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The future of shale gas in Algeria

Last July, Algeria's state energy company, Sonatrach, announced that it intended to begin exploitation of the large shale gas fields in Algeria by 2020, with an estimated production capacity of 30 billion cubic meters in the first stage, or 40% of Algeria’s current production capacity (73.4 billion cubic meters in 2012). The announcement came a few months after the council of ministers decided to exploit these nonconventional resources in May 2014.

Algeria’s hydrocarbon law was amended early in 2013 to allow the exploitation of unconventional energy resources, including shale gas and shale oil. British Petroleum (BP) 2013 figures said Algeria likely had the third-largest shale gas reserves in the world, after China and Argentina. Sonatrach experts estimate this reserve to be around 19,820 billion cubic meters, in seven major basins — Ghadames-Berkine and Illizi Basins in the southeast near the Libyan border; Mouydir, Ahnet and Reggane Basins in the desert; and the Timimoun and Tindouf Basins in the southwest.

Why the rush?

The decision to exploit this resource was made without any real discussion on its high cost — 4 or 5 times more than the cost of exploitation of conventional gas, according to a former general manager of Sonatrach — and on the threat it poses to underground water resources, as it needs huge quantities of water to break up shale to release the gas (so far there is no successful alternative technology for the so-called hydraulic fracturing). This is not to mention its environmental risks, most importantly, the contamination of underground water due to the use of toxic chemicals. This will eventually cause the demise of oasis agriculture.

In response to the criticism of rushing to make such a decision, the government is resorting to the pretext of "why deprive ourselves of this gift," as expressed by Prime Minister Abdelmalek Sellal, who said, “It is a sin not to take advantage of this gas.” The government also, as usual, resorted to accusing oppositionists of disturbing peace and destabilizing the situation.

The only explanation for these rushed developments in the exploitation of shale gas is that the Algerian petroleum reserves seem not to have been renewed enough, as discoveries in recent years have found amounts that are not that large. Domestic energy consumption has increased in a way that prevents Algeria from maintaining the current level of petroleum and gas exports.

The country’s domestic oil consumption increased as the number of cars skyrocketed (increase of 26% from 2006 to 2012), while natural gas consumption grew due to the country’s increased electric power demand (gas is used for 96% of electricity production annually).

If we take natural gas as an example of the almost steady increase in domestic needs, we see that domestic consumption, which ranges between 25-30 billion cubic meters (according to the 2012 figures of the Algerian Electricity and Gas Regulation Commission), will likely reach 50 billion by 2017-20.

Algeria exports the majority of its gas (68% in 2012, i.e., 50 billion cubic meters). A stagnation in production implies a decline in gas exports, which today account for half of Algerian foreign revenues. The Algerian regime is in a state of concealed fear of a rapid depletion of its foreign financial resources. This threatens to suffocate the economy and undermine one of the foundations of the Algerian regime’s dominance, which is based not only on repression but also on the relative distribution of hydrocarbon resources. As a result of this fear, the decision was made to start shale gas exploitation.

This step was an escape from admitting that the economic system is bankrupt due to its dependence on oil and gas revenues. The solution lies in ending this dependency and not extending its duration, which only postpones the expected collapse.

Shale gas exploitation involves a sad irony. Groundwater is turned into a tool to destroy the desert agriculture that dates back thousands of years, instead of being one of the tools leading to its prosperity. For the purpose of extracting perishable energy, Algeria is willing to waste its water resources, which form the backbone of its food security in a region threatened by drought.

Can this be avoided?

Despite the high cost of shale gas exploitation and its environmental risks (shale gas exploitation is banned in France by court order), the camp rejecting it in Algeria seems to be extremely fragile and totally unable to influence the course of events. This camp combines two different, if not contradictory, parties. The first party represents environmentalists (many of them with leftist inclinations). This party emphasizes the high environmental cost of exploiting shale gas, but does not sufficiently criticize the economic system based on disposing of petroleum profits instead of investing them so as to ensure a minimum degree of economic independence.

The second party comprises some liberal economists and politicians who do not fear the contamination of groundwater and the demise of the ancient desert agriculture as much as they fear that nonconventional hydrocarbon proceeds will offset the proceeds of the diminishing conventional hydrocarbons, thus extending the life of the rentier economy they seek to eliminate.

There are two key reasons why both parties are unable to mobilize public opinion against the exploitation of shale gas. The first is the political deadlock in the country that has prevailed for more than 20 years. It transformed political forces and civil society organizations into empty shells whose sole mission is to issue statements.

The second reason is that large segments of Algerians are easily convinced of the need to find an alternative to the depleted proceeds of conventional hydrocarbons to allow the state to maintain its level of spending on structural bases, public facilities and social grants, but also on loans to greedy businessmen and thousands of young investors, regardless of the feasibility of their projects.

It is no exaggeration if we say that, unfortunately, the average Algerian citizen does not care about the risk of age-old oases disappearing. Algerians do not even care about the risk of wasting groundwater resources that are needed to meet the needs of the north. The only thing citizens care about, after enduring years of successive crises of scarcity and civil wars, is that their consumption remains the same … regardless of the consequences.

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Al Monitor
Al Monitor
Published on:
September 15, 2014
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