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Algeria expects oil
production to remain steady in 2011, while Liquefied Natural Gas (LNG)
supply contracts will be met despite reduced capacity, the head of
state-owned energy giant, Sonatrach, said on Tuesday.

“We will stick to
oil production which will be practically the same as in 2009 and 2010,”
Sonatrach chief executive, Nourredine Cherouati, told a news conference.

The North African
OPEC member supplies about 20 per cent of Europe’s natural gas and is
the world’s eighth-biggest exporter of crude oil, pumping 1.25-1.27
million barrels per day in November and December, according to a
Reuters poll.

Despite an
“incident” at one LNG plant which cut capacity in late 2010, Algeria
still produced 31 billion cubic metres of super-cooled gas last year,
Sonatrach said, and has enough capacity to meet all its supply
contracts.

“We have the capacity to meet the demand on the market,” Mr. Cherouati told reporters when asked about the incident last year.

“We have sufficient
capacity in relation to our contractual obligations so we have taken
the decision to stop the first liquefaction plant that we have,” he
added.

Camel close down

The plant in the
port of Arzew, officially called GL4Z but commonly known as Camel, is
the oldest LNG export facility in the world and is too inefficient to
be profitable in the current market, he said. Sontrach has three LNG
plants at Arzew and one at Skikda.

Mr. Cherouati said he expected the much-delayed Medgaz gas pipeline to Spain to be operational by mid-February.

Algeria has been
sending a lot of its LNG to Europe over the last few years after buyers
in the United States lost interest in imported gas because of booming
North American shale gas production.

Although rising
demand in China, the Middle East and South America have helped support
LNG sales, gas prices in most markets, particularly the United States,
are still well below levels seen before the global financial crisis
slashed industrial energy demand in early 2008.

Increased capacity
in Qatar, the world’s largest LNG exporter, and plentiful alternative
gas production in North America, have put further pressure on gas
prices.

But prices are widely expected to rise over the next decade as higher demand, especially in Asia, slowly absorbs the glut.

Mr. Cherouati said
Sonatrach had not decided whether to buy assets in Algeria, which
Britain’s BP has put up for sale to help pay for the Gulf of Mexico oil
spill in early 2010.

Russian oil
company, TNK-BP, has said it is interested in BP’s Algerian assets,
which include stakes in two major gas-producing fields, but Sonatrach
has the right of first refusal.

Sonatrach, which
some analysts say has under-invested in new oil and gas projects, has
set a target of doubling the number of exploration wells, Mr.Cherouati
said. He did not say how the increase would be achieved or give a
timetable.

Asked if there were
any plans to speed up exploration by making the terms on offer for
foreign investors more attractive, he said: “That is a question that
you have to ask the state… The state is my employer.”

Reuters