Interview: Amine Mazouzi
How would you assess the key investment programme strategies for the 2017-21 period?
AMINE MAZOUZI: Sonatrach is essentially an upstream oil and gas company. Indeed, the share of the upstream in the total investment of the company never falls below 70%. Most of our investments are dedicated to the renewal of our reserves base; as such, I would like to mention that we have recently recorded some breakthroughs with more than 32 discoveries in 2016 versus only 22 discoveries in 2015. Besides the renewal of oil and gas reserves, our investments are dedicated to the maintenance and upgrade of our production units, from the fields’ development to the liquefaction of gas, liquefied petroleum gas separation, refining and shipping. As a state-owned company Sonatrach is dedicated to fulfilling public service missions. Ensuring the energy security of the Algerian domestic market is one of the main missions of our company, and regarding this, I would like to highlight that our company is committed to developing three new refineries in the north of Algeria: a fuel hydrocracker in Skikda and two new naphtha reforming units. To date, the front-end engineering design (FEED) contracts of all these projects are signed, and we expect the commissioning of the first new refinery by 2020.
Despite the drop in global oil prices, Sonatrach is maintaining an ambitious investment programme of more than $70bn for the next five years in order to expand its reserves base locally and abroad, ensure the energy security of the Algerian market and maintain its reputation as a reliable primary hydrocarbons exporter. We expect to recourse to self-financing for this investment programme and to partnership equity only for petrochemical projects.
When will the refineries under development be completed, and what will be their impact?
MAZOUZI: Sonatrach initiated an ambitious programme for the revamping of three existing refineries in the north of the country, with a capacity increase from 2.5m to 3.75m tonnes per annum (tpa) at the Arzew refinery, an increase from 15m to 16.5m tpa at the Skikda refinery and an increase from 2.7m to 3.6m tpa at the Algiers refinery. The first effects of this programme are already visible, since we have already recorded a positive output difference of more than 1m tonnes of refined products in 2016 compared to 2015, with a reduction in imports of gasoline and diesel worth more than $710m, and an increase in the exports of other products such as naphtha and fuel oil.
Another development programme is being launched for the construction of three new refineries and three new conversion units that will raise the refining capacity from 30m to 45m tpa, and change the refining scheme from a simple hydroskimming refining system to a more complex refining system that includes deep conversion. This programme includes three new refineries with 15m tpa of total capacity, a fuel-cracking complex with a capacity of 4.5m tpa and two reforming units with a combined capacity of 3.4m tpa. The contract for the FEED studies of three new refineries at Tiaret, Hassi Messaoud and Biskra were signed in March 2016, while the FEED contract of the fuel hydrocracker and naphtha reforming units were awarded in December 2016. Starting in 2019-20 Sonatrach will recover its historic role as a gasoline and gas oil exporter.
What is the outlook for shale gas in Algeria?
MAZOUZI: Algeria holds the third place worldwide in terms of technically recoverable resources of shale gas with 707trn cu feet, according to a report from the US Energy Information Administration released in 2013. The assessment, made by Sonatrach in collaboration with specialised companies, shows that this figure could be higher, and we are confirming this. The potential of shale gas is huge, however, for the time being the development of shale resources is not on the agenda. Sonatrach is in the process of assessing this potential.