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Algeria’s national oil company has finally unveiled its 2030 strategy, better known as “SH2030”, which sets ambitious target to be achieved by 2030. It seeks to become the fifth largest national oil company (NOC) in the world by 2030, according to the company’s CEO Abdelmoumen Ould Kaddour.
“By 2030, we aim to become the fifth largest NOC in the world, combining our oil and gas reserves, production, refining capacity as well as the commercialized volumes of our different products,” Ould Kaddour said while making the announcement.
The new strategy includes 30 initiatives that revolve around three main pillars. Improving the company’s efficiency through the deployment of innovative technology is one of the key aspects of the new strategy, especially as the company is lagging behind in term of using latest technology in its fields, which resulted in a lower recovery rate. Sonatrach has a recovery factor of less than 20%, compared to 34% in Egypt.
In terms of exploration, Algeria is underexplored, with less than 20 wells per 10,000 sq km. The company plans to drill 80 wells annually and conduct seismic surveys to generate prospects. Sonatrach hopes for 8,500 km per year of 2-D and more than 20,000 km per year of 3-D seismic surveys by 2022.
The new strategy also aims to tap unconventional reserves and renewable resources, and also to tap the development of offshore areas in the Mediterranean. The strategy aims to produce 20 Bcm from unconventional reserves by 2030 to reach 70 Bcm by 2040.
Added to that, SH2030 seeks to increase gas sale volumes destined to export by 50%, according to SH2030 data published.
But the company has gloomy track record in its achieving its previous objectives and there are unrealistic elements contained in the SH2030 strategy.
The objective of producing 20 Bcm of gas from the unconventional resources, which goes up to 70 Bcm by 2040, seems too ambitious as there is strong public protest against the development of any type of unconventional resources. That led the government to halt all activities related to unconventional reserves.
Speaking about developing offshore reserve, and new frontier region in the north of the country is nothing new, as the company has already completed offshore seismic survey and was supposed to drill first well in 2015, but no progress was made.
Furthermore, the objective of increasing gas exports by 50% seems very ambitious, as international gas market is witnessing stiff competition and Sonatrach has already losing market share to other competitors. Plus, huge gas supply from Qatar and Australia are soon to flood the market.
The silver lining of the SH2030 could be the development of the petrochemical industry, which will allow Sonatrach to convert its natural gas into polyethylene and polypropylene where Algeria can benefit from its proximity to European market, where petrochemical products are much needed products for automotive industry and other industries. This is despite an earlier attempt by the company in 2007 to jumpstart its petrochemical industry but it failed.
At the time, Sonatrach unveiled an ambitious plan to revamp its petrochemical sector and awards contract to build ethylene cracker to France super giant Total, and two other contracts to build methanol plant and an aromatic plant. But few months later, problems emerged initially with the ethylene project as Sonatrach didn’t have enough gas to feed the ethane cracker at the agreed price, and alternatively, it proposed a higher price as it suggested to that it will supply gas via the 800 km from Hassi Rmal. This created a standoff of the project which was then scrapped, but it was recently revived but with no progress.
The two other projects were also canceled and the dream became a nightmare as a number of scandals emerged that saw the company consuming seven CEOs in less than 8 years.
A key challenge to the strategy seems to be an internal one. Executing such strategy requires a well aligned team that works towards one objective. A recent report by AlgeriePart news website revealed that many senior vice presidents are opposing all the changes attempts of the CEO.
While the CEO is determined to go ahead with new strategy, a recent presidential decree issued by president Abdelaziz Bouteflika stripping the CEO from the authority of appointing his vice presidents, has raised questions on the reasons behind this decree, specially with the presence of insubordinate who would defy the authority easily, and who already showed resistance to changes as personal interests are at stake.
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