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BMI View: Algeria's short-term oil production will be supported by increased
focus on conventional assets, but in the absence of deeper, market-oriented
reforms foreign participation will remain low, limiting the oil output over the
long-term. Our outlook for the gas sector is also bearish, mostly due to slow
progress in gas pricing reforms, which will curb upstream investment and lead to
production declines toward the second half of our forecast period. More
generally, the Algerian market oil and gas market will continue to suffer from
unattractive fiscal and regulatory regime, ongoing security concerns, and the
Latest Updates And Key Forecasts
-Algeria's oil and gas reserves will continue to decline during 2016-2020. Oil
reserves are forecast to contract by 33.7% to 8.0bn bbl in 2025, while gas
reserves will see a reduction of 19.5%, falling to 3.6tcm over the same period.
The country will shift the exploration focus away from shale and other frontier
plays towards improving recovery from producing assets.
-Sonetrach announced that Algeria's oil production is entering a new phase of
growth. In 2016, the company expects to increase its gas production to 69mn
tonnes, up from 67mn tonnes a year earlier. We hold our forecast that Algeria's
oil production will increase marginally in 2016 and 2017, before declining at an
average annual rate of 1.2% during 2018-2025.
-Algeria will continue to lag its regional peers in terms of gas pricing
reforms. Reforms will be insufficient to draw significant new foreign investment
into the upstream gas sector over the coming years, contributing to secular
decline in domestic output.
-We hold our view that Algeria's refining capacity will remain stable at
650,800b/d until 2025. While the country's NOC is planning significant upgrades
to the country's refining sector, we have kept the new capacity out of our
forecast due to lack of details and progress in the new projects.