Interview : Claudio Descalzi
How would you assess the potential of the upstream segment in the medium term?
CLAUDIO DESCALZI: Algeria still has a great upstream potential. Gas production is proving to be vital as many resources in the south-west basins are being developed and will be producing over the next few years. I also believe that Algeria has much to benefit from re-examining well-known producing plays using newer exploration technologies. This could also open up new plays that were previously overlooked, as we have seen with the Algerian offshore segment.
What are the main strengths and weaknesses of the Algerian energy sector?
DESCALZI: Algeria’s energy sector can boast many positive factors. First, it is a well-established industry, with an extensive and reliable infrastructure network and a variety of export routes. Second, from the point of view of an international company, Algeria is a reliable partner; Sonatrach is widely recognised as one of the best national oil companies in the world in terms of human resources and industrial knowledge. Lastly, Algeria has proved to be a remarkably stable country, despite being in a region dominated by political tensions, which has significant benefits for the energy sector.
The country’s main challenges are related to the natural decline in the quantity of hydrocarbon reserves. Algeria needs to stabilise its long-term production while striking a delicate balance between sustaining its exports and meeting a growing domestic demand for energy, as well as investing in the development of new infrastructure.
Which particular areas have the most potential for further investment?
DESCALZI: I think the upstream sector still has potential and I believe it will remain a strong engine for investments. Another strategic sector is renewables; Algeria has plenty of solar energy and this potential has yet to be harnessed. Rather than being a threat to the oil and gas industries, renewables can work in synergy, helping to reduce the gas demand of the domestic power sector while diversifying and decarbonising the energy base of the economy. The downstream oil sector can offer good reasons to invest as well. As Algeria develops its economy, it will need to meet growing demand for oil products and plastics. However, international companies need to look beyond their core markets, which are often struggling with a decline in demand.
How can international companies support the modernisation of Algeria’s energy sector?
DESCALZI: Eni has been in Algeria for almost 40 years, and since 1981 we have built a healthy relationship with Sonatrach and local stakeholders. This does not happen by coincidence, but instead is made possible through a proficient collaboration in many areas, going beyond a purely industrial relationship.
In this regard, international oil companies can contribute a lot, bringing to the country modern exploration and drilling technologies, as well as improving standards and processes. For example, Eni has committed to decarbonisation and aims to achieve zero gas flaring by 2025. We welcome any enhancement on the regulatory framework that favours companies working towards similar goals.
What could be done to improve the sector’s attractiveness to foreign investors?
DESCALZI: Investments in the energy sector are made under predictable and certain terms. There has been an ongoing debate over the reform of the petroleum law, which is expected to be finalised in 2019. Having a final and stable legal framework in place should help to encourage foreign investment in Algerian energy in the medium to long term.