Wars, Coups, Whatever. Nothing Stops Europe’s No. 3 Gas Supplier

ALGIERS (Capital Markets in Africa) – Arab Spring-style protests have rocked Europe’s third-biggest natural gas supplier. Thousands of young Algerians have taken to the streets, fed up with an octogenarian president who’s been in power for 20 years and a weak economy that doesn’t generate enough jobs. While the rare public display of dissatisfaction has sparked a political crisis in the authoritarian state, the country’s energy exports haven’t been disrupted.

What’s going on in Algeria?
Protesters say their 82-year-old President Abdelaziz Bouteflika should not seek a fifth term in the April elections. Bouteflika, who had a stroke in 2013 and is rarely seen in public, quelled smaller protests when he ran in 2014, using a mixture of water cannons and enhancements to subsidies and salaries. Handouts would be more painful this time for Africa’s biggest oil and gas producer because its economy is still struggling to cope with four years of lower crude prices. Inflation is rising and the country’s reserves are projected to plummet to $67 billion this year from $177 billion in 2014, according to the International Monetary Fund.

Will oil and gas exports be affected?
It’s unlikely. “With the vast majority of oil and gas facilities located in remote areas far from urban centers and very scarcely populated, the risk of disruption is low,” according to Riccardo Fabiani, an analyst with research consultants Energy Aspects. Algeria is one of OPEC’s smaller producers, pumping about a million barrels of crude a day. It plans to boost natural gas output, which it exports by ship and via pipelines to Italy and Spain.

What does history tell us about Algeria?
A decade-long civil war that that erupted after the military canceled an Islamist electoral victory in 1991 was brutal on civilians, but didn’t hinder the energy industry. Foreign companies including BP Plc, Total SA and Repsol SA continued to invest in projects, and the $2.3 billion pipeline to Spain was completed in 1996. Even so, the country is no stranger to security risks. In 2013, Islamist militants linked to al-Qaeda killed 40 workers at the In Amenas gas plant, which is operated by Statoil ASA, BP and Algeria’s state-owned Sonatrach.

What’s the impact on energy projects?
Algeria plans to develop onshore and offshore gas fields, start a trading business, revamp and build refineries and boost output of petrochemicals. This expansion hinges on a stable political leadership and a new set of laws that can attract foreign investors. Algeria’s energy industry has cycled through five ministers and six Sonatrach chief executives since 2010. The current upheaval increases the risk of “paralysis in the oil and gas sector and a series of reshuffles aimed at placating protesters,” Fabiani said. “That could undermine those officials that have been trying to restructure the sector.”

Source: Bloomberg Business News