As the top producer and key exporter of natural gas to Europe from Africa, Algeria is a region of special interest to Gazprom. The company has a representative office in this North African country ensuring a permanent presence. In addition, Gazprom International, the corporation’s specialized enterprise for upstream projects abroad, has a branch office there.
Gazprom International operates a hydrocarbon exploration and development project at the El Assel block in the Berkine oil and gas basin. To date, four oil and gas fields have been discovered in the area, and they are being prepared for development.
El Assel block
The El Assel licence block is located in the eastern part of the Algerian territory of the Sahara Desert, 150 kilometers southeast of the city of Hassi Messaoud, the oil and gas capital of Algeria. The block consists of three parts (blocks 236b, 404a1 and 405b1) with an initial area of 3,250 square kilometers.
In December 2008, as a result of the first national and international tender for exploration and development of hydrocarbons carried out by ALNAFT, Algeria's National Agency for Valorisation of Hydrocarbon Resources, Gazprom International obtained the right to a contract for the El Assel block.
Originally, the contract for the El Assel block was signed with Sonatrach, Algeria's state oil and gas company. Following the tender, Sonatrach ceded 49% of the share of the project to Gazprom International that became the operator at the exploration stage. At that point, the previously discovered Zemlet Er Rekkeb field was added to the territory of the contract block.
The operator is accountable to ALNAFT for complying with the contract regarding its terms, and the types and volume of exploration works. At the same time it is working together with Sonatrach on the basis of Joint Operating Agreement. Within the framework of the project, the companies formed an association the supreme governing body of which is the Operating Committee composed of representatives of Sonatrach and Gazprom International. This body has the right to make decisions regarding the strategy of implementing the project as well as a wide range of other practical issues within its competence.
In January 2009, a supplementary agreement was signed formalizing the involvement of Gazprom International in the project for blocks 236b, 404a1 and 405b1 at the El Assel block. The agreement, valid until 2039, came into force in May 2009 following its ratification by a decree of the President of the People’s Democratic Republic of Algeria. Gazprom International acted as the operator with a 49% share at the geological exploration stage, while Sonatrach acted as the partner and co-investor with a 51% share.
Between 2009 and 2016, over the course of the three stages of geological exploration, Gazprom International completely fulfilled its contractual obligations to the Algerian side. During this period, 2D seismic works over 200 kilometers and 3D seismic works over 3,098 square kilometers were carried out. In addition, nine exploratory and appraisal wells (with a total of 41,400 meters drilled) were built at the El Assel block. As the result, four oil and gas fields were discovered and evaluated; the proven reserves of the fields are to be approved by the Algerian partners during the transition to the development stage.
In 2010, following the tests of Rhourde Sayah-2, the first exploratory well, a potentially commercial discovery was made at the Rhourde Sayah structure. In 2011, the ZERP-1 exploratory well was drilled in the southern part of El Assel, allowing for the evaluation of the deposits of the previously discovered Zemlet Er Rekkeb field. In 2012, the ZERN-1 exploratory well led to the discovery of Zemlet Er Rekkeb Nord, a new oil and gas deposit. In September 2014, the RSHN-1 exploratory well proved the existence of another deposit - the Rhourhe Sayah Nord field - in the northern part of the block.
In 2016, drilling and tests of RSH-3, the last exploratory well, were completed at the El Assel block. A 3D seismic survey over 350 square kilometers was carried out at the Rhourde Sayah Nord structure. In addition, evaluation reports on the discovered fields and development plans were prepared.
The next step in cooperation between Gazprom International and Sonatrach will be the alignment and adoption of plans for development of the fields discovered: Zemlet Er Rekkeb, Zemlet Er Rekkeb Nord, Rhourde Sayah and Rhourde Sayah Nord.
According to preliminary estimates, the production of both natural gas and liquid hydrocarbons in the area is viable. In accordance with the existing legislation of Algeria, liquid hydrocarbons are distributed between partners at the metering station in proportion to their shares in the project. Each participant of the project acquires ownership rights to their share of crude and may use it at their discretion upon paying the relevant taxes. In respect to gas, and taking into account its specifics as a commodity, the contract stipulates that either the procedure and terms of sale of gas by Gazprom International to the Algerian party must be agreed upon before the start of production or a joint distribution company must be established with Sonatrach.
Currently, the mechanism of open tenders for hydrocarbon blocks, which exists in Algeria, as well as a large-scale national program for geological exploration works and development of oil and gas infrastructure are of particular interest to the Gazprom Group in terms of business opportunities. At the same time, the national status of Gazprom and Sonatrach provides grounds for undertaking bilateral cooperation with regard to certain projects in Algeria. This would be in the form of intergovernmental agreements, which do not contradict the current oil and gas law.
Nevertheless, cooperation between the companies is not limited to operations within the republic. It may also include (in accordance with the propositions of the Algerian party) the possibility of carrying out joint operations in third countries. Sonatrach’s positions in Africa are of particular interest. This is a matter not only of boosting cooperation within the areas of geological exploration and production, but also about sharing assets, examining and undertaking out diagnostics of old fuel and energy complex facilities, staff training and retraining, optimizing exports through swap models (pipeline gas in exchange for LNG) in the global market, developing the fuel supply system within Algeria, and more. Both parties have shown interest in intensifying the cooperation.
In 2012, Abdelhamid Zerguine, then Sonatrach CEO, made the following statement during a meeting with a Gazprom International delegation: “Being the largest companies present in this region, Sonatrach and Gazprom not only do not compete; on the contrary, they interact successfully on the principles of mutually beneficial cooperation. This is our great advantage.”
Algeria has the second largest proven natural gas reserves (4.6 trillion cubic meters as at the beginning of 2016) in Africa after Nigeria (5.2 trillion cubic meters), with the bulk of hydrocarbon reserves concentrated in the central and eastern parts of the country. Algeria is the top producer of natural gas in Africa, leaving its competitors far behind. In 2015, the volume of natural gas produced in the country reached 83 billion cubic meters, over half of which was exported. The key consumers of both pipeline gas and LNG are still European countries, including Turkey, which account for up to 90% of exports.
In terms of proven oil reserves, Algeria ranks fourth in the region with 1.5 billion tonnes. It is third in terms of oil production, which reaches 68.5 million tonnes per year. Over two-thirds of the oil produced is exported, and more that 75% of it goes to European countries.
At the same time, the oil and gas potential of Algeria remains very promising. The bulk of the proven reserves is concentrated in the central and eastern parts of the country, while two-thirds of the territory still remain largely unexplored. It is worth noting that the cost of production of energy resources in Algeria is one of the lowest in the world.
Diplomatic relations between Algeria and the USSR were established in March 1962, four months before the country officially acquired independence in an eight-year-long war with the French colonizers. The USSR was the first state to establish diplomatic relations with the republic. At the end of 1963, an agreement on economical and technical cooperation was ratified by the countries. Pursuant to the agreement, the USSR undertook to assist in the recovery and development of Algeria’s industry, carry out geological exploration works and train specialists. With the active participation of the Soviet Union, four institutes were established and nearly 40 training centers were opened and expanded in the country.
For instance, in 1964, a Petroleum Institute with a technical college was opened in Boumerdes, and by the beginning of the 1970’s the city had become a regional center. Many Algerian students came to Soviet universities. At the same time, thousands of workers and engineers from our country made their contribution to shaping the basis of Algeria’s industry and developing such fields as energy, mining and metallurgical industries, mechanical engineering, water industry, etc. For example, in 1967, when Algeria decided to partially nationalize the oil and gas industry, specialists from the USSR were sent to work in the African country. This not only prevented a crisis in the sector, but also elaborated a global strategy for its development and the commencement of construction of a range of new major facilities. In 1968, an agreement was reached to send four prospecting parties to Algeria with all the necessary equipment to carry out geological exploration over a period of seven years and create a map of oil and gas resources.
Due to this interaction, by the beginning of the 1980’s, Algeria had become a dynamically developing industrial country. However, the powerful wave of the global oil crisis did not leave the USSR and Algeria unaffected. The situation was then aggravated by the collapse of the socialist bloc and the fall of the Soviet Union, leading to the destabilization of Algeria. All of this created a prolonged economic crisis and a freeze of cooperation between the two countries.
The possibility of reinvigorating relations between Russia and Algeria emerged in mid-2000’s. In 2001, a declaration on strategic partnership was signed by the countries, and in 2006, a memorandum of understanding, which envisaged developing cooperation in a wide range of areas, was signed by Gazprom and Sonatrach.
Over the last decade, Algeria has faced a fall in the production of hydrocarbons, which is connected with a reduction in the volume of exploration works and foreign investments, while oil and gas account for 97% of the country's export revenues. Due to this, the Algerian government has prepared a large-scale plan for increasing oil and natural gas production through existing fields and discovering new ones. In this way, Algeria plans to boost hydrocarbon production and exports significantly by 2019. In addition, by 2020 Sonatrach plans to make major investments in expanding its oil and gas transport infrastructure, thus increasing the capacity of the existing pipelines. This is linked with the government's plans to guarantee an increase in exports.
Algeria is a North African state located in the western part of the Mediterranean. It is the largest country in Africa. Algeria is bordered to the west by Morocco, to the southwest by Mauritania and Mali, to the southeast by Niger and to the east by Libya and Tunisia. The Sahara Desert occupies most (80%) of the country’s territory.
The southeastern part of the Algerian desert is where the Hoggar Mountains are located, with the country’s highest peak, Mount Tahat (2,906 meters). The northern part of the Algerian Sahara, where the Chott Melrhir salt lake is situated, lies 26 meters below sea level.
In the north of Algeria, the Tell Atlas and Saharan Atlas ranges run parallel to each other, divided by high plateaus and massifs traversed by deep gorges. 93% of the country’s population live within the narrow strip of the coastline and the foothills of Tell Atlas.
In addition to oil and gas, Algeria’s subsoil is rich in ferrous and non-ferrous metal ores, manganese, phosphorite and other minerals.
The vegetation of the Mediterranean coast region is comprised of hard-leaved evergreen trees and shrubs. In the Atlas Mountains, there are forests of cork and holm oak, Aleppo pine, juniper, thuja, Atlas cedar and other trees, which are mainly broad-leaved. Olives and pistachio are grown in areas up to 500 meters above sea level. The flora of Sahara is naturally fairly scant and is represented mainly by ephemeral plants and Salsola species. The fauna is also extremely scarce.
Algeria has a subtropical Mediterranean climate in the north and a tropical desert climate in Sahara. Winters are warm and rainy (12°С in January) on the coast and cool in the mountains, which can be covered with snow for 2-3 weeks. Summers are very hot and dry. All rivers are seasonal riverbeds (wadi) that become filled with water only during the rainy season. They are used for irrigation and water supply, so reservoirs and hydropower plants are built in certain zones. The Chelif River, 700 kilometers in length, is the longest in the country. Lake basins are also only filled with water during the rainy winter season. In the Sahara Desert, large oases can be found in areas of major groundwater reserves.
Algiers is the capital of Algeria. It is situated on the coast of the Mediterranean Sea in the area where in the 9th century B.C., the Phoenicians founded the port of Ikosim, later renamed Icosium by the Romans. In 935, the Berbers founded a city on the ruins of Icosium and named it Al-Jazair (which translates as “the islands” from Arabic) after the islands off the coast. Eventually, the name transformed into “Algiers” in the European languages.
Algiers, located on picturesque steep hills, extends for over 20km along the bay of Algiers. The city stretches out from the sea to the hazy mountains. Its streets run along the seaside, towering one over another. There are buildings in the capital which you can enter, then take an elevator to the 7th floor and exit right back into a street. The architects that worked in the city, including the famous Le Corbusier, used the local landscape masterfully.
There are many precipices and steep slopes that form patches of wilderness practically in the city center. Ruins of mossy medieval walls right next to ultramodern glass-and-concrete towers named Mauritania, Lafayette, Jolie, and cozy small houses with pointed roofs reminiscent of the traditions of the last century make the city truly unique.
According to the Algerian Constitution, the Head of State is the President, elected by the people for a five-year term. Since 2008, according to a constitutional amendment, the number of presidential terms is unlimited. Since 1999, Abdelaziz Bouteflika has been Algeria’s President.
Algeria is divided into 48 provinces (wilayah).
Algeria's population is estimated at 40 million. It is 99% Sunni Muslim. Ethnic groups: Arabs (83%), Berbers (16%), other (under 1%). Languages: Arabic (official), Berber. As a result of the colonial past, French is widely spoken across the country.