Algeria to boost 2016 oil output, offer rights amid global glut

ALGIERS (Bloomberg) -- Algeria’s state oil producer Sonatrach Group plans to raise crude output by 5% next year and offer energy-exploration rights to foreign companies by the end of March, steps that may add barrels to an oversupplied global market.

Algeria, Africa’s biggest natural-gas producer, is seeking to attract international companies to an auction of rights to develop oil and gas fields, including those with hard-to-reach tight deposits, Salah Mekmouche, Sonatrach V.P. of E&P, said in an interview in Algiers. State petroleum regulator Alnaft will organize the bidding round, taking into consideration feedback from foreign companies to improve on the results of the country’s last auction in 2014, he said.

“We hope that oil prices will rise by then as this will increase the interest of companies in the bidding round even more,” Mekmouche said.

Sonatrach has struggled to raise production in the aftermath of a corruption probe at the company and an al-Qaeda terrorist attack in 2013 at In Amenas, a gas field that the state company operates with BP Plc and Statoil ASA. Algeria’s oil output has remained at about 1.1 MMbpd for the last two years. Brent crude has tumbled 35% in 2015 amid a worldwide supply glut and was trading at $37.27/bbl in London at 7:37 a.m. local time.

Company Restructured

“We will end the year 2015 with about the same level of output as last year,” Mekmouche said. “For 2016, we expect an increase in production by at least 5% compared with 2015,” he said, declining to give figures. 

Algeria’s production rose 4.4% in 2014 to 200 million metric tons of oil equivalent, the state news agency APS reported in February, citing energy ministry data. Royal Dutch Shell Plc and Repsol SA won licenses in a September 2014 energy auction that awarded rights to only 4 of 31 offered areas. Algeria pumped 1.1 MMbopd in November, ranking ninth for output among members of the Organization of Petroleum Exporting Countries, data compiled by Bloomberg show.

Sonatrach has reduced costs and spending and curtailed investment as a result of lower oil prices, Mekmouche said. The company has restructured since Amine Mazouzi became CEO in May and delegated greater decision-making powers to its managers, he said.

Sonatrach’s top three priorities are exploring for oil and gas in areas near existing production facilities, raising output through the use of new technology and overcoming delays to deliver projects on time, Mekmouche said. The company’s upstream unit has changed its name to Exploration & Production and will be in charge of dealing with international companies, he said.