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Algeria's Sonatrach points to 'encouraging' shale gas tests, eyes more JVs

Highlights

Two pilot projects underway to assess shale gas potential: CEO

Upgraded estimates point to 9,800 Tcf of shale gas in place

Sonatrach invites partners for 'high-risk, high-return' work

Malabo — Algeria's state-owned Sonatrach is carrying out two pilot projects to assess the commercial viability of its vast shale gas resources, and the results to date have been "very encouraging," the company's new CEO Kamel Eddine Chikhi said.

Speaking late Wednesday at the summit of the Gas Exporting Countries Forum (GECF) in Malabo, Equatorial Guinea, Chikhi also invited companies to join Sonatrach in its efforts to make new discoveries in frontier plays, including its unexplored offshore.

According to a recent upgrade to its shale gas estimates by regulator Alnaft, Algeria has 9,800 Tcf (277 Tcm) of shale gas-in-place, up from a previous estimate of around 6,000 Tcf -- which was translated into technically recoverable reserves of some 707 Tcf.

"We engaged two pilot projects in order to assess the deliverability of the sites and we are now evaluating the results," Chikhi -- who was only named Sonatrach chief 10 days ago -- said.

"The results showed that the flow we recorded over more than one year is very encouraging, and better than many of the wells drilled in other parts of the world, particularly in the US," he said.

"This is very encouraging -- we are analyzing and continuing our work on that."

Algeria's efforts to date to develop its vast shale gas resources have been hampered by local protests and the fall in oil and gas prices, but Sonatrach wants to seize the initiative again.

JV CREATION

Part of its plans is to bring in foreign companies to create joint ventures to explore not just its shale sites, but also its underexplored areas in southwestern Algeria and offshore.

To date, only three wells have been drilled off Algeria's Mediterranean coast.

"We are confident we can get more partners under our partnership framework in the country," Chikhi said, adding that the recent approval of Algeria's new hydrocarbon law would make investment more economical for international players.

"Here I am sending a message," Chikhi said. "We want partners in frontier areas -- this may be high-risk, but high-return."

In the offshore, Chikhi said Sonatrach had already mapped areas of interest and there are prospects that could be "readied for drilling."

"There are opportunities for E&P growth -- in unconventionals and frontier areas," he said. "We are open to discuss acquisitions in the framework of business development and invite our partners to join us."

Sonatrach has held talks in recent weeks with US majors Chevron and ExxonMobil, while Italy's Eni has an agreement with Sonatrach for offshore work.

DISCOVERY RATE

Chikhi said that over the past 10 years, 270 oil and gas discoveries have been made in Algeria, "which is huge number."

"Maybe not all of them are economic, but the discoveries are there," he said.

In Algeria's 2018-2022 mid-term plan, 85 exploration and appraisal wells should be drilled each year, but Chikhi said much of the work is left to Sonatrach itself.

"I don't see so many companies coming to assess resources," he said.

Chikhi again called on international companies to consider Algeria, pointing to the country's well-established export infrastructure.

"What makes Algeria most promising is its export network," he said, highlighting its three gas pipelines to southern Europe from Hassi R'Mel -- one to Italy and two to Spain -- and its LNG plants.

Algeria's current LNG export capacity is more than 30 Bcm/year, while pipelines are able to transport more than 50 Bcm/year. Both its LNG terminals and pipelines are underutilized at present.

Algeria shipped some 14 Bcm of LNG last year, mostly to European markets, while its pipelines supplied some 33 Bcm of gas.

-- Stuart Elliott, Stuart.Elliott@spglobal.com

-- Edited by James Burgess, james.burgess@spglobal.com