Sonatrach Says Dwindling Oil Prices Won’t Deter Investments

Algeria will press ahead with its $90 billion investment plan in the country’s oil and gas industry even with crude prices trading near five-year lows, the head of the hydrocarbons company Sonatrach, Said Sahnoun said.

Sonatrach will invest $22 billion in natural-gas field development as part of the $90 billion program for 2015-2019, Said Sahnoun, the company’s interim chief executive officer, said at the North Africa Oil & Gas Summit conference held Sunday in Algiers.

Oil prices have declined about 40 percent from a June peak amid overproduction and slower demand growth. Brent crude ended last week at $69.07 a barrel.

“The plan will not be affected,” Sahnoun told reporters. “It has been designed with a price of $70 a barrel.”

Sonatrach will invest $400 million to develop shale gas in a venture with another company, he said, without identifying the partner. The project is to start next year and begin producing gas in 2017, he said.

The Organization of Petroleum Exporting Countries decided on Nov. 27 to maintain its production target, prompting a deeper price slump. Algeria is OPEC’s ninth-largest producer with a daily output of 1.1 million barrels a day.

Sonatrach in July announced plans to increase oil and gas output to 225 million tons of oil equivalent in 2018, from 195 million tons of oil equivalent last year.

Algeria’s crude output has been declining from a record 1.4 million barrels a day in 2007 as security concerns and delays to the auction of oil rights hampered projects to bring more crude on stream.

Sonatrach plans to intensify exploration by drilling 125 wells a year with a target of increasing production to 225 million tonnes of oil equivalent by 2019.

Mr Said Sahnoun affirmed that the company would invest about $80 billion between next year and 2019 to boost production and does not expect lower oil prices to affect spending plans.

 “I remain optimistic about our energy output for the coming years, and we are ready to work with all of our partners,” he argued.

 Algeria supplies about a fifth of Europe’s gas needs but relies on mature fields for most of its energy output and looks to foreign explorers to help to develop new reserves and increase flagging production.

 Last year, Sonatrach’s  total production was at 192 million tonnes of oil equivalent, including 121 million tonnes from natural gas, 54.5 million tonnes from crude oil and 9.5 million tonnes from condensate.

The Sonatrach CEO did not give any detail on proposals Algeria will make to improve terms, such as changes to the hydrocarbons law, to draw in foreign companies after the last energy bidding round failed to attract many investors.

Only four of 31 areas on offer were taken by foreign consortiums that included Spain’s Repsol, Royal Dutch Shell and Norway’s Statoil.