Total group to invest up to $2 bln in Algeria field

Algerian state firm Sonatrach and a consortium led by Total (TOTF.PA) will invest between $1.5 and $2 billion in Algeria’s Ahnet gas permit by 2014, the North African country’s Energy Ministry said on Sunday.

 

The Ahnet contract area was the most promising acreage allocated in a licensing round late last year in which contracts were also awarded to a consortium led by Spain’s Repsol (REP.MC) and another consortium led by China’s CNOOC.

 

“We expect an investment of $1.5 billion to $2 billion in the development of the Ahnet project,” Algerian Energy Ministry official Djilali Takhrist said after a ceremony to sign the contracts. “This investment will run up to 2014,” he said.

 

He said combined investment in the other two permits — Repsol’s South-East Illizi concession and the Hassi Bir Rekaiz area won by CNOOC -would be over $150 million.

 

Sunday’s signing ceremony was held minutes after Algerian Energy and Mines Minister Chakib Khelil confirmed that Sonatrach boss Mohamed Meziane was under investigation and his duties had been taken over by an interim chief executive. Industry sources told Reuters last week Meziane and other senior Sonatrach executives were under investigation as part of a corruption inquiry. Neither Meziane nor the other executives have commented on the allegations.

 

Total was hopeful it could make the Ahnet permit into a “success story,” Christophe de Margerie, the company’s Chief Executive, said during the signing ceremony. “Ahnet contains a lot of reserves,” he said.

 

The Ahnet contract area lies in the desert of south-western Algeria and occupies an area of 17,358 sq km. Algeria’s Energy Ministry says discoveries to date on the permit indicate that it holds sizeable reserves of dry gas.

 

It is located next to the productive In Salah gas field operated by BP (BP.L) StatoilHydro (STL.OL) and Sonatrach.

 

Algerian energy officials say the geology in the Ahnet permit is challenging, with low rock permeability which makes it difficult to bring the gas to the surface.

 

Sonatrach — which will hold a majority stake in the concession — has committed to build a pipeline from Ahnet to the country’s main energy hub at Hassi Messaoud in time for first gas production, which is expected in 2014.

 

The licensing round in which Ahnet and the two other permits were awarded was a serious disappointment for Algeria’s energy sector. Seven other contract areas on offer in the round were not allocated because of lacklustre interest from foreign firms.

 

Officials blamed the global downturn, but industry executives said the terms on offer were too tough.

 

Some energy analysts have said the lack of new oil and gas projects in development could, in the long term, leave Algeria struggling to sustain planned increases in energy exports.

 

Algeria supplies about 20 percent of Europe’s gas needs and is also the world’s eighth-largest exporter of crude.