Algeria Signs Oil, Gas Deal as OPEC Member Seeks to Boost Sales

(Bloomberg) - Algeria will supply oil and other energy products to Jordan for the first time under a memorandum of understanding signed on Monday, as the OPEC member seeks to diversify sales after years of stagnating crude production.

Algeria’s state-run Sonatrach Group will start shipping liquefied natural gas and liquefied petroleum gas to Jordan in September, followed by crude oil, Algerian Energy Minister Salah Khebri said in an interview in Amman. Sonatrach and National Electric Power Co. of Jordan should reach a final agreement in the next few weeks, he said, without specifying shipment volumes. Sonatrach will also explore for oil and gas in Jordan.

“This is the first time that we are going to get fuel and gas from Algeria,” Hasan Hiari, head of the natural gas department at Jordan’s Ministry of Energy & Mineral Resources, said in a separate interview in Amman. "We are keen on diversifying our energy sources."

Algeria, Africa’s biggest natural gas producer, has invited international companies to help develop its oil and gas fields as Sonatrach has struggled to raise production after a corruption probe at the company and a deadly al-Qaeda terrorist attack in 2013 at the In Amenas gas field. The nation operated 55 oil rigs in April, an increase in each month since November, according to Baker Hughes Inc. Algeria pumped 1.1 million barrels a day of crude in April, its production little changed since 2013.

Demand Boost

Oil-producing nations increasingly face the challenge of meeting higher demand rather than cutting supply to support prices. The International Energy Agency on May 12 boosted its forecast for world oil demand this year by 100,000 barrels a day, and Goldman Sachs Group Inc. said on May 15 that the oil market has flipped to a deficit in output sooner than it expected. Benchmark Brent crude has climbed 32 percent this year as supplies were tightened by a decline in U.S. drilling, wildfires in Canada and disruptions in Nigeria.

Algeria, the ninth-biggest member of the Organization of Petroleum Exporting Countries, plans to raise crude output by 5 percent in 2016 and offer energy-exploration rights to foreign companies, Salah Mekmouche, Sonatrach vice president of exploration and production, said in an interview in Algiers in December. Natural gas pipeline flows from Algeria, the European Union’s third-biggest supplier, into Italy reached a three-year high in April, data from Italian grid Snam Rete Gas SpA show.

Jordan, which has almost no energy resources of its own, is also looking at solar, wind and nuclear power for future energy needs. By 2025, 48 percent of the nation’s electricity will be generated by nuclear reactors, up from 4 percent today, Prime Minister Abdullah Ensour said Monday at an energy conference in Amman. It plans to have 500 megawatts of solar- and wind-power capacity operational by the end of this year.

To contact the reporter on this story: Mohammad Tayseer in Amman at mtayseer@bloomberg.net To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net Bruce Stanley, Claudia Carpenter