Oil revenues down, Algeria shifts strategy to woo energy investors

After a heavy fall in oil prices, Algeria’s Sonatrach is shifting strategy to attract investors and increase output, a source at the state energy company said.

the company is offering foreign firms direct negotiations to buy stakes in 20 oil and gas fields.

The campaign to bring in energy investment comes at a crucial time for the North African OPEC (Oil Producing and Exporting Countries) producer as it tackles lower revenues and stagnating production.

#Algeria's #SONATRACH says it will offer foreign firms direct negotiations to buy into 20 oil & gas fields https://t.co/QFgBKM5ZTu #Algerie

— Imad Mesdoua (@ImadMesdoua) March 22, 2016

Algeria, a key gas supplier to Europe, is also in talks with European Union officials on holding a summit in Algiers in May to discuss energy investment opportunities in Algeria as EU leaders look to diversify from Russian gas.

The switch to bilateral deals follows two energy bidding tenders that failed to attract much interest. A bid scheduled for last year was canceled because of low crude prices.

“Direct negotiations are a more efficient, less expensive, a faster, and a less bureaucratic approach,” the Sonatrach source said of the talks. “Sonatrach is already in negotiations with ENI and several other foreign firms.”

The source did not give details of the other firms and ENI declined to comment. The stakes being sold are expected to leave Sonatrach the majority holder as Algerian law dictates.

The 20 fields, which the source said Sonatrach took over from state hydrocarbons agency ALNAFT in September as part of the streamlining process, include oil and gas fields across the center and south of the country in places such as Ouargla and Adrar provinces, and Illizi near the Libyan border.

As part of the campaign, Sonatrach chief Amine Mazouzi will travel to China at the end of the month for meetings with Chinese oil companies SINOPEC and CNPC, which are already operating in Algeria.

Algeria’s energy potential is not in doubt, but oil executives say tough terms on production-sharing contracts, bureaucracy and other problems, such as customs delays and archaic banking systems, make the country a less attractive prospect.

Reuters