By Arezki Daoud – 21 March 2019: Echoing the positions of many of the foreign companies operating in Algeria, peaking with Exxon Mobil halting talks with Sonatrach on the American company’s involvement in a gas project, oil analyst Julian Lee wrote in Bloomberg that the political crisis in Algeria has made its future oil production “extremely uncertain.” Mr. Lee certainly says what international oil companies think quietly. The problem in Algeria has clearly been engineered by the presidency, as “Algeria’s fate was sealed by 82-year-old President Abdelaziz Bouteflika’s decision in February to seek a fifth term in office…” The public reaction was instantaneous in rejecting the presidential decision, throwing Algeria into the kind of uncertainty that no investor wants to deal with.
Mr. Lee pointed out to the obvious problems of industrial action that could cripple the Algerian oil sector. He noted the demonstrations that have already affected the operations of the ports of Arzew and Bejaia, Algeria’s most important ports for oil export. He also warned that any involvement of the military in repressing the protesters could have significant security implications for the country’s oil facilities. Indeed MEA Risk’s documentation and tracking of arms’ caches found in the Sahara region over the past months shows that there is still a significant risk from insurgent groups in their efforts to inflict damage to the country’s Saharan oil facilities. Although most arms’ caches are found near the border with Mali, it is conceivable that such weapons could be used within the broader region, while no one wants a repeat of the kind of terror attack against In Amenas in January 2013. Judging by the recent increase in the visits to regional military bases and outposts by defense chief General Gaid Salah, and several of his pronouncements on the issue, the military has been signaling that it is focusing on protecting the country, leaving politics to civilians.
For Algeria, Exxon’s temporary freeze of talks with Sonatrach on gas production is bad news. This is because according to Julian Lee, Algerian oil is not so indispensable. Lee said:
“…any loss of Algerian oil shipments might be more easily replaced with light, sweet U.S. cargoes than has been the case for the heavier grades lost from Venezuela and Iran.”
If Algeria sleeps at the wheel and the regime insists on deepening the crisis, there will not be any shortage of suppliers to replace Algerian oil. The country has already seen its petroleum export momentum drop considerably. MEA Risk LLC reports that in January this year, hydrocarbon exports, which accounted for more than 90% of Algerian sales abroad fell by a massive 40% year over year, to settle at a mere $2.14 billion. Algeria becoming a member of the “Shaky Six,” [Angola, Iran, Libya, Nigeria and Venezuela] remains a critical question that the Bouteflika clan will have to answer.
