First auction since 2011
* Security concerns after early 2013 Amenas gas plant attack
* Hydrocarbons law passed in 2013 offers incentives
By Hamid Ould Ahmed
ALGIERS, Sept 30 (Reuters) – Algeria will hold its first auction of oil and gas fields since 2011 on Tuesday as the OPEC member looks to offset flagging production and safeguard stable gas supply for Europe.
The north African nation is offering 31 areas including conventional oil and gas fields and a substantial number of shale offerings with more than half of the fields in the south of the country.
Africa’s largest gas producer supplies a fifth of Europe’s gas needs but it relies on mature fields for most of its energy output. It is looking to foreign explorers to help develop new reserves and increase production.
Officials have delayed the auction twice after foreign players asked for more time to study the fields on offer. Contracts will be signed at the end of October.
“We are optimistic. The round will be fruitful because many companies have shown real interest in investing,” said one Algerian government official.
“Those who were reluctant have changed their positions after we delayed bids opening, which allowed them to get more details and better understand the potential and contract terms.”
Foreign oil executives have in the past complained about Algeria’s tough contract terms, difficult business environment and security worries. A 2013 militant attack on the country’s Amenas gas plant killed 39 foreign oil contractors.
Yet officials said they were optimistic after initial strong interest from 50 companies they hope will be drawn by incentives under a new oil law, improvements in security and the potential of the fields on offer.
The disappointing 2011 auction secured bids for just two fields out of 10, one from Spain’s Cepsa and the other from Algerian state energy company Sonatrach.
A hydrocarbons law passed in 2013 now offers tax and contractual incentives, and benefits for unconventional energy investments.
Increasing output is vital for a government that relies heavily on energy exports for state income and to pay for social programmes, including food and fuel subsidies that have helped keep it stable amid turbulent times in North Africa.
Analysts say rising domestic energy consumption will also be a concern should Algeria fail to draw the kind of investment required to bolster its production. Oil output last year was 1.2 million barrels per day, about the same as 2012.
Some of the 2014 gas blocks on offer are from Algeria’s unconventional shale reserves, which are among the world’s largest and are largely unexplored.
But Algeria also has no experience of developing shale gas, which involves technologies such as hydraulic fracturing and horizontal drilling. Some analysts have questioned how the country will develop the infrastructure needed for shale operations.
Security has been a concern since the 2013 Amenas attack which prompted BP and Norway’s Statoil to pull their workers out. The kidnapping and beheading of a French tourist this month in the mountains east of Algiers was a reminder of risks in the North African country which fought a war against Islamist extremists in the 1990s.
Still, Statoil this month said the Amenas plant, which produced 11.5 percent of Algeria’s gas output before the attack, was due to return to full production soon after improvements in security in the area. (Writing by Patrick Markey; editing by Jason Neely)