Wednesday, May 19, 2010

Algeria Petrochemicals Report Q3 2010 - New Market Report Published

Algeria's short-term goals will be more focused on the development of upstream resources, with petrochemicals development ongoing and not expected to be onstream until 2014, according to BMI's latest Algeria Petrochemicals Report.

The June 2009 BP Statistical Review of World Energy estimate for proven oil reserves is 12.2bn bbl. There is scope for expansion, with the report assuming at least 12.5bn bbl by 2014. Estimates of 'recoverable oil resources' range as high as 43bn bbl. Exploration success rates in the Berkine Basin have been high and several billion barrels of oil may lie in the area. With gas, we forecast 2008's 4,500bcm of reserves to rise to 4,650bcm by 2014. State-owned company Sonatrach announced five new oil and gas discoveries, bringing the total number of finds for 2009 to nine. In the announcement, reported by state news provider Algerie Presse Service in late December, Sonatrach said it had made five discoveries in the Berkine, Illizi and Amguid/Hassi Messaoud basins, all in the east of the country. No reserves estimates have been released and Sonatrach has not commented on the potential impact of the new discoveries. We forecast that estimated gas production of 100bcm in 2009 will reach 140bcm by 2014.

As a result of this expansion in gas and oil production capacities and the country's geographical position and economic relations giving it easy access to the markets, Algeria is well placed to take advantage of the decline in the falling competitiveness of the West European petrochemicals industry. However, an uncertain business environment and delays to the Arzew ethylene cracker are undermining the industry's progress.

In 2009, Algeria had petrochemicals production capacities of 130,000 tonnes per annum (tpa) of ethylene, 178,000tpa of PE, 40,000tpa of VCM, 35,000tpa of PVC, 120,000tpa of methanol and 990,000tpa of ammonia. The Algerian petrochemicals industry is set to experience massive growth in olefins, polyolefin, aromatics, methanol and fertiliser production from 2014 after the completion of the Arzew petrochemical complex and a number of urea and ammonia units. The round of contracts signed in July 2007 will see the construction of a 1.1mn tpa ethane cracker at Arzew, which will be used to manufacture 410,000tpa of MEG, 350,000tpa of HDPE and 450,000tpa of LLDPE, mainly for export. This will be overseen by a 51:49 joint venture (JV) between French major Total Petrochemicals and Sonatrach.

The Total-Sonatrach joint venture is in the process of awarding technology and design contracts for the complex at Arzew. However, in November 2009 the cracker faced delays as the contract looked set to be renegotiated over cost issues. The JV was formally agreed in December 2007 and was due to come onstream in 2012, but this has now been pushed back to 2014. The European Commission cleared Total to create a petrochemical JV with Sonatrach. The investment, shared equally by the partners, will cost US$3bn and process 1.4mn tpa of gas, fed from natural gas fields in southern Algeria. The contract was awarded in July 2007 and includes the construction of the ethane cracker. In March 2009, the American Scientific Design Company was selected to provide its EG technology to the complex, which will have capacity for 550,000tpa of EG. The award includes the license, provision of a process design package, technical assistance and start-up services, and the initial charge of Scientific Design's ethylene oxide catalyst.

In the Middle East and Africa Petrochemicals Business Environment Ratings table, Algeria is in 10th place with an overall score of 38.0 points, 0.2 points less than in the previous quarter, due to a decline in its country risk score. In nearly every indicator, Algeria comes last by a long margin - except when Nigeria scores worse - and the situation is likely to remain that way until the Arzew complex is onstream.

Algeria Petrochemicals Report Q3 2010:

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