Despite low global prices and oversupply that have plagued the world’s oil markets this year, Algeria is on track to increase crude output by 5 percent in 2016, as well as provide new exploration rights to international firms by mid-Spring.
According to a Bloomberg report, the North African producer is intent on attracting foreign firms to its fields in the year ahead after a series of industry setbacks in recent years. The country’s state-backed producer Sonatrach is aiming to finally increase production after a series of challenges, chief among them a deep corruption scandal that help erode favor among needed international firms.
In recent years, this has meant that exploration auctions have underperformed and production has slowed. Combined with a deep decline in global pricing over the last year, this slowdown has created financial pressure on the North African nation.
Earlier this year, Algeria’s government moved to reduce spending by about 10 percent due to the loss of oil revenue due to a sustained decline in prices across the world.
For any oil producer, a sharp disruption in output or pricing would cause significant problems, but for Algeria, the product makes up about 60 percent of the country’s budget. In fact, the country’s steady revenue has not only allowed for growth and steadiness but also played a part in providing needed stability when many countries in the region have faced significant unrest in recent years through the support of a sprawling welfare system.
In the year ahead, Sonatrach will seek out potential interest for development rights to oil and gas fields, “including those with hard-to-reach tight deposits, Salah Mekmouche”. However, progress on this front will be dependent on a change in the global pricing situation.
“We hope that oil prices will rise by then as this will increase the interest of companies in the bidding round even more,” Salah Mekmouche, Sonatrach vice president of exploration and production told local media.
In addition to new company leadership, Sonatrach has moved to reduce costs and spending and “curtailed investment”, according to the report.