Algeria Clearing the Decks for International Shale Gas Development Projects

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Algeria's state-owned energy company, Sonatrach, estimates that the country's shale gas reserves could be as high as 2 trillion cubic meters. This estimate is based on tests conducted on 180,000 square kilometers in three provinces. The U.S. Energy Information Agency (IEA) estimates that Algeria's conventional natural gas reserves are 4.5 trillion cubic meters.

Exploratory drilling for shale gas is already under way and has produced some positive results and hopes for further discoveries, according to Global Arab Network (GAN). In 2011, Irish oil and gas company, Petroceltic International (OTC: PTIFF) (Dublin, Ireland) successfully employed hydraulic fracturing ("fracking") on its Ain Tsila field in southeastern Algeria. The operation boosted flow rates at the AT-7 well to 4.9 million standard cubic feet per day and more than doubled the pre-fracture flow rate at the AT-8 well from 15.4 million to 38.6 million standard cubic feet per day.

Also in 2011, Sonatrach signed international agreements with Talisman Energy Incorporated (NYSE:TLM) (Calgary, Alberta) and Eni SpA (NYSE:E) (Rome, Italy) to explore its non-conventional resources. Based on prior assessments, Eni confirmed the potential for shale gas reserves in Algeria, saying the partnership would assess the technical; and commercial feasibility of their development.

Sonatrach also announced this year that after entering into discussions with Royal Dutch Shell plc (NYSE: RDS) (The Hague, Netherlands) and ExxonMobil (NYSE:XOM) (Irving, Texas), it was moving on partnership agreements with both companies for shale gas development.

While the development of shale gas resources in Algeria will require considerable investment and additional technological capacity, it will also create plenty of opportunities for foreign oil companies to engage in joint ventures if the volume of reserves proves to match Sonatrach's initial estimates, reports GAN.

The government's move to amend its legislation is a sign it plans to make the most of the new opportunities in non-conventional resources as it seeks out ways of driving the hydrocarbons industry in the medium-term.

The new legal framework will provide incentives for the exploration of non-conventional resourced that go beyond those offered for conventional oil and gas.

The 2005 National Hydrocarbons Code restricted foreign investment in energy exploration and extraction projects, and this caused a slowdown in foreign investment and projects. The state has now recognized that the participation of foreign countries is critical if Algeria is to develop the technology needed to grow the industry and cultivate a capable workforce. The state also has decided to revise the Hydrocarbons Code.

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