A new vision for Algeria

A new vision for Algeria

Alessandro Scipione
Share
The north African country is aiming to expand and improve crude oil refining infrastructure and boost exports in order to tackle the oil price crisis that is negatively affecting its economy
The #Algerian government wants to bring the country's electrification rate to over 97%, thus reaching even the remotest regions

Algeria’s new government, led by Prime Minister Abdelmadjid Tebboune, a trusted man of the National Liberation Front (NLF), the party that has held power almost uninterruptedly since the country’s independence in 1962, presented to the National Assembly, the lower parliamentary chamber, an ambitious plan of action to respond to the fall in oil prices on the international markets, a resource on which a major part of the Organization of Petroleum Exporting Country (OPEC) member’s economy depends. On the one hand, the Algerian authorities intend to consolidate the base of hydrocarbon reserves through new explorations and licenses (including offshore) and, on the other hand, increase the level of output and development of refining and petrochemical industry capacities. The primary cumulative production target for the period 2017-2021 is approximately one billion tons of oil equivalents, with an average annual rate of growth of 3.7 percent, higher than the 132.2 billion cubic meters of gas recorded in 2016 and the 128 billion cubic meters recorded in 2015.

New investments in the refining system

The Algerian government’s "new vision" envisages a 35 percent increase in the output of refined products, through two new refineries in the east and west of the country – in the departments of Hassi Messaoud and Tiaret, respectively, 850 kilometers south-east and 150 kilometers south-west of the capital, Algiers – each with a capacity of five million tons of oil equivalents per year; the modernization of two other refineries in the coastal region of Skikda, 350 kilometers east of the capital; a new catalytic cracking unit (a system for producing fuel at a high number of octanes) at four million tons per year and two catalytic reforming systems (a process used to increase the number of octanes for hydrocarbon mixtures).

Algerian authorities intend to consolidate the base of hydrocarbon reserves through new explorations and licenses (including offshore) and, on the other hand, increase the level of output and development of refining and petrochemical industry capacities

Boost in electricity production

Also important is the electricity sector, with an increased installed capacity of 10.6 percent: from 18,981 megawatts in 2016 to 31,404 megawatts estimated for the end of 2021. The government also plans to improve the electricity and gas distribution network, the Achilles heel of the current Algerian system, to meet the population’s growing energy demand: 40 million people with an average age of less than 30 years. The government intends to increase the country’s electrification rate to over 97 percent, so as to reach citizens in the country’s most remote regions. Yet this is not all: on May 31, the country opened a new 536-kilometre long gas pipeline, with a transport capacity of 12 billion cubic meters per year, with an estimated value of approximately $586.9 million. The pipeline, known as “GR6”, connects the towns of Rhourd Ennous (in the southeastern province of Illizi) and Hassi R'Mel (in the central province of Laghouat, 400 kilometers south of Algiers).

Positive consequences on the trade deficit

This strategy is already beginning to give results. Trade deficit fell by 54.4 percent in the first five months of 2017, compared with the same period in 2016, due to the simultaneous increase in hydrocarbon exports and the reduction in imports of a wide range of industrial products, including cars. Italy ranked third among the Algerian market’s main exporters, with a flow of €1.382 billion, down 32.95 percent compared with the same period last year. In first place is China, with an export of $3.925 billion, up 10.44 percent compared with the period January-May 2016; it is followed by France with $1.673 billion (-27 percent). Italy is at the top of the list of Algeria’s main customers, with a sum of $2.602 billion in the first five months of 2017, up 17.1 percent compared with the same period of 2016, due to a greater importation of gas. In second place is Spain, with an import of $1.854 billion (+13.2 percent), followed by France with $1.836 billion (up 28.3 percent). According to the Algerian newspaper “Echourouk”, in the first three months of 2017 Algerian exports to Italy replaced those of Russia, for the first time in many years. From Algeria, in the period under review, 2.19 billion cubic meters of gas were transported, compared with 1.55 billion cubic meters imported from Russia. Russian gas supplies imported by Italy declined by 8.7 percent in the first quarter of 2017. Algerian gas exports to Italy, in the first three months of this year, recorded an increase of 93.7 percent, compared with the same period in 2016.

Italy ranked third among the Algerian market's main exporters, with a flow of €1.382 billion, down 32.95 percent compared with the same period last year. In first place is China, with an export of $3.925 billion, up 10.44%

An increasingly closer energy relationship with Italy

According to quarterly data released by Snam in its report published on May 4, 2017, the entry point of Mazara del Vallo, where the Transmed gas pipeline transports Algerian gas into the Italian network via Tunisia and the Mediterranean Sea, recorded an increase of 3.07 billion cubic meters, an increase of over 90 percent compared with the same period in 2016. As regards the volumes entered at the entry point of Tarvisio, the point of arrival of the TAG gas pipeline that imports Russian gas, a reduction of 640 million cubic meters was recorded, approximately 8.7 percent less compared with the same period in 2016.