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Q4 2010
www.businessmonitor.com
oil & Gas Report
ISSN 1748-3786
Published by Business Monitor International Ltd.
alGeRia
INCLUDES 10-YEAR FORECASTS TO 2019

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ALGERIA OIL & GAS
REPORT Q4 2010
INCLUDES 10-YEAR FORECASTS TO 2019
Part of BMI’s Industry Survey & Forecasts Series
Published by: Business Monitor International
Copy deadline: August 2010

Algeria Oil & Gas Report Q4 2010
© Business Monitor International Ltd Page 2

CONTENTS
Executive Summary .........................................................................................................................................7
Algeria Energy Market Overview ....................................................................................................................9
Global Oil Market Review ..............................................................................................................................12
Drifting With The Tide.............................................................................................................................................................................................. 12
Quarterly Trends ...................................................................................................................................................................................................... 13
Deepwater Turbulence.............................................................................................................................................................................................. 13
Global Oil Market Outlook .............................................................................................................................15
Waiting For The Wind To Change............................................................................................................................................................................ 15
Oil Price Forecasts................................................................................................................................................................................................... 15
Oil Supply, Demand And Price Outlook.......................................................................................................17
Short-Term Demand Outlook.................................................................................................................................................................................... 17
Table: Global Oil Consumption (000b/d) ............................................................................................................................................................ 18
Short-Term Supply Outlook ...................................................................................................................................................................................... 18
Table: Global Oil Production (000b/d)................................................................................................................................................................ 19
Longer-Term Supply And Demand....................................................................................................................................................................... 20
Oil Price Assumptions ......................................................................................................................................................................................... 21
Table: Crude Price Assumptions 2010................................................................................................................................................................. 21
Table: Oil Price Forecasts................................................................................................................................................................................... 21
Regional Market Overview ............................................................................................................................22
Oil Supply And Demand....................................................................................................................................................................................... 22
Table: Africa’s Oil Consumption, 2007-2014 (000b/d)........................................................................................................................................ 23
Table: Africa’s Oil Production, 2007-2014 (000b/d)........................................................................................................................................... 24
Oil: Downstream ................................................................................................................................................................................................. 25
Table: Africa’s Oil Refining Capacity, 2007-2014 (000b/d)................................................................................................................................ 25
Gas Supply And Demand ..................................................................................................................................................................................... 26
Table: Africa’s Gas Consumption, 2007-2014 (bcm)........................................................................................................................................... 26
Table: Africa’s Gas Production, 2007-2014 (bcm).............................................................................................................................................. 27
Liquefied Natural Gas ......................................................................................................................................................................................... 28
Table: Africa’s LNG Exports, 2007-2014 (bcm).................................................................................................................................................. 28
Business Environment Ratings ....................................................................................................................29
Composite Scores................................................................................................................................................................................................. 29
Table: Regional Composite Business Environment Rating .................................................................................................................................. 29
Upstream Scores.................................................................................................................................................................................................. 30
Table: Regional Upstream Business Environment Ratings.................................................................................................................................. 30
Algeria Upstream Rating – Overview .................................................................................................................................................................. 31
Algeria Upstream Rating – Rewards ................................................................................................................................................................... 31
Algeria Upstream Rating – Risks......................................................................................................................................................................... 31
Downstream Scores ............................................................................................................................................................................................. 32
Table: Regional Downstream Business Environment Ratings ............................................................................................................................. 32
Algeria Downstream Rating – Overview.............................................................................................................................................................. 33
Algeria Downstream Rating – Rewards............................................................................................................................................................... 33
Algeria Downstream Rating – Risks .................................................................................................................................................................... 33

Risk Summary ................................................................................................................................................34
Political .................................................................................................................................................................................................................... 34
Economic.................................................................................................................................................................................................................. 34
Business Environment............................................................................................................................................................................................... 34
Industry Forecast Scenario...........................................................................................................................35
Oil And Gas Reserves ............................................................................................................................................................................................... 35
Oil Supply And Demand............................................................................................................................................................................................ 35
Gas Supply And Demand .......................................................................................................................................................................................... 36
LNG .......................................................................................................................................................................................................................... 37
Refining And Oil Products Trade.............................................................................................................................................................................. 37
Revenues And Import Costs ...................................................................................................................................................................................... 38
Table: Algeria’s Oil And Gas, 2007-2014 ........................................................................................................................................................... 39
Other Energy ............................................................................................................................................................................................................ 40
Table: Algeria’s Other Energy, 2007-2014.......................................................................................................................................................... 41
Key Risks To BMI’s Forecast Scenario..................................................................................................................................................................... 41
Long-Term Oil And Gas Outlook.............................................................................................................................................................................. 41
Oil And Gas Infrastructure ............................................................................................................................42
Oil Refineries....................................................................................................................................................................................................... 42
Table: Refineries In Algeria................................................................................................................................................................................. 42
Gas Pipelines....................................................................................................................................................................................................... 42
Macroeconomic Outlook ...............................................................................................................................46
Table: Algeria – Economic Activity ..................................................................................................................................................................... 48
Competitive Landscape.................................................................................................................................49
Table: Key Players In The Algerian Energy Sector ............................................................................................................................................. 50
Overview/State Role............................................................................................................................................................................................. 50
Licensing And Regulation.................................................................................................................................................................................... 51
Government Policy .............................................................................................................................................................................................. 52
Licensing Rounds................................................................................................................................................................................................. 52
International Energy Relations............................................................................................................................................................................ 53
Table: Key Upstream Players.............................................................................................................................................................................. 54
Table: Key Downstream Players ......................................................................................................................................................................... 54
Company Monitor...........................................................................................................................................55
Enterprise Nationale Sonatrach........................................................................................................................................................................... 55
Anadarko Algeria................................................................................................................................................................................................. 61
Eni Algeria Production........................................................................................................................................................................................ 65
BP Algeria ........................................................................................................................................................................................................... 68
BHP Petroleum (Algerie)..................................................................................................................................................................................... 71
CEPSA................................................................................................................................................................................................................. 73
Statoil Algeria...................................................................................................................................................................................................... 75
Hess – Summary .................................................................................................................................................................................................. 77
Maersk Oil – Summary ........................................................................................................................................................................................ 77
Repsol YPF – Summary ....................................................................................................................................................................................... 77
Royal Dutch Shell – Summary ............................................................................................................................................................................. 78
ConocoPhillips – Summary.................................................................................................................................................................................. 78
Total – Summary.................................................................................................................................................................................................. 78
BG Group – Summary.......................................................................................................................................................................................... 79

Talisman Energy – Summary............................................................................................................................................................................... 80
Gazprom – Summary ........................................................................................................................................................................................... 80
Others – Summary ............................................................................................................................................................................................... 81
Long-Term Oil And Gas Forecasts...............................................................................................................82
Regional Oil Demand .......................................................................................................................................................................................... 82
Table: Africa’s Oil Consumption, 2012-2019 (000b/d)........................................................................................................................................ 82
Regional Oil Supply............................................................................................................................................................................................. 83
Table: Africa’s Oil Production, 2012-2019 (000b/d)........................................................................................................................................... 83
Regional Refining Capacity ................................................................................................................................................................................. 84
Table: Africa’s Oil Refining Capacity, 2012-2019 (000b/d)................................................................................................................................ 84
Regional Gas Demand......................................................................................................................................................................................... 85
Table: Africa’s Gas Consumption, 2012-2019 (bcm)........................................................................................................................................... 85
Regional Gas Supply............................................................................................................................................................................................ 86
Table: Africa’s Gas Production, 2012-2019 (bcm).............................................................................................................................................. 86
Algeria Country Overview ................................................................................................................................................................................... 86
Methodology And Risks To Forecasts....................................................................................................................................................................... 87
Glossary Of Terms .........................................................................................................................................88
BMI Methodology ...........................................................................................................................................89
How We Generate Our Industry Forecasts.......................................................................................................................................................... 89
Energy Industry ................................................................................................................................................................................................... 89
Cross Checks ....................................................................................................................................................................................................... 90
Oil And Gas Ratings Methodology....................................................................................................................................................................... 90
Table: Structure Of BMI’s Oil & Gas Business Environment Ratings................................................................................................................. 92
Indicators............................................................................................................................................................................................................. 93
Table: BMI’s Upstream Oil & Gas Business Environment Ratings – Methodology ............................................................................................ 93
Table: BMI’s Downstream Oil & Gas Business Environment Ratings – Methodology........................................................................................ 94
Sources ................................................................................................................................................................................................................ 95

Executive Summary
The latest Algeria Oil & Gas Report from BMI forecasts that the country will account for 9.36% of
African regional oil demand by 2014, while providing 18.02% of supply. African regional oil use of
3.06mn barrels per day (b/d) in 2001 rose to 3.75mn b/d in 2009. It should average 3.81mn b/d in 2010
and then rise to around 4.26mn b/d by 2014. Regional oil production was 7.93mn b/d in 2001, and in
2009 averaged 9.67mn b/d. From a projected 10.23mn b/d in 2010, it is set to rise to 11.93mn b/d by
2014. Oil exports are growing steadily, because demand growth is lagging behind the pace of supply
expansion. In 2001, the region was exporting an average of 4.87mn b/d. This total had risen to 5.92mn b/d
in 2009 and is forecast to reach 7.67mn b/d by 2014. Angola has the greatest production growth potential,
with Nigerian exports set to climb if it can resolve recent quasi-political issues.
In terms of natural gas, the region in 2010 will have consumed an estimated 122.9bn cubic metres (bcm),
with demand of 165.6bcm forecast for 2014. Production of an estimated 219.5bcm in 2010 should reach
305.2bcm in 2014, which implies net exports rising from 97bcm to 140bcm in 2014. In 2010, Algeria’s
share of regional gas supply is an estimated 37.82%, rising to 38.17% by 2014. The country’s share of
demand in 2010 is an estimated 18.44%, with 18.02% predicted by 2014.
For 2010 as a whole, we continue to assume an average OPEC basket price of US$83.00/bbl, +36.4%
year-on-year (y-o-y). Risk is now clearly on the downside, thanks to the slow progress made during June.
However, a full-year outturn in excess of US$80 remains a strong possibility and we see no need to
review our assumptions at this point. The 2010 US WTI price is now put at US$87.63/bbl. BMI is
assuming an OPEC basket price of US$85.00/bbl in 2011, with WTI averaging US$89.74. Our central
assumption for 2012 and beyond is an OPEC price averaging US$90.00/bbl, delivering WTI at just over
US$95.00.
For 2010, the BMI assumption for premium unleaded gasoline is an average global price of
US$95.45/bbl. The overall y-o-y rise in 2010 gasoline prices is put at 36%. Gasoil in 2010 is expected to
average US$93.23/bbl. The full-year outturn represents a 35% increase from the 2009 level. For 2010,
the annual jet price level is forecast to be US$95.90/bbl. This compares with US$70.66/bbl in 2009. The
2010 average naphtha price is put by BMI at US$83.53/bbl, up 41% from the previous year’s level.
Algeria’s real GDP is assumed by BMI to have risen by 3.1% in 2010, with forecast average annual
growth in 2010-2014 put at 4.0%. We expect estimated oil demand of 341,000b/d in 2010 to rise by up to
4.0% per annum to 399,000b/d in 2014. State oil company Sonatrach dominates the industry, operating
in partnership with various international oil companies (IOCs), and accounts for 60% of the country’s oil
output. Thanks largely to IOC investment, combined oil and gas liquids output is forecast to increase
from an estimated 1.89mn b/d in 2010 to 2.15mn b/d in 2014, with exports heading towards 1.75mn b/d.

The country’s OPEC membership and assigned production quota could frustrate volume growth
ambitions. Gas production of an estimated 83bcm in 2010 should reach 117bcm by 2014. Consumption of
an estimated 28bcm in 2010 is expected to rise to 34bcm by the end of the forecast period, providing
exports of 83bcm.
Between 2010 and 2019 we are forecasting an increase in Algerian oil and gas liquids production of
37.9%, with volumes rising steadily from an estimated 1.89mn b/d in 2010 to 2.60mn b/d by the end of
the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 42.3%, with
growth slowing to an assumed 4.0% per annum towards the end of the period and the country using
485,000b/d by 2019. Gas production is expected to rise to 135bcm by the end of the period. With demand
rising by 55.1% between 2010 and 2019, export potential should rise from 56bcm to 92bcm, in the form
of LNG and by pipeline. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Algeria takes second place in BMI’s composite Business Environment (BE) ratings table, which
combines upstream and downstream scores. It now holds sixth place in the updated upstream Business
Environment ratings, sandwiched between Angola and Egypt. The country’s score benefits from healthy
oil and gas reserves, a large number of non-state companies active in the upstream sector and decent
licensing terms. Algeria is near the top of the league table in BMI’s updated downstream Business
Environment ratings, with some high scores but progress further up the rankings unlikely. It is ranked
third behind Egypt, thanks to high scores for gas consumption, nominal GDP, likely refining capacity
expansion and oil demand growth.

Algeria Energy Market Overview
Algeria is a major oil producer, with considerable reserves and production upside potential. It is a
member of OPEC, which theoretically restricts its ability to expand output. The country is also an
important supplier of gas to Europe, both via pipeline (to Spain, Italy and Portugal) and in the form of
liquefied natural gas (LNG). The June 2010 BP Statistical Review of World Energy suggests that Algeria
had proven reserves total of 12.2bn barrels (bbl) of oil in 2009. Algeria hopes to increase its crude oil
production capacity significantly over the next few years by attracting more foreign investment.
Oil and gas exports, which make up more than 95% of Algerian exports by value, are the main driver of
economic growth. Algeria’s average crude oil production in 2009 was an estimated 1.3mn b/d. Together
with more than 300,000b/d of condensate and at least 200,000b/d of natural gas liquids, the country
pumped around 1.81mn b/d. The country was pumping 1.25mn b/d of crude alone in June 2010, having in
2009 reduced output in accordance with the late 2008 OPEC agreement. Estimated sustainable crude
capacity is thought to have exceeded 1.40mn b/d by the end of 2009.
Oil consumption, at 331,000b/d in 2009, leaves substantial export potential. Some 90% of the country’s
oil exports are destined for the EU, mainly Italy, Germany and France. The crude produced is generally of
an exceptionally high quality, with low levels of sulphur, which makes it highly suitable for EU refiners
and their strict fuel standards. As of January 2010, Algeria had four oil refineries – a large complex in
Skikda, and small plants in Algiers, Arzew and Hassi Messaoud – with combined capacity of 462,000b/d.
Gas reserves were estimated at 4,500bcm in 2009, although increased exploration activity could rapidly
increase this total. Production in 2009 of 81bcm and consumption of around 27bcm provided an export
capacity of 55bcm, more than a third of which takes the form of LNG. Algeria meets some 20% of EU
gas demand.
For Algeria, gas was the dominant fuel in 2009, accounting for an estimated 61.7% of PED, followed by
oil at 36.2%, and coal with a 1.8% share of PED. Regional energy demand is forecast to reach 1,075mn
tonnes of oil equivalent (toe) by 2014, representing 19.3% growth over the period since 2010. Algeria’s
estimated 2009 market share of 4.35% is set to climb to 4.47% by 2014, with hydro-electricity making an
insignificant contribution and the country having no nuclear capability. Electricity generation in Algeria
is largely based on gas. The fuel in 2009 provided 97.5% of generated electricity. Oil accounts for around
1.8% of generation, with hydro claiming a tiny sliver of the power pie. Renewables do not yet make a
meaningful contribution.
According to BMI calculations, Algeria at the end of 2009 had installed electricity generating capacity of
more than nine gigawatts (GW), virtually all based on conventional thermal sources. In 2009, Algeria

generated an estimated 41TWh and consumed an estimated 31TWh of electricity. Since 2000, electricity
generation has increased by more than 40% and consumption by 45%. Surplus power was exported to
Morocco and Tunisia.
Algeria in 2009 brought online six gas-fired power stations with 2GW of capacity, according to a June
2010 statement from the head of the state-owned utility company Societe Nationale de l'Electricite et du
Gaz (Sonelgaz). The power stations were built at a cost of US$6bn as part of a 2006 emergency plan to
satisfy rising electricity demand in the country, Noureddine Boutarfa told Algerian public radio. ‘Today,
Algeria has sufficient means of production until 2012,’ at which point new power stations will start
operating, Boutarfa said.
State-owned national company Sonatrach operates the largest oil field in Algeria, Hassi Messaoud,
where peak production should be 600,000b/d. Sonatrach also operates the 180,000b/d Hassi R’Mel field
and other smaller producers, including Tin Fouye Tabankort Ordo, Zarzaitine, Haoud Berkaoui/Ben
Kahla and Ait Kheir. IOCs have increased steadily their share of Algeria’s oil production with the largest,
Anadarko Petroleum of the US, having a gross capacity in excess of 500,000b/d. Other major foreign
investors include US-based Hess, BHP-Billiton of Australia, UK major BP, Spain’s Repsol YPF and
CEPSA, Royal Dutch Shell, Norway’s Statoil and Total of France.
Algeria is planning to go ahead with a licensing round by the end of 2010 in spite of the recent shakeup of
the country's energy ministry and state-run oil company, Reuters reported on June 23 2010. The news
service quoted an anonymous energy ministry official who emphasised the need to bring foreign expertise
into the country's upstream sector.
Algeria's former energy minister, Chakib Khelil, announced plans for a new licensing round in March
2010, saying that the fiscal terms were likely to remain unchanged. The comments raised the likelihood
that the 2010 licensing round would end much the same as the 2009 round, which saw just three out of 10
permits on offer allocated to investors. Most IOCs cited unattractive fiscal terms as the reason for their
reticence.
Since Khelil's announcement, Algeria's energy industry leadership has undergone a transformation.
Sonatrach, which dominates the country's oil and gas industry, saw a corruption scandal bring down its
CEO, Mohammed Mezian, and senior management. Those officials are now either in jail or house arrest
while a corruption investigation continues. The scandal also saw the dismissal of Khelil, who had
previously acted as OPEC chief and headed the country's energy ministry for a decade. Khelil was
replaced as energy minister by Youcef Youcefi and Mezian was replaced as Sonatrach CEO by Nordine
Cherouati. Both appointees are seen as close to the military, which was seen to be pushing forward the
corruption investigation.

The new team has stopped short of making public pronouncements on improving terms for oil and gas
investors. The comments of anonymous officials as reported by Reuters, however, do appear to show that
at least some in the government recognise the need to attract foreign investment and expertise. The
comments raise the possibility of the new leadership looking at improving licensing terms for the
upcoming auction round.

Global Oil Market Review
Drifting With The Tide
Although Q2 started with encouraging oil market strength, this had largely dissipated by the end of the
quarter. Little changed in terms of oil market fundamentals but there was a major shift in sentiment
among investors and forecasters. Eurozone economic woes, China jitters and a general sense of
macroeconomic fragility meant that oil prices were dragged lower with equities and currencies. Crude
once again became a stock market proxy, with little enthusiasm for the commodity. Seemingly endless
bad news from the Gulf of Mexico hardly helped encourage oil market speculation, as BP’s very public
battle with US President Obama cast a shadow over future upstream developments and oil company
prospects. None of this was actually negative in terms of near-term price prospects, but investors needed
little excuse to avoid oil.
Demand projections for 2010 continued to firm up during the second quarter, even though the jury is still
out regarding the strength and sustainability of the economic recovery. The imposition of ‘tougher’
sanctions by the UN against Iran failed to increase oil market tension. Inventories have changed little and
OPEC policy appears to be one of ignoring likely over-supply in the hope that it will go away without
action being required.
According to the International Energy Agency (IEA)’s July 2010 monthly Oil Market Report (OMR),
OECD end-May commercial oil inventories stood at 2,757mn barrels (bbl), up 35mn bbl from the April
level. This increase was broadly in line with the five-year average stock build, representing a relatively
benign development. More worrying, perhaps, is an estimated build of 3.5mn bbl in June, at a time when
a draw of around 8.7mn bbl is usually expected. Crude stocks emerged lower, but this improvement was
outweighed by a products gain largely in the US.
In terms of production, the worrying OPEC output trend seen earlier in the year appears to have been
reversed or, at least, stabilised. June saw global oil supply fall by more than 250,000 barrels per day (b/d)
according to the IEA. OPEC and non-OPEC producers saw volumes fall during the month. Crude oil
supply from OPEC averaged 28.9mn b/d in June (IEA estimate), down by 65,000b/d when compared with
the previous month. Much of this reduction, however, reflects Iraqi cutbacks, with the 11 core members
actually increasing supply by some 40,000b/d. Quota compliance of around 59% is now pretty stable and
close to the historical OPEC norm.
Non-OPEC supply in Q2 has been fairly stable when compared with the first quarter, but has shown a
clear weakening trend during the three months. Output of around 52.7mn b/d in April slipped to 52.4mn
b/d in May and emerged still lower at around 52.2mn b/d in June. Among the major contributors to the

June downturn were Norway and the US. Average Q210 non-OPEC supply is put at around 52.4mn b/d,
compared with 52.5mn b/d in Q1.
Quarterly Trends
The Energy Information Administration (EIA) in its July 2010 monthly report suggested that Q210 global
oil demand was 85.50mn b/d, compared with 85.26mn b/d in Q110 and 83.88mn b/d in Q209. Non-
OECD demand is reported at 40.87mn b/d, compared with 39.41mn b/d in the previous quarter and
39.53mn b/d in Q209. The OECD states saw a 1.22mn b/d quarter-on-quarter fall in consumption during
Q210, amounting to 44.63mn b/d. In Q209, OECD demand was 44.35mn b/d, based on EIA data.
According to the Paris-based IEA, Q210 global consumption averaged 86.57mn b/d, compared with
86.04mn b/d in Q110 and 83.89mn b/d in Q209. The year-on-year (y-o-y) change was a gain of 3.19%.
OECD demand in Q210 is reported at 45.20mn b/d, compared with 45.99mn b/d in Q110 and 44.46mn
b/d in Q209. Non-OECD consumption in Q210 was reportedly up 4.92% y-o-y at 41.37mn b/d. In Q110,
non-OECD consumption was 40.06mn b/d.
OPEC’s July 2010 monthly oil report states Q210 global oil demand at 84.40mn b/d, down from 84.76mn
b/d during the previous quarter and up from 83.26mn b/d in Q209 (+1.37%). OECD demand is said to
have risen by 0.13% y-o-y, with North American consumption higher by 1.96%. Non-OECD demand was
up 2.78% y-o-y, according to the OPEC data.
The EIA Q210 estimates suggest that non-OPEC oil supply was 51.28mn b/d, compared with the Q110
level of 51.42mn b/d and the 49.98mn b/d recorded in Q209. Russia, the US and Canada were significant
contributors to the supply increase. OPEC output for Q210 is put at 34.71mn b/d, up from 34.51mn b/d in
Q110 and the 33.59mn b/d delivered in the second quarter of 2009.
Global Q210 production based on IEA data was an average 86.44mn b/d. This compares with 86.62mn
b/d in Q110. The non-OPEC element for the most recent quarter is 52.40mn b/d, easing lower from
52.52mn b/d in Q1. Overall OPEC volumes, including gas liquids, are said to have fallen from 34.09mn
b/d to 34.04mn b/d between Q110 and Q210.
OPEC itself believes that non-OPEC oil supply averaged 52.03mn b/d in Q210. OPEC crude output was
assessed at 29.17mn b/d during the quarter, with the cartel pumping an average 29.20mn b/d in June.
Deepwater Turbulence
There will be lasting repercussions resulting from the Deepwater Horizon incident in the Gulf of Mexico.
It is inconceivable that deepwater drilling programmes will not be revised and disrupted as a result of the

record-breaking oil spill that appears to be threatening BP’s future. Ultra-deepwater discoveries and
development represent a significant part of the non-OPEC oil industry’s growth potential. Even in
countries that are less sensitive than the US to environmental issues, we can expect to see higher costs,
modified methods of operation and project delays as the industry responds to this fresh challenge.
Preliminary estimates from the EIA in the wake of the deepwater drilling moratorium announced by US
Energy Secretary Ken Salazar in late May suggest a shortfall in US supply of around 31,000b/d in Q410
and about 82,000b/d in 2011. The IEA believes that delays to new projects resulting from the Macondo
oil spill have already shaved 30,000b/d off both 2010 and 2011 US crude production. It warns that
extended project delays could reduce its 2015 projection for US Gulf production by
100,000b/d‐300,000b/d.
On June 22, a US district court judge lifted the partial deepwater drilling moratorium, arguing that it was
too broad a measure that discriminated against companies with untainted safety records. Damage to the
regional economy and to the US energy industry was no doubt another factor taken into consideration. On
July 8, an appeals court backed the decision, but the Obama administration is believed to be considering a
more focused moratorium. At present, however, there is no deepwater drilling in the GoM.
In the US Congress, a wave of proposed legislation is making progress through various committees, with
key proposals including new safety measures, increased demands on companies active in deepwater
drilling, greatly enhanced liability for operators and a possible ban on drilling within 75 miles (121km) of
the US coastline.
Once a framework is in place, other countries with deepwater prospects can be expected to adopt some or
all of the US measures. EU Energy Commissioner Günther Oettinger has called for an EU deepwater
drilling moratorium, although there appears to be limited support and equally limited risk. The North Sea
has less deepwater potential than other regions, with pretty demanding regulation already in place.

Global Oil Market Outlook
Waiting For The Wind To Change
With fair winds and following seas, oil prices could gather momentum during the remaining months of
2010, moving briskly ahead after a period in the doldrums. Market fundamentals are generally favourable
but a wave of negative sentiment needs to be overcome before progress can be made. Oil has recently
become a victim of broader macroeconomic pessimism, tracking equity and currency trends rather than
energy market conditions. If stock markets can gain ground in the third quarter, crude and products prices
should follow them higher. Looking ahead to 2011, the supply and demand picture is again reasonably
attractive and should be able to support further modest oil price gains.
Our 2010 target of US$83.00 per barrel (bbl) for the OPEC basket price is still just about attainable, but
only if a recovery gets underway soon and can be sustained throughout H2. The demand side of the
equation looks reasonable and supply risk is arguably more on the downside from here. Inventories
continue to be an area of concern but, overall, the oil market looks in reasonable shape for a mildly
bullish phase.
Any momentum gained during the second half of 2010 should be carried through into 2011. Oil demand
growth next year is likely to fall somewhat short of the forecast 2010 level, reflecting OECD efforts to
reduce oil dependency in the wake of high fuel prices and environmental initiatives. Helping offset this
factor is a likely slowing of non-OPEC supply expansion. With potential delays and cost overruns in the
frontier areas following the Deepwater Horizon disaster, volumes are expected to grow more slowly. This
provides breathing space for OPEC, which will hope to regain a little market share during 2011.
Oil Price Forecasts
In terms of the OPEC basket of crudes, the average price in Q210 was US$76.59/bbl, up modestly from
the US$75.40/bbl recorded during the previous three months. In Q209, the OPEC price averaged
US$58.81/bbl, so the most recent quarter has seen a year-on-year (y-o-y) gain of 30%. Prior to the weekly
average low of US$68.95 reached in late May 2010, the OPEC basket had been as high as US$83.36/bbl
(weekly average) at the beginning of that month. Becalmed in much of June and July, the price traded in a
narrow range of US$71-74/bbl. The monthly averages for the second quarter of 2010 have been
US$82.33, US$74.48 and US$72.95/bbl. BMI is currently assuming that July will deliver an average
close to US$76 if the price rallies as expected from here.
In terms of other marker prices, North Sea Brent averaged US$78.30/bbl during Q2, with WTI achieving
US$77.78, Urals (Mediterranean delivery) at US$76.89/bbl and Dubai realising an average US$78.12.

These averages have been calculated using OPEC data and monthly prices from the International Energy
Agency (IEA).
As mentioned above, the BMI assumption for July 2010 OPEC crude is US$76.00/bbl and, for the third
quarter we are expecting an average of US$86.67/bbl. This suggests a 13% strengthening of quarterly
realisations when compared with Q210 and a y-o-y gain of US$19/bbl when compared with Q309
(+28%).
For 2010 as a whole, we continue to assume an average OPEC basket price of US$83.00/bbl (+36.4% y-
o-y). This is the forecast introduced in our October 2009 quarterly report. Risk is now clearly on the
downside, thanks to the slow progress made during June. However, a full-year outturn in excess of
US$80/bbl remains a strong possibility and we see no need to review our assumptions at this point. Any
failure of prices to rally significantly in Q3 will mean a downgrade in our October quarterly report.
The 2010 US West Texas Intermediate (WTI) price is now put at US$87.63/bbl. The July 2010 monthly
report from the US-based Energy Information Administration (EIA) predicts a 2010 average WTI crude
price of just under US$79/bbl, rising to US$83.00 in 2011. BMI is assuming an OPEC basket price of
US$85.00/bbl in 2011, with WTI averaging US$89.74. Our central assumption for 2012 and beyond is an
OPEC price averaging US$90.00/bbl, delivering WTI at just over US$95.00/bbl.

Oil Supply, Demand And Price Outlook
Short-Term Demand Outlook
The BMI oil supply and demand assumptions for 2010 and beyond have once again been revised for all
71 countries forming part of our detailed coverage, reflecting the changing macroeconomic outlook and
the impact of environmental initiatives. Investment in exploration, development and new production has
been rising as a result of higher crude prices, but deepwater activity has been set back by events in the
GoM. Costs associated with oil field development and exploration/appraisal drilling have begun to rise
again, with deepwater programmes now particularly vulnerable.
We have once again made only modest changes to forecast oil production levels, in line with recent
OPEC output and known project delays, with no clear evidence of large-scale spending changes by
international oil companies (IOCs) or national oil companies (NOCs).
According to the updated BMI model, 2010 global oil consumption will now increase by 2.06% from the
2009 level. This represents an upgrade to the forecast contained in the April 2010 quarterly report. The
2010 forecast represents slightly higher OECD demand (+0.94%) and a revised non-OECD increase of
3.12%. The overall increase in demand is estimated at 1.74mn b/d. North America is now expected to see
expansion of 244,000b/d (+1.17%), with OECD European demand set to recover by 142,000b/d
(+1.10%). Non-OECD gains are expected to be 2.50% in Asia, 1.69% in Latin America, 3.64% in
Central/Eastern Europe, 4.07% in the Middle East and 1.66% in Africa.
The IEA, in its July 2010 Oil Market Report, predicts a slightly more bullish rise in 2010 oil demand of
2.13%, or 1.80mn b/d. The organisation’s assumptions suggest an impressive 4.35% rise in non-OECD
consumption (+1.71mn b/d). This points to 0.13% higher OECD oil demand, lagging the likely economic
recovery and any weather-related benefits accrued in Q1.
July 2010 EIA estimates suggest that world demand will rise y-o-y from 84.26mn b/d to 85.82mn b/d,
with the 1.56mn b/d increase in consumption amounting to a gain of 1.85%. This view sits just below the
somewhat more optimistic BMI assumption and the IEA’s still more generous estimate. Non-OECD
demand is predicted to increase by 3.91% (1.52mn b/d), while OECD demand is expected to rise by just
30,000b/d (0.07%). Consumption in the US is expected to increase by 200,000 b/d (1.07%). With
Canadian demand 3.26% higher and that of Europe 0.97% lower, it is in Japan that the US energy body
sees the greatest risk of a decline – forecasting a fall of 3.21%.

OPEC’s July 2010 report suggests a likely increase in 2010 global oil consumption of 0.95mn b/d, or
1.12%. OECD demand is forecast to fall by 150,000b/d (0.33%). Non-OECD demand is expected to
average 40.04mn b/d, compared with 38.93mn b/d in 2009 (+2.85%).
Table: Global Oil Consumption (000b/d)
2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Africa 3,578 3,710 3,753 3,813 3,904 4,001 4,131 4,262
Middle East 6,469 6,864 7,146 7,422 7,709 7,904 8,161 8,376
NW Europe 13,642 13,541 12,963 13,105 13,145 13,202 13,292 13,297
N America 23,003 21,785 20,881 21,125 21,070 21,187 21,304 21,422
Asia/Pacific 25,761 25,994 26,348 27,008 27,679 28,515 29,300 30,064
Central/Eastern Europe 5,965 6,129 5,831 6,043 6,205 6,368 6,537 6,712
Latin America 7,597 7,724 7,631 7,760 7,906 8,070 8,259 8,412
Total 86,075 85,855 84,651 86,391 87,742 89,405 91,149 92,719
OECD 44,999 43,395 41,508 41,900 41,636 41,868 42,055 42,194
non-OECD 41,076 42,460 43,143 44,491 46,106 47,537 49,094 50,526
Demand growth % 1.33 (0.26) (1.40) 2.06 1.56 1.90 1.95 1.72
OECD % (1.20) (3.56) (4.35) 0.94 (0.63) 0.56 0.45 0.33
Non-OECD % 4.26 3.37 1.61 3.12 3.63 3.10 3.27 2.92
f = forecast. Historical data: BP Statistical Review of World Energy, June 2010/BMI. All forecasts: BMI.
Short-Term Supply Outlook
According to the revised BMI model, 2010 global oil production will rise by 2.52%, representing an
OPEC increase of 3.47% and a non-OPEC gain of 1.80%. The overall increase in supply is estimated at
2.20mn b/d in 2010, which represents an upgrade from the forecast delivered by the April 2010 quarterly
report. We continue to assume that the existing OPEC production ceiling will be retained for the whole of
2010, but that actual output will remain close to the Q210 level. Should quota adherence deteriorate
further, then OPEC volumes could emerge rather higher.
The EIA was in July 2010 forecasting a 620,000b/d y-o-y rise in non-OPEC oil output, representing a
gain of 1.23%. World oil production is predicted to be 85.89mn b/d in 2010, up from 84.23mn b/d
(+1.66mn b/d) in 2009. The US organisation expects a 1.04mn b/d (3.07%) upturn in OPEC oil and
natural gas liquids (NGL) output.

OPEC itself sees 2010 non-OPEC supply rising by 740,000b/d to 51.86mn b/d. In 2010, OPEC NGLs and
non-conventional oils are expected to increase by 0.49mn b/d over the previous year to average 4.84mn
b/d. The July 2010 OPEC monthly report argues that the call on OPEC crude is expected to average
28.7mn b/d, representing a downward adjustment of 105,000b/d from its previous assessment and a
decline of 300,000b/d from the previous year. This suggests little scope for members to raise output.
The IEA’s 2010 assumption for non-OPEC oil supply is 52.40mn b/d, representing a rise of 1.47%. This
somewhat cautious view is based on output declines in Mexico, the UK and Norway, which offset partly
the growth predicted for Brazil, Russia, China, India and Colombia. OPEC production of NGLs is
expected to rise sharply from 4.66mn b/d to 5.26mn b/d. Increased biofuels supply (+16%) and a slight
downturn in processing gains imply a need for OPEC crude volumes of 28.83mn b/d in 2010. This is very
close to OPEC’s estimated Q210 output.
Table: Global Oil Production (000b/d)
2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Africa 10,229 10,190 9,671 10,225 10,514 10,874 11,375 11,931
Middle East 25,207 26,229 24,407 24,861 25,182 25,500 25,923 26,673
NW Europe 5,160 4,881 4,628 4,543 4,162 4,009 3,812 3,724
N America 10,167 10,002 10,408 10,475 10,545 10,565 10,585 10,600
Asia/Pacific 8,474 8,689 8,568 8,911 9,159 9,300 9,254 8,979
Central/Eastern Europe 12,954 12,977 13,368 13,628 13,854 13,936 14,044 14,402
Latin America 10,119 9,857 9,749 10,045 10,304 10,340 10,465 10,632
OPEC NGL adjustment 4,300 4,600 4,660 5,260 5,870 5,989 6,135 6,361
Processing gains 1,985 2,084 2,290 2,200 2,230 2,275 2,320 2,366
Total 88,573 89,493 87,795 90,004 91,584 92,572 93,689 95,406
OPEC 34,642 35,568 33,076 33,784 34,320 35,018 35,871 37,192
OPEC inc NGLs 38,942 40,168 37,736 39,044 40,190 41,008 42,007 43,553
Non-OPEC 49,631 49,325 50,059 50,960 51,394 51,564 51,683 51,852
Supply growth % 0.27 1.04 (1.90) 2.52 1.76 1.08 1.21 1.83
OPEC % (0.17) 3.15 (6.05) 3.47 2.93 2.03 2.44 3.68
Non-OPEC % 0.61 (0.62) 1.49 1.80 0.85 0.33 0.23 0.33
f = forecast. Historical data: BP Statistical Review of World Energy, June 2010/BMI. All forecasts: BMI.

Longer-Term Supply And Demand
The BMI model predicts average annual oil demand growth of 1.84% between 2010 and 2014, followed
by 1.47% between 2014 and 2019. After the forecast 2.06% global demand recovery in 2010, we are
assuming 1.56% growth in 2011, followed by 1.90% in 2012, 1.95% in 2013 and 1.72% in 2014.
OECD oil demand growth is expected to remain relatively weak throughout the forecast period to 2019,
reflecting market maturity, the ongoing effects of recent demand destruction and the greater commitment
to energy efficiency. Following the 4.35% decline in 2009 OECD oil consumption and the forecast 0.94%
rise in 2010, we expect to see a decrease of 0.63% in 2011. On average, OECD demand is forecast to rise
by 0.33% per annum in 2010-2014, then fall by 0.12% per annum in 2014-2019.
For the non-OECD region, the demand trend in 2010-2014 is for 3.21% average annual market
expansion, followed by 2.74% in 2014-2019. Demand growth is forecast to recover from 1.61% in 2009
to 3.12% in 2010 and 3.63% in 2011.
BMI is forecasting global oil supply increasing by an average 1.68% annually between 2010 and 2014,
with an average yearly gain of 1.64% predicted in 2014-2019. We expect the trend to be at its weakest
towards the end of the 10-year forecast period, with gains of just 1.21% and 0.62% predicted in 2018 and
2019.
Non-OPEC oil production is expected to rise by an annual average of 0.71% in 2010-2014, then 0.28% in
2014-2019. OPEC volumes are forecast to increase by an annual average of 2.91% between 2010 and
2014, rising to 3.19% per annum in 2014-2019.

Oil Price Assumptions
The OPEC basket price, having averaged an estimated US$76.59/bbl in Q210, is forecast to be US$86.67
in Q3 and US$93.33/bbl in Q4. The full year forecast remains an average of US$83.00/bbl. Brent, WTI
and Urals prices for 2010 are put at US$84.96, US$87.63 and US$83.80/bbl respectively.
Table: Crude Price Assumptions 2010
Q110 Q210e Q310f Q410f 2010f
Brent (US$/bbl) 76.24 78.30 87.62 97.68 84.96
Urals – Med (US$/bbl) 75.32 76.89 86.62 96.36 83.80
WTI (US$/bbl) 78.67 77.78 90.36 103.69 87.63
OPEC basket (US$/bbl) 75.40 76.59 86.67 93.33 83.00
Dubai (US$/bbl) 75.83 78.12 86.49 94.23 83.67
e/f = estimate/forecast. Source: BMI.
By 2011, there should be further growth in oil consumption and more room for OPEC to regain market
share and reduce surplus capacity through higher production quotas. We are assuming a further increase
in the OPEC basket price to an average US$85.00/bbl, implying Brent at US$87.01, WTI at
US$89.74/bbl and Urals at US$85.82. For 2012 and beyond, we continue to use a central case forecast of
US$90.00/bbl for the OPEC basket.
Table: Oil Price Forecasts
2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Brent (US$/bbl) 72.52 96.99 61.51 84.96 87.01 92.13 92.13 92.13
Urals - Med (US$/bbl) 69.51 94.49 61.04 83.80 85.82 90.87 90.87 90.87
WTI (US$/bbl) 72.26 99.56 61.68 87.63 89.74 95.02 95.02 95.02
OPEC basket (US$/bbl) 69.08 94.08 60.86 83.00 85.00 90.00 90.00 90.00
Dubai (US$/bbl) 68.37 93.56 61.69 83.67 85.69 90.73 90.73 90.73
f = forecast. Source: BMI.

Regional Market Overview
West and North Africa have an important role to play in terms of global oil supply, with Angola’s
offshore deepwater wealth an increasingly important factor. Nigeria is struggling to contend with
domestic political problems that have been hampering oil expansion. Gas is another important export
product for the region, largely in the form of LNG. North Africa and Nigeria play a growing role in the
supply of the world’s gas. The likes of Nigeria, Libya and Algeria have been renegotiating contract terms
with foreign partners so as to retain a greater share of hydrocarbons revenues.
Oil Supply And Demand
Perennial problem child Nigeria and West African rival Angola face further OPEC-related friction if they
continue to push for a revised output ceiling. A return by Nigeria to higher production levels has been
taking place, and further progress is possible during 2010/11. Thanks to this and the Angolan trend, our
data suggest that Africa is set to play an increasingly important role in world oil supply, with Angola
remaining a magnet for foreign investment – in spite of deepwater drilling concerns.
Overall African oil production will average a forecast 10.23mn b/d in 2010. By 2014, we see output rising
to at least 11.93mn b/d, when Angolan volumes are likely to have reached a plateau. We are assuming
steady growth from Algeria and Libya, with Nigeria seeing recovery from recent depressed levels.
African demand is set to increase from an estimated 3.81mn b/d in 2010 to 4.26mn b/d by 2014,
providing an export capability increasing from an estimated 6.41mn b/d to 7.67mn b/d.

Table: Africa’s Oil Consumption, 2007-2014 (000b/d)
Country 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Algeria 288 311 331 341 355 369 383 399
Angola 70 81 85 94 108 124 149 179
Cameroon 27 31 33 34 36 38 40 42
Republic of Congo 6 6 7 7 7 8 8 8
Egypt 650 693 720 734 756 779 810 835
Equatorial Guinea 1 1 1 1 1 1 1 1
Gabon 13 13 14 14 15 15 16 17
Libya 260 268 274 279 287 296 308 320
Nigeria 291 286 280 288 303 318 342 367
South Africa 550 532 518 523 531 539 547 555
Sudan 88 89 84 87 92 96 101 106
BMI universe 2,244 2,311 2,345 2,404 2,491 2,584 2,706 2,830
Other Africa 1,334 1,399 1,408 1,409 1,413 1,417 1,425 1,432
Regional total 3,578 3,710 3,753 3,813 3,904 4,001 4,131 4,262
f = forecast. Source: Historical data: BP Statistical Review of World Energy, June 2010; BMI
Oil use of 3.06mn b/d in 2001 rose to 3.75mn b/d in 2009. It should have averaged 3.81mn b/d in 2010
and then rise to around 4.26mn b/d by 2014. Algeria accounts for an estimated 8.94% of 2010 regional oil
consumption, with a likely market share of 9.36% by 2014.

Table: Africa’s Oil Production, 2007-2014 (000b/d)
Country 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Algeria 2,016 1,993 1,811 1,885 1,925 1,965 2,050 2,150
Angola 1,720 1,875 1,784 1,890 1,970 2,150 2,300 2,400
Cameroon 82 84 73 73 72 80 84 85
Egypt 710 722 742 730 715 685 700 683
Gabon 230 235 229 250 260 255 250 245
Libya 1,820 1,820 1,652 1,660 1,695 1,725 1,800 1,865
Nigeria 2,305 2,116 2,061 2,240 2,275 2,350 2,450 2,700
South Africa 16 15 11 12 15 17 16 16
Sudan 468 480 490 565 600 630 691 735
BMI universe 9,965 9,939 9,434 9,980 10,262 10,615 11,107 11,655
Other Africa 264 251 237 245 252 259 269 277
Regional total 10,229 10,190 9,671 10,225 10,514 10,874 11,375 11,931
Regional oil production was 7.93mn b/d in 2001, and in 2009 averaged 9.67mn b/d. From an estimated
10.23mn b/d in 2010, it is set to rise to 11.93mn b/d by 2014. Algeria in 2010 accounts for an estimated
18.44% of regional oil supply, and its market share is expected to be 18.02% by the end of the forecast
period.
Oil exports are growing steadily, because demand growth is lagging behind the pace of supply expansion.
In 2001, the region was exporting an average 4.87mn b/d. This total had risen to 5.92mn b/d in 2009 and
is forecast to reach 7.67mn b/d by 2014. Angola has the greatest production growth potential, with
Nigerian exports set to climb if it can resolve recent quasi-political issues.

Oil: Downstream
Table: Africa’s Oil Refining Capacity, 2007-2014 (000b/d)
Country 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Algeria 450 450 462 562 594 594 594 594
Angola 39 39 39 39 39 39 39 239
Cameroon 42 37 37 37 37 37 70 70
Equatorial Guinea na na na na na na na na
Egypt 726 726 726 726 726 726 726 976
Gabon 17 24 24 24 24 24 24 30
Libya 378 378 378 450 450 550 550 650
Nigeria 505 505 505 505 505 505 540 540
South Africa 485 485 485 485 485 485 485 485
Sudan 122 122 122 122 122 122 122 122
BMI universe 2,785 2,787 2,799 2,971 3,003 3,103 3,171 3,727
Other Africa 267 441 441 463 510 510 510 536
Regional total 3,052 3,228 3,240 3,434 3,513 3,613 3,681 4,263
Refining capacity for the region was 3.14mn b/d in 2001, rising gradually to 3.24mn b/d in 2009. Angola,
Algeria and Nigeria are all expected to increase significantly their domestic refining capacity, with the
region’s total capacity forecast to rise from an estimated 3.43mn b/d in 2010 to 4.26mn b/d by 2014. In
2010 Algeria has an estimated 16.38% of regional refining capacity, and its market share is forecast at
13.94% in 2014.

Gas Supply And Demand
Table: Africa’s Gas Consumption, 2007-2014 (bcm)
Country 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Algeria 24.3 25.4 26.7 27.5 28.9 30.5 32.1 33.7
Angola 2.5 3.5 4.0 5.0 6.0 7.0 8.1 9.3
Cameroon na na na na 0.2 0.2 0.2 0.2
Republic of Congo na 0.5 0.5 1.0 1.0 1.2 1.5 2.0
Egypt 38.4 40.8 42.4 44.6 46.8 48.9 51.3 53.4
Equatorial Guinea 1.4 1.5 1.5 1.6 1.7 1.8 1.9 2.0
Gabon 0.1 0.1 0.1 0.2 0.5 1.0 1.0 1.0
Libya 5.3 5.5 5.8 6.3 7.0 7.8 9.0 9.6
Nigeria 10.6 12.3 8.9 13.0 15.0 18.5 21.0 25.0
South Africa 5.9 6.5 7.0 7.0 9.0 10.0 10.5 12.0
Sudan na na na na na na na na
BMI universe 88.5 96.1 97.1 106.4 116.1 126.8 136.6 148.2
Other Africa 16.6 16.6 16.6 16.6 16.6 16.6 16.6 17.4
Regional total 105.1 112.7 113.6 122.9 132.6 143.4 153.2 165.6
f = forecast. na= not applicable. Source: Historical data: BP Statistical Review of World Energy, June 2010; BMI

Table: Africa’s Gas Production, 2007-2014 (bcm)
Country 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Algeria 84.8 85.8 81.4 83.0 90.0 103.0 111.0 116.5
Angola 2.5 3.5 4.0 5.0 6.0 12.0 15.0 16.3
Cameroon na na 0.1 0.2 0.2 0.2 0.2 0.2
Republic of Congo na 0.5 0.5 1.0 1.0 1.2 1.5 2.0
Egypt 55.7 59.0 62.7 64.0 66.0 70.0 73.0 75.0
Gabon 0.1 0.1 0.1 0.2 0.5 1.0 1.0 1.0
Libya 15.3 15.9 15.3 16.2 17.0 18.0 19.5 20.5
Nigeria 35.0 35.0 24.9 35.0 38.0 42.0 49.0 55.0
South Africa 3.3 3.3 3.5 3.5 3.5 5.0 7.0 7.0
Sudan na na na na na na na na
BMI universe 201.7 209.8 198.7 214.5 228.6 258.9 283.8 300.2
Other Africa 2.7 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Regional total 204.4 214.8 203.7 219.5 233.6 263.9 288.8 305.2
f = forecast. na = not applicable. Source: Historical data: BP Statistical Review of World Energy, June 2010; BMI
In terms of natural gas, the region in 2010 will have consumed an estimated 122.9bcm, with demand of
165.6bcm forecast for 2014. Production of an estimated 219.5bcm in 2010 should reach 305.2bcm in
2014, which implies net exports rising from 97bcm to 140bcm in 2014. In 2010, Algeria’s share of
regional gas supply is an estimated 37.82%, rising to 38.17% by 2014. The country’s share of demand in
2010 is an estimated 18.44%, with 18.02% predicted by 2014.

Liquefied Natural Gas
Table: Africa’s LNG Exports, 2007-2014 (bcm)
Country 2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Algeria 24.7 21.9 20.9 20.5 21.1 21.5 27.9 27.8
Angola na na na na na 5.0 7.0 7.0
Cameroon na na na na na na na na
Egypt 13.6 14.1 12.8 13.9 13.7 15.6 16.2 16.1
Libya 0.8 0.5 0.7 0.7 0.7 0.7 0.7 0.7
Nigeria 21.2 20.5 16.0 20.0 21.0 21.0 26.0 27.5
Regional total 60.3 62.2 55.1 59.9 61.2 68.6 82.4 83.8
f = forecast. na = not applicable. Source: Historical data: BP Statistical Review of World Energy, June 2010; BMI
The highest growth in LNG exports by 2014 will come from Nigeria (+37.5% from 2010) and from Egypt
(+15.6%) thanks to its IOC-partnered schemes. There will also be growing volumes from Libya and
Algeria. Angola has significant longer-term gas export potential, although the first volumes have yet to
flow and the most rapid growth phase will occur in the next decade. Equatorial Guinea aims to become a
regional LNG export hub, while Cameroon looks set to become an LNG exporter by around 2016.

Business Environment Ratings
The African region comprises 11 countries, including all major West and North African states.
Government influence remains very high, with limited privatisation activity. Oil production growth for
the period 2010-2014 ranges from a negative 6.5% for Egypt to a positive 30.1% in Sudan, while oil
demand growth ranges from 6.1% to 90.4% across the region. Gas output is forecast to rise in most
countries, led by a 400% rise in Gabon (from a very low base), 226% in Angola and 100% in Congo. The
spread of gas demand growth estimates ranges from 4.1% to 131.4%. The political and economic
environment varies, depending partly on market maturity and specific factors such as the quasi-political
oil disruptions in Nigeria and sanction-prone Sudan.
Composite Scores
Composite Business Environment scores are calculated using the average of individual upstream and
downstream ratings. South Africa now holds the top slot of the regional league table and Sudan is at the
bottom. The composite upstream and downstream scores are 62 points and 41 points respectively, out of a
possible 100. The range is narrow, compared with other regions.
South Africa has pulled clear of Algeria, and leads by six points that should see it safe for a few quarters.
Algeria is just one point clear of Egypt and Nigeria, which share third place. Angola is capable of moving
higher if the risk outlook improves, breaking away from Libya with which it currently shares fifth place.
Gabon is now three points behind its hydrocarbons-rich West African neighbours, but is five points clear
of Congo. Cameroon is hot on the tail of Congo, while remaining clear of regional laggards Equatorial
Guinea and Sudan at the foot of the table.
Table: Regional Composite Business Environment Rating
Upstream Rating Downstream Rating Composite Rating Rank
South Africa 60 63 62 1
Algeria 56 56 56 2
Egypt 52 58 55 3=
Nigeria 58 51 55 3=
Angola 57 51 54 5=
Libya 61 47 54 5=
Gabon 61 41 51 7
Rep of Congo 51 40 46 8
Cameroon 50 39 44 9
Equatorial Guinea 45 41 43 10
Sudan 38 44 41 11
Source: BMI. Scores are out of 100 for all categories, with 100 the highest.

Upstream Scores
Gabon/Libya and Sudan are now the best and worst performers in this segment, showing that the overall
pecking order is quite different from that for combined scores. Gabon has moved higher to share first
place with Libya, with both just one point ahead of a vulnerable South Africa. Nigeria and Angola have
longer-term potential to climb higher, with South Africa a near-term target. Algeria is closing in on
Angola and Nigeria, taking sixth place with 56 points.
Republic of Congo and Egypt are bickering over seventh place with 51 and 52 points respectively.
Cameroon is just one point further back and has longer-term potential to catch the two of them. All three
should be able to stay ahead of Equatorial Guinea and Sudan for the foreseeable future.
Table: Regional Upstream Business Environment Ratings
Rewards Risks
Industry
Rewards
Country
Rewards Rewards
Industry
Risks
Country
Risks Risks
Upstream
Rating Rank
Gabon 58 65 59 80 40 66 61 1=
Libya 63 70 64 60 43 54 61 1=
South Africa 44 70 50 95 62 83 60 3
Nigeria 68 50 63 55 33 47 58 4
Angola 61 60 61 60 28 49 57 5
Algeria 50 85 59 55 39 49 56 6
Egypt 40 70 48 75 42 63 52 7
Rep of Congo 46 55 48 70 37 58 51 8
Cameroon 53 20 44 80 35 64 50 9
Sudan 35 30 34 60 21 47 38 11
Scores are out of 100 for all categories, with 100 the highest. The Upstream BE Rating is the principal rating. It
comprises two sub-ratings ‘Rewards’ and ‘Risks’, which have a 70% and 30% weighting respectively. In turn, the
‘Rewards’ Rating comprises Industry Rewards and Country Rewards, which have a 75% and 25% weighting
respectively. They are based upon the oil and gas resource base/growth outlook and sector maturity (Industry) and the
broader industry competitive environment (Country). The ‘Risks’ rating comprises Industry Risks and Country Risks
which have a 65% and 35% weighting respectively and are based on a subjective evaluation of licensing terms and
liberalisation (Industry) and the industry’s broader Country Risks exposure (Country), which is based on BMI’s
proprietary Country Risk Ratings. The ratings structure is aligned across the 14 Industries for which BMI provides
Business Environment Ratings methodology, and is designed to enable clients to consider each rating individually or as
a composite, with the choice depending on their exposure to the industry in each particular state. For a list of the
data/indicators used, please consult the appendix. Source: BMI

Algeria Upstream Rating – Overview
Algeria now holds sixth place in the updated upstream Business Environment ratings, sandwiched
between Angola and Egypt. The country’s score benefits from healthy oil and gas reserves, a large
number of non-state companies active in the upstream sector and decent licensing terms.
Algeria Upstream Rating – Rewards
Industry Rewards: On the basis of upstream data alone, Algeria ranks sixth in the African region, above
Republic of Congo. The country ranks fourth in terms of oil reserves and second for gas reserves, but
only fifth and ninth respectively for oil and gas production growth prospects.
Country Rewards: Contributing to Algeria’s equal fourth position with Gabon in the Rewards section is
its top-ranked country rewards rating, well ahead of Egypt, Libya and South Africa. Algeria ranks first by
the number of non-state operators in the upstream sector.
Algeria Upstream Rating – Risks
Industry Risks: Algeria is ranked equal eighth with Angola in the Risks section of our ratings. Its equal
last place with Nigeria for industry risks is attributable to a moderately attractive licensing environment
being countered by limited privatisation progress. Moves to impose windfall taxes on oil producers are
seen as a negative and a possible indication of greater state control over upstream assets.
Country Risks: Its broader country risks environment is somewhat more attractive, ranking Algeria sixth
ahead of Congo. The best score is for physical infrastructure, which represents the only major benefit for
private companies. Long-term policy continuity receives a mid-range score, but the ability of private
companies to operate is hindered by the country’s low scores for rule of law and corruption.

Downstream Scores
South Africa and Cameroon are in the top and bottom places respectively in the downstream ratings, with
the former driven by the size of the fuels market, privatisation moves and the competitive landscape, plus
a reasonable country risk rating. Egypt still holds second place, but is at some risk from Algeria. Both are
currently well clear of Angola, which has been caught by Nigeria. Sudan has moved ahead of Equatorial
Guinea and Gabon, with Congo and Cameroon squabbling at the foot of the ladder.
Table: Regional Downstream Business Environment Ratings
Rewards Risks
Industry
Rewards
Country
Rewards Rewards
Industry
Risks
Country
Risks Risks
Downstream
Rating Rank
South Africa 46 88 56 100 47 79 63 1
Egypt 64 58 63 45 53 48 58 2
Algeria 63 52 61 40 55 46 56 3
Angola 66 50 62 15 46 27 51 4=
Nigeria 56 72 60 20 45 30 51 4=
Libya 54 38 50 30 54 39 47 6
Sudan 38 54 42 55 39 49 44 7
Equatorial
Guinea 38 26 35 60 49 55 41 8=
Gabon 30 42 33 70 41 58 41 8=
Rep of Congo 40 38 40 65 7 42 40 10
Cameroon 38 30 36 45 45 45 39 11
Scores are out of 100 for all categories, with 100 the highest. The Downstream BE Rating comprises two sub-ratings
‘Rewards’ and ‘Risks’, which have a 70% and 30% weighting respectively. In turn, the ‘Rewards’ Rating comprises
Industry Rewards and Country Rewards, which have a 75% and 25% weighting respectively. They are based upon the
downstream refining capacity/product growth outlook/import dependence (Industry) and the broader socio-demographic
and economic context (Country). The ‘Risks’ rating comprises Industry Risks and Country Risks which have a 60% and
40% weighting respectively and are based on a subjective evaluation of regulation and liberalisation (Industry) and the
industry’s broader Country Risks exposure (Country), which is based on BMI’s proprietary Country Risk Ratings. The
ratings structure is aligned across the 14 Industries for which BMI provides Business Environment Ratings methodology,
and is designed to enable clients to consider each rating individually or as a composite, with the choice depending on
their exposure to the industry in each particular state. For a list of the data/indicators used, please consult the appendix.
Source: BMI

Algeria Downstream Rating – Overview
Algeria is near the top of the league table in BMI’s updated downstream Business Environment ratings,
with some high scores but progress further up the rankings unlikely. It is ranked third behind Egypt,
thanks to high scores for gas consumption, nominal GDP, likely refining capacity expansion and oil
demand growth.
Algeria Downstream Rating – Rewards
Industry Rewards: On the basis of downstream data alone, Algeria ranks third, behind Egypt and
Angola, of the 11 countries, reflecting the country’s fourth-ranked refining capacity and oil demand, plus
second-ranked gas consumption. Refining capacity expansion and gas demand growth are third and fifth
respectively for the region.
Country Rewards: Algeria ranks third behind Angola in terms of the Rewards section, and its country
rewards rating holds fifth place in the region. Population ranks the country fifth, while growth in GDP per
capita is seventh-highest. Competition attracts a below-average score.
Algeria Downstream Rating – Risks
Industry Risks: In the Risks section of our ratings, Algeria is ranked sixth just ahead of Cameroon. Its
eighth-highest score for industry risks, behind Egypt and Cameroon, reflects the regulatory regime and
limited progress in terms of privatisation of government-held assets.
Country Risks: Its broader country risks environment is attractive, ranked first, ahead of Egypt. The best
score and optimum score is for short-term economic external risk, followed by short-term policy
continuity. Physical infrastructure is somewhat better than the regional norm but operational risks for
private companies are increased by the state’s short-term economic growth risk, rule of law and legal
framework.

Risk Summary
Political
The recent visit of the Chinese State Councillor Dai Bingguo to Algiers is intended to improve the already
prolific bilateral relations between the two countries. In a statement offered to Algerian President
Abdelaziz Bouteflika, the Chinese official said that this visit was an opportunity to listen to the Algerian
leadership's views on ways to upgrade the Sino-African relations. These developments are set to serve
both the interest of the two nations involved, as well as those of Africa in general. Two agreements were
signed during this visit, covering an exchange programme in the field of higher education and scientific
research, as well as a memorandum of economic and technical cooperation.
Economic
We expect Algeria's current account surplus growth to pick up in 2010 and expand to 17.8% of GDP,
after last year's figure reading 9.7%, the lowest of the decade. This year's increase will be primarily
attributable to a projected 34.2% y-o-y growth in exports, due to still elevated oil prices, but also a low
base in 2009. Imports will also grow but only by 10.0% in 2010, contributing to the widening of the
current account surplus. The progress in general trade is, however, susceptible to oil price volatility, given
that hydrocarbons exports are accountable for a projected 98.5% of total exports in 2010.
Business Environment
A new monthly 0.5% tax on revenues of mobile operators was imposed by the Algerian government this
month. This has a direct impact on Djezzy, the Algerian unit of Egypt's mobile phone operator Orascom,
implying a further US$4.6mn deducted from its US$1.82bn total annual revenue. This will add to
previous shocks suffered by Djezzy, with the 2009 introduction of a 5% sales tax on credit recharges
charged on the operators, and the 42.0% lowering of interconnection rates in the same year. This is a
mark of Algeria's unpredictable and often damaging policies towards foreign investors. Given the
government's plans to prioritise local businesses over foreigners, there could be more bad news in the
pipeline for the likes of Djezzy.

Industry Forecast Scenario
Oil And Gas Reserves
With recent oil discoveries, plans for more exploration drilling, improved data on existing fields and use
of enhanced oil recovery schemes, proven oil and gas reserves should rise. The June 2010 BP Statistical
Review of World Energy estimate for proven oil reserves is 12.2bn bbl. There is scope for expansion,
with BMI assuming 12.5bn bbl by 2012. Estimates of ‘recoverable oil resources’ range as high as 43bn
bbl. Exploration success rates in the Berkine Basin have been high and several billion barrels of oil may
lie in the area. With gas, we see the 2009 reserves estimate of 4,500bcm rising to 4,800bcm in 2014.
In August 2009 BP announced plans to invest US$2bn over five years (or an average of US$400mn a
year) in Algeria. The investment would signify a continuation of BP’s strategy in the country, where it
had spent a total of US$5bn in the previous 12 years (equal to an average of US$417mn a year). BP plans
to drill new exploration wells, maintain production at the In Salah and In Amenas gas fields, and develop
a US$100mn carbon capture and storage (CCS) project at the In Salah field. These plans, of course, pre-
date the Deepwater Horizon affair in the US Gulf, with capital expenditure set to be reviewed in its wake.
Oil Supply And Demand
Productive crude capacity is thought to
have reached 1.40mn b/d by the end of
2009, although June 2010 crude output
averaged an estimated 1.25mn b/d.
Including condensates and gas liquids,
total production in 2009 was around
1.81mn b/d.
Anadarko Petroleum has announced
that the development of the El Merk oil
field project is on schedule, with
production due to start in late 2011. In an
August 2009 conference call with
investors, the company’s CEO, Jim
Hackett, said site preparation was under
way, with the majority of contracts having been awarded.
We are assuming OPEC resistance to continuing output expansion in excess of quota, limiting Algeria’s
production growth. Combined oil, condensate and gas liquids output is forecast to increase to 2.15mn b/d
Algerian Oil Production,
Consumption And Exports
2000-2014
f = forecast. Source: Historical data: BP Statistical Review of World
Energy, June 2010. Forecasts, BMI.

in 2014, with exports heading towards 1.75mn b/d. We expect Algerian oil demand of 331,000b/d in 2009
to rise to 399,000b/d by 2014.
Gas Supply And Demand
Algeria’s total natural gas export
capacity, via pipeline and LNG tanker, is
now believed to be more than 70bcm a
year. This should increase rapidly as
major new gas fields, export pipelines
and LNG facilities come online.
Algeria’s goal was to export 85bcm a
year by 2010, but our forecasts suggest
that this target is not feasible before
2014/15. We forecast that 2009 gas
production of 81.4bcm will reach
116.5bcm by 2014. Consumption of
around 26.7bcm in 2009 is expected to
rise to 33.7bcm by the end of the forecast
period, providing exports of 82.8bcm.
The Gassi Touil venture, in the Saharan Berkine Basin, has suffered considerable delays and cost
overruns. It is now set to enter production no earlier than 2013. The project includes a liquefaction
terminal, which will be located in the industrial area of Arzew. The gas to be used will originate from
reserves that have already been discovered in the Gassi Touil, Rhourde Nouss and Hamra areas. The
project delay accounts for a reduction in terms of gas export forecasts.
Plans to expand significantly exports of gas by sea and pipeline have been delayed by Sonatrach.
Customers may have to wait two years to receive the extra volumes, putting extra pressure on the
European gas market. According to Sonatrach’s former chairman and CEO Mohamed Meziane, a 31%
increase in pipeline and LNG supplies can be expected by 2012, rather than the original 2010 start date.
GdF Suez and Sonatrach have announced that they will jointly develop the Touat gas field in the south-
west of Algeria. According to a July 2009 joint company statement, the partners were to start work on the
US$1.5bn project later in 2009, with the aim of bringing the field onstream in 2013. Peak output should
reach around 4.5bcm per annum.
Algerian Gas Production,
Consumption And Exports
2000-2014
f = forecast. Source: Historical data: BP Statistical Review of World
Energy, June 2010. Forecasts, BMI.

Total and its Spanish partner CEPSA were due to have started the development phase of the Timimoun
gas project in late 2009 following the receipt of final regulatory approvals in October. The Timimoun
field is expected onstream in 2013, with annual output of 1.6bcm.
LNG
Algeria was the world’s first producer of LNG and was the fourth largest exporter of LNG in 2008
(behind Qatar, Malaysia and Indonesia), with around 10% of the world’s total. Most of the gas goes to
Western Europe. The Algerian government believes that it will become the world’s biggest LNG exporter
by 2011/2012, thanks to project expansion.
Poland hopes to receive its first shipments of LNG from Algeria by 2010-2011. The governments of the
two countries signed a memorandum of understanding (MoU) on energy cooperation in January 2007 as
part of Poland’s plans to wean itself off its dependence on energy supplies from Russia. Polish gas
monopoly PGNiG has held exploratory talks on a possible supply contract with Sonatrach.
GdF Suez, Europe’s leading LNG importer, signed a deal with Sonatrach in December 2007 to extend
existing LNG supply contracts from 2013 to 2019. The contracts had a total annual value of around
EUR2.5bn (US$3.7bn) under the market conditions of the time. The deal was agreed during French
President Nicolas Sarkozy’s visit to Algeria, and several other agreements on energy were signed,
including a wide-ranging accord on civil nuclear power and a commitment from French major Total to
invest EUR1bn (US$1.5bn) in a new petrochemical plant in the country.
Sonatrach has awarded construction contracts for an LNG plant at Arzew, which will have a capacity of
4.7mn tonnes per annum (tpa). The project will be fully financed by Sonatrach at a cost of DZD227bn
(US$4.49bn). Gas for the facility will be sourced from Algeria’s Gassi Touil and Rhourd Nouss fields,
with a planned 2013 start-up.
Refining And Oil Products Trade
There are currently four operating refineries in Algeria: two mid-sized 60,000b/d refineries at the port
cities of Algiers and Arzew, a 30,000b/d plant near the Hassi-Messaoud flagship oil field and a large
300,000b/d complex in the Skikda industrial park on the north-east coast. The Skikda complex is being
expanded. A US$1.2bn modernisation contract was awarded to Samsung Engineering in May 2009, with
the view of boosting refining capacity by 32,000b/d in 2012, while a subsidiary of China’s CNPC handed
over a new turnkey 100,000b/d processing unit in July 2009, which should enter production in 2010.
In March 2009 Sonatrach announced that it would invest US$63.5bn in petrochemical plants and
refineries, as well as oil field expansion, between 2009 and 2013. This represents a 41% increase from an

estimated US$45bn planned for 2008-2012. We are assuming refining capacity rising from 462,000b/d in
2009 to 594,000b/d by 2014. The country has considerable refined oil products export capability, which
delivers substantial revenues to the treasury.
Revenues And Import Costs
Our OPEC basket oil price assumption for 2010 is US$83.00/bbl, rising in 2011 to US$85.00/bbl. For
2012-2014 we forecast US$90.00/bbl. The implication is for Algerian oil export revenues to rise from an
estimated US$46.78bn in 2010 to US$57.53bn in 2014. Gas export revenues in 2010 are estimated at
US$18.48bn and could be US$29.81bn by 2014. Combined Algerian oil and gas revenues are put at
US$65.25bn in 2010, rising to US$87.34bn by the end of the forecast period.

Table: Algeria’s Oil And Gas, 2007-2014
2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Proven reserves, bn barrels 12.2 12.2 12.2 12.2 12.3 12.5 12.5 12.5
Oil production, 000b/d 2,016 1,993 1,811 1,885 1,925 1,965 2,050 2,150
Oil consumption, 000b/d 288 311 331 341 355 369 383 399
Oil refinery capacity, 000b/d (EIA, BMI) 450 450 462 562 594 594 594 594
Oil exports, 000b/d (BMI) 1,728 1,682 1,480 1,544 1,570 1,596 1,667 1,751
Oil price, US$/bbl, OPEC basket 69.1 94.1 60.9 83.0 85.0 90.0 90.0 90.0
Value of oil exports, US$mn (BMI base
case) 43,570 57,755 32,878 46,776 48,723 52,437 54,745 57,526
Value of petroleum exports, US$mn
(BMI base case) 56,965 77,913 46,243 65,254 69,534 78,507 83,187 87,339
Value of oil exports at constant
US$50/bbl, US$mn 31,536 30,697 27,010 28,179 28,660 29,132 30,414 31,959
Value of oil exports at constant
US$100/bbl, US$mn 63,072 61,393 54,020 56,359 57,321 58,263 60,827 63,917
Value of petroleum exports at constant
US$50/bbl, US$mn 42,020 40,393 36,728 39,311 40,902 43,615 46,215 48,522
Value of petroleum exports at constant
US$100/bbl, US$mn 84,039 80,786 73,456 78,622 81,804 87,230 92,430 97,044
Refined petroleum products exports,
000b/d (BMI) 117 94 85 165 180 166 151 136
Gas proven reserves, tcm 4.50 4.50 4.50 4.50 4.60 4.80 4.70 4.59
Gas production, bcm 84.8 85.8 81.4 83.0 90.0 103.0 111.0 116.5
Gas consumption, bcm 24.3 25.4 26.7 27.5 28.9 30.5 32.1 33.7
Gas exports, bcm (BMI) 60.5 60.4 54.7 55.5 61.1 72.5 78.9 82.8
Value of gas exports, US$mn (BMI
base case) 13,395 20,157 13,365 18,478 20,811 26,070 28,443 29,814
Value of gas exports at constant
US$50/bbl, US$mn 10,484 9,696 9,718 11,132 12,242 14,483 15,802 16,563
Value of gas exports at constant
US$100/bbl, US$mn 20,967 19,393 19,436 22,263 24,484 28,967 31,603 33,126
LNG exports, bcm 24.7 21.9 20.9 20.5 21.1 21.5 27.9 27.8
LNG price, US$/mn BTU 7.73 12.55 9.06 12.36 12.65 13.40 13.40 13.40
LNG revenues, US$mn (BMI) 5,346 7,696 5,302 7,092 7,484 8,079 10,452 10,411
f = forecast. Source: Historical data: BP Statistical Review of World Energy June 2010, EIA, unless otherwise stated

Other Energy
Power consumption amounted to an estimated 30.7TWh in 2009 and is forecast to reach 38.9TWh by the
end of the forecast period, providing a broadly balanced market, assuming 5.3% average annual growth
(2010-2014) in electricity generation.
Conventional thermal sources are expected to remain the dominant fuel for electricity generation in the
coming years, with many power projects under construction or planned that will use natural gas. BMI’s
projections see estimated gross Algerian power generation of 41.0TWh in 2009 rising to 53.4TWh by
2014, having in 2009 risen by 2.8%. Algeria’s thermal generation in 2009 was an estimated 40.8TWh, or
3.84% of the regional total. By 2014, the country is expected to account for 4.06% of thermal generation.
Algeria has signed a nuclear cooperation accord with the US that may enable it to develop nuclear power
generation capability in the long term. The country has large uranium deposits and two nuclear research
reactors, but has no immediate plans for nuclear power. Under the accord, US nuclear officials will work
with partners from Algeria’s Atomic Energy Commission to determine possible projects of common
interest. Algeria plans to sign similar agreements with South Africa, which has Africa’s only nuclear
power plant, and Egypt. Its traditional partners are China, which helped supply a 15MW reactor at Ain
Ouassara in Algeria’s Djelfa region, and Argentina, which helped to build a 3MW reactor at Draria near
Algiers. Algeria signed a deal with Russia in January 2007 on possible nuclear cooperation. Iran has also
offered to share nuclear expertise.
Algeria has no significant hydro-electric power generating capacity and there are no major development
projects. BMI is predicting just 0.8TWh of hydro-power generation by 2014.
The Hassi R’mel integrated solar combined cycle power station is a hybrid power station near Hassi
R’mel in Algeria. The plant combines a 25MW parabolic trough concentrating solar power array,
covering an area of over 180,000m2
, in conjunction with a 130MW combined cycle gas-turbine plant. The
plant has been developed by New Energy Algeria (NEAL), a joint venture between Sonatrach Sonelgaz
and SIM.
Reports on news service Reuters suggest that Algeria’s largest private company, Cevital, is planning to
build a US$8bn solar power complex in Algeria to export renewable electricity to Europe. The plant will
have around 2GW of capacity and the company is now seeking foreign investors to help fund the project.

Table: Algeria’s Other Energy, 2007-2014
2007 2008 2009 2010f 2011f 2012f 2013f 2014f
Coal reserves, mn tonnes na na na na na na na na
Coal production, mn tonnes na na na na na na na na
Coal consumption, mn toe 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7
Electricity generation, TWh 37.0 40.0 42.8 43.4 45.6 48.1 50.8 53.4
Thermal power generation, TWh 37.0 39.8 40.8 43.0 45.1 47.5 50.1 52.6
Hydro-electric power generation, TWh 0.2 0.3 0.3 0.4 0.5 0.6 0.7 0.8
Consumption of hydro-electric power,
TWh 0.2 0.3 0.3 0.4 0.5 0.6 0.7 0.8
Consumption of nuclear energy, TWh na na na na na na na na
Primary energy consumption, mn toe 35.6 37.6 39.7 41.3 43.1 45.5 47.5 50.1
f = forecast; na = not applicable. Source: Historical data, BP Statistical Review of World Energy, June 2010.
Forecasts: BMI.
Key Risks To BMI’s Forecast Scenario
Oil price sensitivity is high and has a dramatic impact on the Algerian economy. Should the OPEC basket
price average US$50/bbl for the years 2010-2014, export revenues (crude oil and natural gas combined)
would average US$39.31bn to US$48.52bn. However, at an average of US$100/bbl, the total income
ranges from an estimated US$78.62bn to US$97.04bn.
Long-Term Oil And Gas Outlook
Details of BMI’s 10-year forecasts can be found in the appendix to this report. Between 2010 and 2019
we are forecasting an increase in Algerian oil and gas liquids production of 37.9%, with volumes rising
steadily from an estimated 1.89mn b/d in 2010 to 2.60mn b/d by the end of the 10-year forecast period.
Oil consumption between 2010 and 2019 is set to increase by 42.3%, with growth slowing to an assumed
4.0% per annum towards the end of the period and the country using 485,000b/d by 2019. Gas production
is expected to rise to 135bcm by the end of the period. With demand rising by 55.1% between 2010 and
2019, there should be export potential increasing from 56bcm to 92bcm, in the form of LNG and by
pipeline.

Oil And Gas Infrastructure
Oil Refineries
There are currently four operating refineries in Algeria: two mid-sized 60,000b/d refineries at the port
cities of Algiers and Arzew, a 30,000b/d plant near the Hassi-Messaoud flagship oil field and a large
300,000b/d complex in the Skikda industrial park on the north-east coast. The Skikda complex is being
expanded. A US$1.2bn modernisation contract was awarded to Samsung Engineering in May 2009, with
the view of boosting refining capacity by 32,000b/d in 2012, while a subsidiary of China’s CNPC handed
over a new turnkey 100,000b/d processing unit in July 2009, which should enter production in 2010.
Table: Refineries In Algeria
Refinery
Capacity
(b/d)
Owner
(Contractor) Completed Details
Skikda 300,000 Sonatrach/Naftal 1980 Processes Saharan Blend
Algiers 60,000 Sonatrach/Naftal 1964
Arzew 60.000 Sonatrach/Naftal 1972 Built by Itochu
Hassi-Messaoud 30,000 Sonatrach/Naftal 1962
Total Capacity 450,000
Planned Additional Capacity
Skikda 100,000 CNPC 2010
Source: Company data
Skikda Refinery
The Skikda refinery, founded in 1980, is the largest refinery in the country and one of the largest in
Africa. The refinery runs on Saharan blend, which is sourced from the area of Hassi Messaoud via
pipeline and from the Skikda oil terminal. The plant is linked to a petrochemicals complex in the same
city.
Gas Pipelines
Algeria is a major gas exporter, sending abroad 33.8bcm of gas through its pipelines in 2009, with
another 20.9bcm exported in the form of LNG. Currently, the country has two operational gas export
pipelines from its flagship Hassi R’Mel gas field: one to Spain and one to Italy. The 12bcm Maghreb-
Europe gas pipeline (MEG, also known as the Pedro Duran Farrell pipeline) came onstream in 1996,
linking Hassi R’Mel to the southern Spanish city of Cordoba. The Trans-Mediterranean pipeline
(TransMed, aka Enrico Mattei pipeline) runs via Tunisia to Sicily and thence to mainland Italy. An

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