Pertamina to inject US$900m in Algerian energy sector

Photo credit: Indonesia Business Post

The state-owned Indonesian energy firm Pertamina plans to invest US$900m in Algeria over the next 25 years. The investment will focus on new oil field developments, refining, and decarbonisation ventures. Foreign Affairs Minister Retno Marsudi announced this following a recent bilateral meeting with her Algerian counterpart in Algiers.

Pertamina has operated the Menzel Lejmat Nord oil field since 2014, following its acquisition of US oil major ConocoPhillips' Algerian business. In June 2023, the company announced the renewal of its management contract for the Menzel block, in which it holds a 65% interest. Located in the Sahara desert some 1,000km south of the capital Algiers, the oilfield has a capacity of 35,000 barrels per day (bpd) although average oil production from January to May 2023 was just under 15,000 bpd.

In addition to continuing crude oil production, Pertamina has received authorisation to build a liquefied petroleum gas (LPG) plant, capable of producing 1 million tonnes annually, primarily for export to Indonesia. Late last year, Pertamina also signed a memorandum of understanding with Sonatrach, Algeria’s state-owned oil and gas company, to explore potential collaboration in carbon capture and storage projects.

The Menzel project was Pertamina's first foray into operating an oil field outside Indonesia. This venture is part of the company's broader strategy to acquire international assets, driven by the need to supplement declining domestic oil production in Southeast Asia's largest economy. Indonesia's current oil output is just over 600,000 bpd, which is less than half of what it was during its 1990s peak and insufficient to meet national consumption needs. 

Pertamina is looking to increase output at the Menzel field and develop adjacent areas in Algeria. Pumping over 960,000 bpd, Algeria ranks as Africa's fourth-largest producer. All of Algeria's proven oil reserves are onshore, and about two-thirds of its potential oil territory remains underexplored or undeveloped. The north African country is also a major gas producer, with an annual output of approximately 100 billion cubic metres. With the tenth-largest proven natural gas reserves, Algeria ranks as the world's fourth-biggest gas exporter. By May last year, after Russian imports were sharply curtailed, Algeria had become the single biggest gas supplier to Italy, and in 2022, Spain relied on it for a quarter of its gas supplies. Despite, such investments in hydrocarbons the Algerian economy is expected to grow much slower than that of neighbouring Morocco and Tunisia.

 

References

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‘Algeria - country commercial guide’, International Trade Administration, U.S. Department of Commerce, 31 January 2023

‘Algerian pipeline gas flows to Southern Europe remain robust in 2023’, S&P Global Commodity Insights, 22 May 2023

‘MLN Algeria, Pertamina's first oil field operated abroad’, Pertamina, 14 June 2023

‘Pertamina and partners to invest $800m in Algerian oil field’, Nikkei Asia, 16 June 2023

‘New contract, Pertamina to develop oil and gas block in Algeria for the next 35 years’, Pertamina, 17 June 2023

‘Pertamina strikes Algerian oil production contract’, African Law & Business, 05 July 2023

‘Press statement H.E. Retno L.P. Marsudi Minister for Foreign Affairs of the Republic of Indonesia Algiers, 20 December 2023’, Ministry of Foreign Affairs of the Republic of Indonesia, 20 December 2023

‘Indonesia's Pertamina to invest $900 million in Algeria: Minister’, Jakarta Globe, 21 December 2023

‘Pertamina - Sonatrach strengthen upstream to downstream oil and gas cooperation’, Pertamina, 21 December 2023

‘Crude oil production | Africa’, Trading Economics, Accessed 05 January 2024