Germany’s Wintershall Dea — already active in Algeria’s upstream — has become the latest international producer to sign a memorandum of understanding with state-owned Sonatrach to allow for talks on new joint upstream opportunities.
The MOU covers potential for exploration and production cooperation both in Algeria and abroad, Sonatrach said in a statement Aug. 17.
Wintershall Dea holds a stake in the major Reggane Nord gas project that started up in 2017.
“Wintershall Dea is well established in Algeria through our participation in the Reggane Nord project,” Wintershall Dea Chief Operating Officer Dawn Summers said in a separate statement.
“In 2020 we are evaluating a potential increase of activities in the country, and this MOU is an important step forward,” Summers said.
The German company said the MOU had a term of two years, effective from July 1, 2020.
“It will provide a framework for Wintershall Dea to identify and potentially access additional business opportunities in the country,” it said.
Algeria has vowed to increase exploration together with international partners following the implementation of a new hydrocarbon law in January, which offers potential investors a more favorable tax regime.
Sonatrach has already signed a number of MOUs in recent months with upstream companies such as Chevron, ExxonMobil, Italy’s Eni, Spain’s Cepsa, Austria’s OMV, Turkey’s TPAO, and Russia’s Lukoil and Zarubezhneft, which allow for talks on opportunities in the Algerian upstream.
Sonatrach has said the MOUs confirm the “renewed dynamism” in Algeria’s upstream sector against the background of the more attractive terms introduced by the new hydrocarbon law.
It has also held talks with other big names in the international upstream including ConocoPhillips, Norway’s Equinor and Russia’s Gazprom Neft as it looks to woo foreign companies back to the country in a bid to revive its flagging oil and gas sector.
Algeria’s new energy minister, Abdelmadjid Attar, who took office in June, has warned that stagnating gas production, rising domestic demand and a lack of upstream investment means gas exports could be significantly curtailed later in the decade.
According to local media, Attar last week said gas exports could drop to as low as 26 Bcm/year over 2025-30, around half the level of exports in 2018.
Algeria’s crude production has also been declining after years of underinvestment, from a peak of 1.4 million b/d in 2008 to around 1 million b/d in early 2020.
That was before OPEC and its allies imposed production quotas due to the coronavirus-related oil-market collapse, with Algeria set to hold output at 864,000 b/d through the end of the year.
Algeria is banking on its revamped hydrocarbons law to revive the sector once the pandemic subsides.
It hopes to win more international interest in its upstream through both bilateral talks and future licensing rounds, the head of energy regulator Alnaft told S&P Global Platts in an interview in May.
Noureddine Daoudi said under the country’s new hydrocarbon law there was considerably more flexibility around how new upstream opportunities could be offered to existing or new partners.
“It allows us to launch calls for tenders to promote potential E&P assets, while direct consultation is also another possibility enabling partnerships in exploration and field development,” Daoudi said.
Algerian government officials have said the new legislation marks a return to provisions in the 1986 hydrocarbons law, which led to significant discoveries in the 1990s, before changes to the regulations in the mid-2000s caused investment to tail off.