Algeria’s gas output is largely dependant on the production from the field Hassi R’Mel, which has been seen to hastily decline to one-third of its previous value. The field has been neglected in terms of development expenditure and maintenance infrastructure and has consequently seen a sharp drop in production in recent years.

The history of Hassi R’Mel

Hassi R’Mel is one of the largest gas fields in the world (eighteenth largest by rank) and holds more than half of Algeria’s total gas reserves. Hassi R’Mel was discovered by the French company Total SA (ADR) (NYSE:TOT) as the operator in 1956 while production started up in 1961. Currently, the local firm Sonatrach owns a 100 percent stake in Hassi R’Mel.

To the southeast of Hassi R’Mel is the largest oil field in Algeria, called Hassi Messaoud, and both these fields are located in the province of Hassi Messaoud. Hassi R’Mel is located in the vicinity of Hassi R’Mel village which is located 340 miles (550 kilometres) south of Algiers. The gas field is 43 miles (70 kilometres) long stretching from north to south and 31 miles (50 kilometres) wide going from east to west.

The field holds proven reserves of about 85 trillion cubic feet (tcf). “The remainder of Algeria’s natural gas reserves come from associated fields (alongside crude oil reserves) and non-associated fields in the south and southeast regions of the country,” reports the U.S. Energy Information Administration (EIA).

Steep decline in Algeria’s gas output

The production from Hassi R’Mel dropped from 75 billion cubic meters (bcm) in 2008 to just 55 bcm in 2012. “The startling drop in just four years is one of the main reasons for the fall in Algeria’s gas exports in the past few years: they slid from 60 billion cu.m. in 2007 to 52 billion in 2011 and 55 billion in 2012. Already predicted at the end of 2008, the fall in Hassi R’Mel’s output can be blamed on the intense exploitation of the field some years previously,” reports Africa Intelligence.

“In the 2000s, Algeria over-exploited Hassi R’Mel’s reserves to make up for delays in development work on other Algerian fields, particularly Gassi Touil, Rhourde Nouss and also fields in the south-west, notably Tinhert, Touat, Timimoun and Reggane North. In addition, work to re-develop the field wasn’t done for fear of disrupting intensive production,” adds Africa Intelligence.

Upcoming projects in Algeria and investment

Total SA (ADR) (NYSE:TOT) is now vested in the Southwest Gas Project in Algeria, which is expected to start up by 2016. This includes Reggane Nord, Timimoun, and Touat projects and entails the construction of gas collection facilities, gas treatment plants and pipelines connecting this area to the Hassi E’Mel gas hub.

“The Repsol-led Reggane Nord project consists of developing six fields and is expected to reach a plateau production rate of 102 billion cubic feet (bcf) per year. The Timimoun project, led by Total SA (ADR) (NYSE:TOT) in partnership with Sonatrach and Cepsa, is expected to reach peak production of 57 bcf per year, and the Touat project, led by the France-based GDF Suez in association with Sonatrach, is projected to reach peak output of 159 bcf per year,” reports the Energy Information Administration (EIA).

Total SA (ADR) (NYSE:TOT) is also vested in the development of the new field Ahnet for the exploration of tight gas reserves. This field is expected to contribute 100 to 150 bcf and will come online by 2016 as well. Other new projects to be started up in Algeria are shown in the table below.

Table 1: Upcoming Natural Gas Projects in Algeria

Algeria
Source: Energy Information Administration (EIA)

These upcoming projects will have to compensate for the decline in Hassi R’Mel. However, most of these projects are not expected to come online for another couple of years which indicates that we can expect a drop in the gas output of Algeria for the next few years.