Seventh Bid Round draws poor response - Algeria

This article is extracted from International Oil Letter, Vol 24 issue 52, published 22 December 2008.

ALNAFT, the Algerian National Agency for the Valorisation of Hydrocarbons Resources, has awarded four licenses during the bid opening ceremony of the Seventh Bidding Round (BR-7), two in the Timimoun Basin and two in the Berkine Basin.  IHS understands that one of the reasons for the poor turnout was the requirement for the winning companies to block millions in US dollars in Algerian accounts until work commenced in the awarded blocks, with the financial constraints resulting from the current economic turmoil.

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The official Algerian line on the cause of the failure of this round is that it was hit by the deteriorating market price of hydrocarbons and the deep economic crisis currently engulfing the world.  While lower oil prices certainly have exposed the unattractiveness of Algeria's E&P license terms, it is also true that international oil companies still have strong balance sheets.  While they have generally started looking at cutting project costs, they are also driven by the need to replace reserves and will thus seek out new exploration opportunities.  Algeria is one of the few Middle East-North African (MENA)-region countries allowing foreign investment in its upstream sector and should always be in a good position to attract investment into its oil and gas industry, but at the right terms.  It is very significant that of the six largest investors and acreage holders in Algeria (Anadarko, BP, Total, Hess, Repsol-YPF, and StatoilHydro) none submitted bids even though all were prequalified.

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