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Algeria to increase investment in its oil and gas sector by $2.6 bn in 2022

posted onSeptember 14, 2021
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Algeria's government is aiming for $2.6 billion increase in energy investment next year, Reuters reported on  Monday (Sept. 13) citing the OPEC member country's Prime Minister Ayman Benabderrahmane.

The proposal would bring the total investment in the country’s oil and gas sector to $10billion in 2022, up from $7.4 billion this year, aiming to increase output to 195.9 million tonnes of oil equivalent from 187 million tonnes of oil equivalent, the news agency quoted Benaberrahmane as saying to parliament.

In July 2021, Benabderrahmane, 60, replaced Abdelaziz Djerad , who had held the post since late 2019. Early parliamentary elections were held on June 12, 2021. 

In 2020, the North African nation of 44 million slashed by 50% planned investment spending in oil and gas to $7 billion in order to deal with the financial pressure caused by a drop in crude oil prices in international markets due to Covid-19.

The new action plan includes reforms to improve the investment climate mainly in the non-energy sector to help to reduce Algeria’s reliance on oil and gas which represent around 90% of the country's total exports and 60% of the state budget . 

Algeria is Africa's third-biggest oil producer and among the world's top producers of natural gas. The oil wealth subsidises fuel, water, housing, medicine and basic goods but the Algerian government’s dependence on crude oil for economic growth increases its vulnerability to crude oil price volatility. 

The government plan also included a commitment to keep the government’s subsidy policy unchanged to avoid ongoing social discontent.

Earlier this year, Reuters reported that Italy’s Eni was in talks with British oil major BP to buy the latter's Algeria assets. With the acquisition of BP’s assets, Eni,  the biggest foreign oil and gas producer in Africa with strategic interests in Libya and Egypt, expects to transform Algeria into a hub. The sale would allow BP to refocus its businesses by reducing rising debt while tackling declining margins and climate pressures.

In Algeria, the largest country in both Africa and the Arab world with a total landmass of 919,600 square miles, international firms earn fixed royalties for their oil and gas assets, based on production sharing agreements (PSAs), making them less profitable and difficult to sell. 

The North African nation’s exports of crude and liquefied natural gas each declined around 30% in 2020, according to Bloomberg ship-tracking data.  

This year, the country anticipates earnings of $33 billion from energy export, up from $20 billion in 2020 as global oil prices rebound. 

Algeria's forex reserves amounted to $42 billion in February 2020, plummetting from $194 billion in 2014. 

Unemployment stands at more than 12% according to World Bank figures. 

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