing round to have taken place in Algeria since 2000. The round was launched in July 2008 and initially generated a large amount of interest. Pre-qualified candidates were invited to bid for acreage across 16 zones containing 45 blocks covering an area of 143,257 square kilometres. These zones were distributed throughout sedimentary basins across the country said to be offering high potential and containing many significant discoveries.

The number of bids submitted was low and only four awards have been made for the 16 zones on offer. The awards were made to European, UK and Russian companies and the areas awarded were all located in the Berkine and Gourara basins. In contrast to previous rounds, some of the areas on offer consisted of acreage which was not actually open but operated by Sonatrach. Two out of the four areas which were awarded, El Assel and Rhourde Yacoub, were areas where it was expected that there could be more interest in bidding.

Eni, active in Algeria since 1981, has been awarded the Kerzaz area. This is an area which is located in the Gourara basin and is in excess of 16,000 square kilometres in size. This award adds to Eni’s increasing presence across Algeria which has been further enhanced recently with the acquisition of First Calgary Petroleum Limited. BG Group, which first entered into Algeria in 2006, has been awarded the Guern El Guessa area.

This area is also located in the Gourara basin and is 12,166 square kilometres in size. This new area is situated just to the north of BG’s existing acreage of Hassi Ba Hamou which covers approximately 18,380 square kilometres. This has proved to be a gas rich area with the Hassi Ba Hamou gas discoveries. This award also illustrates BG’s growing position in the country. The companies awarded areas in the Berkine basin are both new entrants to Algeria, E.ON Ruhrgas and GazProm. E.ON has been awarded the Rhourde Yacoub area and GazProm has been awarded the El Assel area. These are both areas which are thought to have a high gas potential. E.ON Ruhrgas currently has gas production in Norway and UK and the expansion to Algeria has been reported as part of the companies’ strategy to secure gas and LNG supplies for the European markets.

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Map: Showing perimeter areas on offer (red shading) and awarded (blue shading) in the Seventh Licensing Round.  Source: PetroView^®

This is the first licensing round since April 2005 and it has been long-awaited in the industry. Algeria has a lot of potential and as a result there has been continued interest, particularly in the gas prone areas. There have been, however, a number of factors which have made this round unique and have raised speculation and created uncertainty about its potential success. This is the first licensing round to take place under the new hydrocarbon laws which give Sonatrach a minimum of 51% in every contract awarded to a foreign player.

It is also the first run by the regulatory authority, Alnaft. Alnaft was created as part of the 2005 act and was expected to have a more complex and revised selection procedure. The initial interest after the announcement of the licensing round was, however, very high. At pre-qualification stages over 70 international companies registered their interest to participate and many of these companies were pre-approved as operators. The pre-qualification process was stringent and required high levels of technical expertise and financial capabilities.  High levels of pre-qualification entrants showed that interest in Algeria’s potential has remained despite the changes. The fact that eventual participation was at such a low level with 11 of the 16 areas receiving no bids may be a further indication of the current economic climate rather than solely the impact of the new hydrocarbon laws and regulations. It is hoped that a further round may occur in 2010 with many of these areas re-offered.

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