Identifier
Created
Classification
Origin
06ALGIERS781
2006-04-29 16:44:00
UNCLASSIFIED
Embassy Algiers
Cable title:  

HEAD OF SHELL ALGERIA OFFERS VIEWS ON ALGERIAN

Tags:  ENRG EPET AG 
pdf how-to read a cable
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ZNR UUUUU ZZH
R 291644Z APR 06
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC 0967
INFO RUEHHH/OPEC COLLECTIVE
RUEHMD/AMEMBASSY MADRID 8449
RUEHNM/AMEMBASSY NIAMEY 1157
RUEHTC/AMEMBASSY THE HAGUE 0409
RUEHKL/AMEMBASSY KUALA LUMPUR 0035
RUEHAT/AMCONSUL AMSTERDAM 0001
RUEHOS/AMCONSUL LAGOS 0052
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
UNCLAS SECTION 01 OF 02 ALGIERS 000781 

SIPDIS

SIPDIS

DEPARTMENT FOR INR/B

E.O. 12958: N/A
TAGS: ENRG EPET AG
SUBJECT: HEAD OF SHELL ALGERIA OFFERS VIEWS ON ALGERIAN
ENERGY SECTOR

ALGIERS 00000781 001.2 OF 002


UNCLAS SECTION 01 OF 02 ALGIERS 000781

SIPDIS

SIPDIS

DEPARTMENT FOR INR/B

E.O. 12958: N/A
TAGS: ENRG EPET AG
SUBJECT: HEAD OF SHELL ALGERIA OFFERS VIEWS ON ALGERIAN
ENERGY SECTOR

ALGIERS 00000781 001.2 OF 002



1. Summary: The head of Shell Algeria, Michael Blaha,
described to Econoff April 24 his perspective on Sonatrach
and the impact of the 2005 hydrocarbon law. Blaha noted the
difficulties the Algerians were having in finding experienced
workers for Algeria's new energy regulatory agencies that
were established by the law. He said that he viewed
Sonatrach, now stripped of its monopoly over Algerian
extraction, as modeling itself along the lines of
international energy companies such as Norway's Statoil or
Malaysia's Petronas. Blaha described how after a nearly 15
year absence from Algeria, Shell had acquired exploration
blocks and was conducting a feasibility study of Nigerian gas
reserves to evaluate its role in the Trans-Saharan Pipeline
project. End Summary.

DISORDER ACCOMPANIES NEW HYDROCARBON LAW
--------------


2. Michael Blaha, the head of Shell Algeria, described to
Econoff April 24 the disorder that accompanied the adoption
of Algeria's new hydrocarbon law in 2005, which spun off
Sonatrach's regulatory functions into separate agencies and
required Sonatrach to compete with international competitors
in bids for Algerian energy projects. Specifically, Blaha
underscored the lack of expertise in the new regulatory
agencies (ALNAFT and ARH) created under the law. Blaha noted
that the new agencies were in the process of "poaching"
experts from Sonatrach, but it was a slow process; Blaha
intimated that Sonatrach was reluctant to see some of these
experts go. He summarized the new hydrocarbon law as the
"minimum" Algeria could have done. The changes undertaken in
the law, he said, were not as revolutionary as the fanfare
that accompanied them might have suggested; in fact, the GoA
had been planning the reforms for a long time.

VIEWS ON FUTURE OF SONATRACH
--------------


3. Stripped of its monopoly over Algerian extraction, Blaha
said he viewed Sonatrach as modeling itself along the lines
of international energy companies such as Norway's Statoil or
Malaysia's Petronas. To accomplish this goal, Sonatrach
recently established an international division. Queried on
whether its approach to internationalization would be through
the sharing of LNG technologies that Sonatrach helped pioneer
in the 1960s, Blaha commented that Algeria's LNG technology
was no longer state of the art. Rather, Sonatrach's
comparative advantage was in hydrocarbon trading. Blaha
described the Algerians as "very savvy traders."


4. Specifically, Blaha highlighted the role of Sonatrach's
vice president for commercialization, Ali Hached, whom he
described as perhaps the second most important person in the
Algerian energy sector behind Minister of Energy and Mines
Chakib Khelil. Blaha said Hached has determined Sonatrach's
pricing decisions for the last 12 years. Hached also
formulated the policy to sell gas to Spain exclusively
through pipeline, presumably to ensure Algeria's long-term
access to European markets.

SHELL RETURNS AFTER NEARLY 15-YEAR HIATUS
--------------


5. Blaha described Shell's return to the Algerian market
after a nearly 15 year absence. Shell operated in Algeria
from the early 1960s until the late 1980s. Last September,
Shell acquired exploration rights in the Gourara Basin
(blocks 345, 346, and 322) as well as the Reggane Region
(blocks 328, 352, and 362). In addition, Shell is pursuing a
gas-to-liquids project with a consortium of international
energy companies including Statoil, BHB Billiton, South
Africa's Sasoil, and Chevron. In February, Shell signed a
memorandum of understanding with Sonatrach to develop
upstream, downstream, and marketing projects.

SHELL STUDYING NIGERIAN PIPELINE PROJECT
--------------


6. Blaha, who previously worked for Shell in Nigeria, said
that Shell had been approached -- presumably by Sonatrach or
Nigerian officials, although he did not specify -- regarding

ALGIERS 00000781 002.2 OF 002


the proposed Trans-Sahara gas pipeline that would link
Nigerian fields to Algeria's gas grid through Niger. He said
that Shell's experience in pipelines and its significant
presence in Nigeria made it a leading candidate for the
project. He noted that the project would be much less
complicated than other pipelines he had worked on for Shell,
including China's West-East pipeline. Blaha said Shell's
decision to take part in the project would hinge on its
technical assessment, currently underway, of retrievable
Nigerian gas reserves. He said the reserves would have to be
sufficiently high to compensate for Nigeria's political risk.
For the Niger section of the proposed pipeline, Blaha
estimated the political risk as low and added that Nigeriens
would benefit from pipeline transit rents and access to
natural gas.
SIEVERS