Table 1.

North Africa key statistics

I
Algeria Egypt Libya Morocco Tunisia
Population (million) 2013 est. 38.1
Population growth rate 1.9%
Life expectancy, years 76.18
Age structure:
o -14 years 28.1%
15 - 24 years 18.1%
25 - 54 years 42.7%
55 - 64 years 6.0%
65 + years 5.1%
Government type Republic
Area (million km
2
) 2.38
Population density 15.99
Arable land, % 3%
Literacy, % 72.6%
Male literacy 81.3%
Female literacy 63.9%
GDP, billion US$, 2010 est. 251
GDP growth rate, 2010 est. 3.3%
GDP / capita 2010 est. 7300
GDP, billion US$, 2012 est. 277
GDP growth rate, 2012 est. 2.5%
GDP /capita 2012 est. 7600
GDP composition 2012 est.
Agriculture 8.9%
Industry 60.9%
Services 30.2%
Unemployment, youth 15 - 24 21.5%
Total unemployment, 2012 est. 10.2%
Population below poverty line 23.0%
GDP / capita 2010 7300
GDP / capita 2012 7600
Youth employment 21.5%
Total unemployment 10.2%
North Africa overview and the
'Arab Spring'
85.3
1.88%
73.19
32.3%
18.0%
38.3%
6.6%
4.8%
Republic
1.00 .
85.68
3%
73.9%
81.7%
65.8%
498
5.1%
6200
549
2.2%
6700
14.7%
17.0%
51.0%
24.8%
13.5%
20.0%
6200
6700
24.8%
13.5%
North Africa is viewed as having been the launching pad for the
protests and demonstrations that later became known as the
'Arab Spring' . This ic; a complex and evolving process across the
region, but at the most basic level, the protestors expressed
dissatisfaction with government and the authorities. The
people held that legitimate governments should be elected by
the people. There were many root causes of the protests,
including poverty, unemployment, a widening gap between
rich and poor, violation of human rights, and a desire to move
December 2013 HYDROCARBON ___ _ _ _ ___ ENGINEERING
6.0 32.6 10.8
4.85% 1.04% 0.95%
75.83 76.31 75.46
27.3% 27.1% 23.0%
18.6% 18.0% 16.5%
45.6% 41.7% 44.7%
4.6% 7.0% 8.1%
3.9% 6.3% 7.7%
Republic Monarchy Republic
1.76 0.45 0.16
3.41 73.15 69.75
1% 19% 17%
89.5% 67.1% 79.10%
95.8% 76.1% 87.40%
83.3% 57.6% 71.1%
91 151 100
4.2% 3.2% 3.7%
14000 4800 9400
79 174 107
104.5% 3.0% 3.6%
12300 5400 9900
1.6% 15.1% 8.9%
43.5% 31.7% 31.9%
54.9% 53.2% 49.8%
17.9% 30.7%
30.0% 9.0% 17.4%
33.0% 15.0% 3.8%
14000 4800 9400
12300 5400 9900
17.9% 30.7%
30.0% 9.0% 17.45
towards democratic reforms and greater freedom from too
powerful, and often corrupt, governments. There were a
variety of responses from entrenched interests, all too many of
which escalated into violence and outright civil war. The Arab
Spring protests quickly toppled the long standing dictatorships
of u n i ~ i a Egypt, and Libya. The civil war in Libya ended only
when Muammar Qaddafi was slain. King Mohammed VI of
Morocco, the lone monarch remaining, appeared to be more in
touch with the populace, allowing peaceful protests and
qUickly promising a new constitution. This staved off any
serious violence. .
,
I
0.35 .-----------------------,
0.3
0.3 r---------------------'
0.248
0.2S r-------'-'-'--'o------

O. IS I
0.1
0.21S
0.102
AI geriiJ Egypt Libya
0.179
Morocco
0.307
0.174
Tunisia
Figure 1. High rates of unemployment and youth
unemployment.
,...--------------------- -,
- Algeri a
- Egypt
- libya
- Morocco
- Tunisi&!
- - Unit ed Kinadom
,..- --_.-. .......
1.S
0.5 r---..:;;:::::::-- ---:;r-- ------.:-:;;;;;o---..... ==;;;--j
2000 2002 2004 2006 2008 2010 2012
Figure 2. North African gasoline prices relative to
UK prices.
Two years later, much of North Africa remains in a state of flux.
As new leaders have emerged, they have found leadership to be a
challenge. Gaining the consensus needed to implement reforms
has been time consuming. Unfortunately, the delays cause
frustration, which in turn makes consensus more difficult to reach.
Some observers have even lamented that the Arab Spring has
turned into the 'Islamist Winter', not just in North Africa but also in
the Middle East, where violence in Syria has reached crisis
proportions.
Table 1 provides an overview of key statistics in Algeria, Egypt,
Libya, Morocco, and Tunisia. Only 1- 3% of the land in Algeria,
Egypt, and Libya is arable. Most of the population lives on the
coast. The smaller, coastally oriented countries of Tunisia and
Morocco have 17% and 19% arable land. The Sahara Desert
continues to expand. Desertification is a major problem, impeding
agricultural activity in much of the inland area. Moreover, the
residents of the inland desert areas often have little to do with
their more urbanised coastal counterparts, and they may largely be
excluded from participation in the new governments. This also
contributes to internal strife.
North Africa's most populous country is Egypt, with
85.3 million people, accounting for nearly half of the region's
population. Algeria's population is 38.1 mj llion, followed by
Morocco with 32.6 million people, Tunisia with 10.8 million, and
Libya with 6 million. Libya is the only country that had a recent
drop in population, related to the civil war. The age structure is
young, with only approximately 4 - 7% of the North African
population aged 65 years and older. Literacy rates are below the
world average, with a wide disparity between male literacy rates
and female literacy rates.
December 2013
HYDROCARBON
ENGINEERING
Figure 1 displays the high rates of unemployment and youth
(ages 15 - 24) unemployment in the North African countries, as
estimated by the CIA World Factbook. The data are 2012 estimates,
with the exception of Libya, for which no youth unemployment
rates are available, and the overall unemployment rate of 30% is an
estimate for 2004. Unemployment is viewed as an increasingly
critical social problem. Tunisia's rebellion in January 2011 was in fact
attributed largely to unemployment and frustration among young
people. Total unemployment is estimated at 17.4%, and it is an
extremely high 30.7% for young people aged 15 - 24, including many
who have college degrees. Tunisia's government had been led for
23 years by President Zine el-Abidine Ben Ali , who had pledged
many improvements in prosperity, education, health care, and
social stability. But the realities continually fell short of the
promises. By the end of 2010, a college educated 26 year old
named Muhammad Bouazizi protested in a self immolation that set
off such a rebellion that President Ben Ali had to leave the country.
The Tunisian rebellion is regarded as a starting point for the
rebellions that spread in Egypt, Libya, Morocco and Algeria.
The 2011 Egyptian Revolution began with a popular uprising on
January 25
th
, and the revolution is ongoing. On February 11th, after
weeks of protests and demonstrations, Egyptian President Hosni
Mubarak resigned from office. Egyptians were unhappy with many
of the same social issues seen in Tuni sia: high unemployment, low
wages, inflation, police brutality, and political censorship. These
same problems plagued other North African countries. There was a
wave of protests, including self immolations, in Algeria, where the
protests grew stronger after the Egyptian Revolution removed
President Mubarek. The successor, President Muhammad Morsi,
was elected in 2012, but he too was ousted in 2013, and the country
remains in flux.
The civil war in Libya escalated rapidly. A series of peaceful
protests in early 2011 were countered with crushing force by
Colonel Qaddafi's troops. The protests escalated into a widespread
uprising, and the rebel forces set up a rival seat of government in
Benghazi, naming themselves the National Transitional Council. The
rebels were backed by NATO, and the civil war ended only when
Colonel Qaddafi was slain in October 2011. Yet the provisional
government has struggled ever since to forge unity among the
disparate tribes, regions and parties that make up the country.
Security has not been restored, and armed militias remain active. In
September 2012, the US Embassy in Benghazi was attacked by
heavily armed militants, and the US Ambassador,). Christopher
Stevens, was assassinated. At the time of this writing, a year has
passed, and although arrests have been made, the investigation has
not been concluded. Important oil export infrastructure has been
blockaded, cutting into vital oil export revenues. The Libyan
government received 91% of its revenues from the oil and gas
industry in 2011, underscoring the critical need for a healthy
flow of oil :
North Africa's oil and natural gas
resources and production
Key role of oil and gas revenues
The social and political turmoil in North Africa has hampered
developments in the oil and gas industry. Because oil and gas
contribute so much to the local economies, this is having a cyclical
impact on the ability of governments to meet the expectations of
the citizenry. According to the Economist Intelligence Unit, oil and
,
,
I
- Egypt, Arab Rep.
- Libya
- Morocco
- Tunisia
- - United Kingdom
;;
;r
;;
.... ---."
1.5
;;;;
------;
0.5
2000 2002 2004 2006 2008 2010
Figure 3. North African pump prices for diesel
relative to UK prices.
Figure 4. North Africa proved oil reserves,
billion bbls.
51 2300
Figure 5. North Africa proved gas reserves,
billion ft3.
Al geria
EllYpt
UbY'
gas
0.06 ,..--------------------------.
b
; om '- ' ------- ---------------,
....... N. Africa % of World Gas Reserves
___ N. Africa % of World Oil Reserves
1'"1
: 0.Q1
1
'-----------------------
o -
Figure 6. North Africa: Falling share of global oil
and gas reserves.
December 2013 HYDROCARBON _ _ ___ _____ ENGINEERING
revenues in 2011 accounted for 10% of government revenue in
Egypt, 67% of government revenues in Algeria, and a whopping 91%
of government revenues in Libya. For the governments now in
transition in North Africa, reviving and stimulating the hydrocarbon
industry is critical.
Pricing issues
It is typical for oil and gas rich countries to use the revenues from
the hydrocarbon sector to subsidise other sectors and programs. It
is also common for governments to subsidise fuel prices. This is
viewed as a way of sharing the wealth with the citizens. But it also
creates its own set of market problems. For example, demand for
the subsidised fuel or fuels may grow so disproportionately that
the pattern of fuel demand is skewed and encourages inefficient
energy use. The domestic refining industry may not be able to
satisfy the lopsided pattern of demand, and subsidised fuel prices
may discourage the investment needed to change this. Subsidised
fuels may also be smuggled out of the country, giving rise to
organised crime. Eventually, the government bill for fuel subsidies
may outweigh the benefits, yet removing long standing subsidies
may be tantamount to political suicide.
All of the North African governments subsidise gasoline and
diesel prices. Figure 2 compares the pump price of gasoline in
North African countries with the price in the UK, as reported by
the World Bank. In 2012, the average price for gasoline in the UK
was US$ 2.17/ltr, above the prices in all of the North Africa
countries, usually by orders of magnitude: 4.8 times as high as the
Egyptian price, 7.5 times as high as the Algerian price, and even 18.1
times as high as the Libyan price of a mere 12 cents/ltr. As noted,
oil and gas revenues overwhelmingly dominate the government
budgets in Libya and Algeria. These two countries have the most
heavily subsidised gasoline in the region, with gasoline priced at
only US$ 0.12/ltr in Libya and US$ 0.29/ltr in Algeria.
Figure 3 compares the pump price of diesel in North Africa
with the price in the UK. The US$ 2.27/ltr price in the UK in 2012
was 13.4 times as high as the Algerian price of
US$ 0.17/ltr and 22.7 times as high as the US$ 0.10/ltr seen
in Libya.
Resource governance
Petroleum and natural gas are critical to the North African
economy. Yet the presence of oil and gas reserves may not
translate directly into economic health, even in countries
considered resource rich. A group known R-S the Revenue Watch
Institute recently released their report, The 2073 Resource
Governance Index. The Resource Governance Index, or RGI, was
developed to evaluate the governance of the oil, gas and mining
industries in 58 countries. These 58 countries produce 85% of the
world's oil, 80% of the world's copper and 90% of the world's
diamonds .. The premise is that good governance of resource
extraction industries is critical to long term economic success. The
evaluation criteria were organised into categories of Institutional
and Legal Setting, Reporting Practices, Safeguards and Quality
Controls, and Enabling Environment. Despite the importance of
resource' extraction in North Africa, Algeria received a 'failing'
score of 38, ranking 4st
h
out of the 58 countries. Egypt received a
'weak' score of 43, placing 38
th
out of 58 countries. Morocco
received a 'partial ' score of 53, ranking 25
th
out of 58 countries.
Libya received a 'failing' score of19, ranking 55
th
out of 58
countries. The report noted that Libya's very low scores on all
,
0.7 +-\:------------------- -=j
0.6
0.5
0.4 -I--- - ---------------- -----"'\--+i
0.3 t---------------------------j
- North Aftica Gas Production % of
0.2 Total Africa
- North Africa Oil Production % of
0.1 Total Africa
Figure 7. North Africa's falling share of African oil
and gas output.
measures reflected decades of corruption and inefficiency,
obviously a difficult system to reform.
On the whole, however, the RGI study establishes that
resource governance is difficult around the world, not just in North
Africa. The Resource Watch group concluded that '80% of
governments fail to achieve good governance in their extractive
sectors'. Yet while North Africa is not alone in grappling with this
problem, the consequences in this region have been severe, and
there is little doubt that poor governance of the oil and gas
industry is part and parcel of the overall poor governance that
fomented the Arab Spring protests. Logically, therefore, it is
doubtful that the political and economic reforms now underway
will be able to succeed without serious attention given to the oil
and gas sectors.
Losing ground: Oil and gas reserves
Oil was discovered in Algeria in 1956, shortly befc;>re the Suez Crisis.
Oil was discovered in Libya in 1959. Libya joined OPEC in 1962, and
Algeria joined in 1969. North African oil and gas resources were
viewed historically as a strategic alternative to Persian Gulf
producers. Oil exports had the added advantage that Suez Canal
transit was not required to reach the markets of Europe and the
Americas. North Africa quickly became a premier oil centre, with a
host of foreign companies participating. But its dominance is
waning, and investment is needed or it will continue to lose
ground.
North African proved oil reserves by country, January 2013, are
shown in Figure 4, as reported by the Oil and Gas Journal (OGJ).
Libya's oil reserves account for nearly three quarters of the regional
total, at 48 billion bbls. Algerian reserves also are considerable at
12.2 billion bbls, followed by Egypt, with reserves listed at 4.4 billion
bbls. For the five countries, total oil reserves are 64.9 billion bbls,
slightly more than half of total African continent oil reserves.
Algeria, Libya and Egypt also possess the majority of North
Africa's natural gas resource, approximately 54% of which is located
in Algeria, followed by 26% in Egypt. Figure 5 shows North Africa's
proved gas reserves as reported by OGYUntil recently, natural gas
reserves had been growing significantly, particularly with new finds
in Egypt. Egypt launched LNG exports in 2005, exporting 7.6 billion
m
3
that year. Libya's national oil company had been working to
expand natural gas reserves, and it hoped to nearly double reserves
to 100 trillion ft3, but the civil war derailed these plans.
In recent years, North Africa's additions to oil and natural gas
reserves have lagged relative to the rest of the world. According to
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1.6
1.41
1.43 1.42
1.38
1.4
1.28 1.29 1.3 1.31
1.27 1.26
1.2
............ ,
1}6
1.18 116
"5 1.!.
.
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I
[ 0.8
,
0.7 0.69 0.69
0.68r 0.68 0.68
0.67..___
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0.6
0.57
\
0.4
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- Algeri a - Eeypt - libya
0. 2

Figure 8. Recent North African crude production.
Figure 9. North African crude/ NGL production
trend, 1965 - 2012.
100
80
, 60
40
20
Figure 10. North Africa falling share of African
natural gas output.
l as
I

- Algeria - Egypt - libya _______ --="""""'"-=--________ ---'
10
Figure 11. Dwindling North Africa LNG exports.
December 2013
HYDROCARBON
ENGINEERING
the data series maintained by BP, North Africa's share of global gas
reserves was fairly steady at approximately 5% from 2003 to 2007.
However, during the five years from 2007 to 2012, North Africa's
share has fallen to 4.3% of global reserves. North Africa's share of
global oil reserves had been on an upward trend, growing from 4.1%
in 2003 to 4.3% in 2007, but this share fell to 3.9% in 2012. These
falling shares are shown in Figure 6.
Oil and natural gas production: Also flagging
As North Africa's share of oil and gas reserves have fallen, oil and
natural gas production has fallen also. Figure 7 shows North Africa's
falling share of output relative to total African output. In 1970,
North Africa produced 92% of total African natural gas plus 79% of
African crude oil. These shares have fallen conSiderably. By 2012,
North Africa accounted for 71% of the continent's natural gas
output and only 42% of the crude output. In 2011, the drop in
Libyan crude production had caused North Africa's share to drop
to just 34%.
Figure 8 provides a closer look at the impact of the Libyan civil
war on oil production by displaying quarterly production as
reported by the International Energy Agency (lEA). In the first
quarter of 2011, Libyan output was 1.13 million bpd. By the second
quarter, it had plummeted to 0.12 million bpd, and it fell to a mere
trickle of 0.04 million bpd in the 3
rd
quarter. By October, Sirte had
fallen and Colonel Qaddafi had been slain. Crude production
began to be restored, and it averaged 0.57 million bpd in the
fourth quarter. In 2012, output hit a peak ofl.43 million bpd before
subsiding to 1.31 million bpd in the second quarter of 2013. Libyan
officials affirm that they will be able to boost crude production to
2 million bpd by 2017. By the third quarter of 2013, however,
output fell once again, as striking workers blocked Sharara and
Elephant oil fields and terminals in western Libya. This helped to
drive up the international oil price. As of the time of this writing,
an agreement has been reached that is intended restore Libyan
production.
Algerian crude production was in the range of
1.26 - 1.28 million bpa in 201l, but it fell to 1.14 million bpd in the
second quarter of 2013. Egyptian crude production declined
modestly from 0.7 million bpd in the first quarter of 2011 to
0.67 million bpd in the third quarter of 2012, but it recovered and
averaged 0.72 million bpd in the second quarter of 2013.
Figure 9 shows the long term trend in crude and NGL
production for the four main North African producers,
1965 - 2012, per BP. Libyan production hit a.peak of nearly
3.4 million bpd in 1970, but output collapsed to 1.0 million bpd in
1987. When sanctions were lifted in 2003, some international firms
returned to Libya, and production rose to 1.8 million bpd by 2006
- 2008. The impact of the civil war is starkly visible in 2011,
followed by a recovery in output in 2012.
Algerian production reached 1.0 million bpd in 1970, and it
neared 2.0 million bpd from during the 2005 - 2008 period. Some
of the strength in liqUids output has been the result of increased
natural gas production and processing. Output fell to 1.67 million
bpd in 2012. Egyptian oil production was only 0.1 million bpd in
1965, but output began to grow in the late 1970s, reaching a peak
of 0.94 million bpd in 1993. Production trended down gently until
2005, when the production decline was reversed. Output in 2012
was approximately 0.73 million bpd. Tunisian output has been
roughly stable in the range of 70 000 - 80 000 bpd over the past
decade, though recent years have shown a slight downturn.
Algeria 5 497 15 0 6
Egypt 9 794 95 39 0
Libya 5 378 4 0 0
Morocco 2 155 27 0 5
Tunisia 34 0 0 0
0 0 0 0
Total 22 1858 140 39 11
Cracking: Distillation ratio 4.5%
80r----------------------------------------,
70
6 0 ~ ~ ~ ~ ~ ~
20 ~ ~ ~ ~ ~
10 ~ ~ ~ ~ ~ ~
Figure 12. North Africa active rotary rigs, monthly
2007 - 2013.
Other a tuclOil
Oiesel
- Gasoline
g
: 2S0 1------1.''''
~
libya Output 2011 li bV;l Demand lOll
Figure 13. Libyan refined product output versus
demand.
North Africa is the key natural gas producing region in
Africa, but as is the case with oil, its overall share of production
is declining. Figure 10 shows natural gas production in Algeria,
Libya and Egypt from 2002 through 2012, along with their
percentage share of total African output. Algeria is the main
producer, and its natural gas production had been trending
upward until the middle of the decade, when it stagnated and
began to slide. From its peak of 88.2 biHion m
3
in 2005, Algerian
production fell to 81.5 billion m
3
in 2012.
Egyptian gas production, as noted, had been growing
strongly, climbing from 27.3 billion m
3
in 2002 to 62.7 billion m
3
in 2009. This leveled off and declined slightly to 60.9 billion m
3
in 2012. Libyan output also had been expanding in the post
sanction years, reaching 15.9 billion m
3
in 2008, but production
stagnated by the late 2000s, and it dipped to 7.9 billion m
3
in
December 2013
HYDROCARBON
ENGINEERING
0 90 0 0 83 3 5
34 84 9 27 208 8 20
0 20 0 0 43 3
0 27 0 0 53 2 2
0 3 0 0 0 0 0
0 0 0 0 0 0 0
34 224 9 27 387 14 30
2011 before recovering somewhat to 12.2 billion m
3
in 2012.
Overall, in 2002, these three natural gas producers accounted
for 82% of African output, but their share fell to 71 % in 2012.
Egypt started exporting LNG in 2005. Exports rose to
14.8 billion m
3
in 2006, but soon they began to slide, and by
2012 Egyptian LNG exports totaled only 6.7 billion m
3
. Algeria
is the premier LNG exporter in the region, but its LNG exports
have also fallen steadily. Algeria exported 27.9 billion m
3
of
LNG in 2003, but exports fell to 15.3 billion m
3
in 2012. Figure
11 illustrates this decline. In 2004, Algerian LNG exports of
24.8 billion m
3
were slightly larger than Qatari exports of
24.1 billion m
3
. By 2012, Qatar's growth in LNG exports had
eclipsed not only Algeria but all of North Africa, amounting
to 105.4 billion m
3
, 6.9 times as much as Algerian exports and
4.8 times as much as total North African exports.
In early 2002, spot prices for Brent crude oil were in the
vicinity of US$ 20/bbl. They marched upward and spiked at
approximately US$ 133 for the month of July 2008. Much of
the world fell into recession, and Brent spot prjces collapsed
by late 2008. Yet prices recovered, and they have remained at
over US$ 100/ bbl since early 20ll. This type of price horizon
has stimulated a great deal of interest in exploration and
production. Much of the enthusiasm has bypassed North
Africa, however. Figure 12 displays the number of active
drilling rigs in Algeria, Egypt, Libya and Tunisia each month
from January 2007 through August 2013, as tracked by Baker
Hughes. Although oil prices were rising strongly in the 2007 -
2008 period, the number of active rigs increased noticeably
only in Egypt. When the oil price collapsed in late 2009,
active rigs in Egypt fell. When prices began to recover, the
number of active rigs in Egypt recovered as well. Yet despite
the continued strength of oil prices, the number of active rigs
leveled off and began to fall in 2012, in conjunction with the
rise in political unrest and the ousting of the newly elected
President.
Tunisia typically has had only three to five rotary rigs
active, but in August 2013, only one rig remained active. From
2007 until early 2011, Libya had 10 - 20 active rigs, and this
dropped to zero during the civil war. Rigs were reactivated
since then, and there were 15 active as of August 2013. Algeria
has seen a recent rise in active rigs, which had been in the
range of 25 - 30 for most of 2000 through 20ll. In August 2013,
Baker Hughes reported 49 active rigs. Perhaps not
coincidentally, the Arab Spring protests did not unseat the
head of state, Abdelaziz Bouteflika, who has ruled since 1999.
Despite suffering a stroke earlier in 2013, he remains in power,
and many believe that he will be able to hand pick a successor
when elections are held next in April 2014.
The oil and gas sectors remain highly active, therefore, but
they are losing ground relative to competitors at a time when
they could be growing. Governments have been taking steps to
increase international participation, but some investors are wary.
For example, Algeria amended its hydrocarbon laws in early 2012 to
attract more foreign investment, and Parliament approved the
changes in January 2013. But this progress was set back by militant
attacks on Algeria's Amenas LNG plant, which claimed over 60
militant and worker lives and shut down the facility. The Amenas
plant is located inland and near the border with Libya, raising
security concerns. In fact, some of the recent interest in exploration
and development in Morocco, which is far less oil and gas prone
than many areas in Algeria and Libya, has stemmed from the idea
that Moroccan installations will be safer.
North Africa's refining industry
Recent events have affected refinery plans
Mirroring the situation seen in the upstream oil and gas sector,
the social and political changes sweeping North Africa also have
detracted from the downstream sector. There have been a
number of refinery upgrades, expansions, and even grassroots
projects planned in North Africa, but the past two years have
proven challenging, and many projects have been postponed or
shelved. Algeria, for example, developed an ambitious
downstream plan that includes rehabilitation and expansion of its
three largest refineries (Arzew, Algiers, and Skikda), a condensate
splitting refinery at Skikda, a fuel oil conversion unit at Skikda
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Gasoline
177.1
67.4
AtgeriaOut put Algeria Demand
Figure 14. Algerian refined product output versus
demand.
(80 000 bpd capacity,) and four new grassroots refineries now
envisioned at 100 000 bpd each. Over the past two years, most
efforts have focused on the Skikda refinery, which often has
been closed or running at low utilisation rates during
maintenance and upgrades. These are planned to add 30 000
bpd of nameplate capacity, a catalytic reformer, and a
hydrotreater. There have been a variety of technical problems,
unfortunately, plus a fire and an explosion, and gasoline imports
have grown. As of the third quarter of 2013, Skikda's crude
capacity was increased to 335 000 bpd, and crude runs are
expected to rise for the remainder of the year. The Arzew
refinery also has been partially shut down for maintenance and
repairs in 2011 and 2012, which reduced gasoline output. The
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Soralchin refinery reportedly reduced its runs in 2012 over
disputes concerning profitability.
Libya's Ras Lanuf refinery also has been run at low
utilisation rates since the civil war, with problems getting
crude deliveries and disagreements between the
government and the refinery operator. At 220 000 bpd, Ras
Lanuf is Libya' s largest refinery. Some of the protests in
2012 resulted in a blockade of the Ras Lanuf port. The Ras
Lanuf refinery reopened in late 2012, but closed again in
early 2013 because of technical problems at the refinery,
power outages, plus a strike by workers at the Port. There
was also a brief shutdown at the Zawiya refinery, caused by
a worker' s strike. Libyan officials have announced that they
will expand Libya's refinery capacity from its current 0.38
million bpd to 1 million bpd within the next six years, but
even the capacity that now exists is subject to closure or
low utilisation rates because of security concerns along the
supply chain.
Table 2 provides a summary of North Africa's refining
industry, partly as reported by OGJ with additions and
corrections provided by Trans-Energy Research Associates,
Inc. Total crude capacity is 1 858 000 bpd. The industry
lacks technological sophistication, with a cracking to
distillation ratio of only 4.5%. North Africa's refining sector
remains in need of investment and attention to raise its
sophistication and competitiveness. The region' s refining
industry is long established, but it more or less operated in
the same business environment as the upstream sector, and
it too would benefit from more investment and more
openness. As an example, consider the capability of the
Algerian and Libyan refining industries to meet domestic
demand.
Algerian and Libyan refinery output
versus demand .
As noted, all of the North African oil producing countries
subsidise domestic fuel prices, Libya and Algeria to an
extreme degree. The Libyan gasoline price was only
12 cents/ltr in 2012, and diesel prices were only 10 cents/
ltr. Algerian gasoline was priced at 29 cents/ltr, while
diesel was priced at 17 cents/ltr. Unsurprisingly, the
demand pattern is skewed toward gasoline and diesel in
both countries. And despite the fact that nameplate
refinery capacity is greater than domestic demand, both
countries are net importers of gasoline and diesel. There
are plans to expand refinery capacity in both countries. But
it can be seen that it is not so mud') the amount of
capacity, but the type of capacity and how it is utilised,
that determines how well the industry will be able to meet
domestic demand.
Figure 13 compares refined product output with
product demand in Libya, and Figure 14 shows the same
information for Algeria, as reported by OPEC. Algerian
refined product output was 501 300 bpd in 2011, while
product demand was 329 400 a surplus of 171
900 bpd of refined product. Libyan refined product output
was 473 200 bpd, while demand was 231 400 bpd, leaving a
surplus of241 800 bpd. The surplus output is a rough
estimate of potential product exports. However, Algerian
output was only 41% gasoline plus diesel , whereas Algerian
demand was 74.2% gasoline plus diesel. Libyan refinery
December 2013
HYDROCARBON
ENGINEERING
production was only 20.4% gasoline and diesel, whereas
the demand pattern was
78.1% gasoline and diesel. In net terms, therefore, Algeria
needed imports of 16 100 bpd of gasoline plus 22 800 bpd
of diesel. Libya needed 80100 bpd of gasoline imports and
4100 bpd of diesel imports. The exports were primarily
lower value products such as fuel oil. As noted, an
80000 bpd fuel oil conversion unit has been planned in
Algeria, as well as a condensate splitter, which would
create a lighter output slate, but many plans and goals have
been set back.
Conclusion: A weakening
breeze?
The winds, like a sirocco, have swept through North Africa,
bringing changes of leadership in Tunisia, Libya, and Egypt
once again. This included an end to the infamous Qaddafi
regime in Libya. Protests and demonstrations have taken
place in Algeria and Morocco as well. The ageing president
of Algeria held on to power, but may hand over the reins
to a successor in early 2014. The King of Morocco allowed
peaceful demonstrations and has made many concessions
toward more open government. Throughout North Africa
and in the Middle East, this movement became known as
the 'Arab Spring' . The situations vary from country to
country, but there are many commonalities in what the
people are protesting: high levels of unemployment, a
widening gap between rich and poor, crime, violence, and
corruption. The people's disaffection stems from a long
standing failure of the governments to deliver on promises.
Some of the economic problems, however, were
exacerbated by the global economic downturn, which local
governments were powerless to combat. Other social and
political ailments were so deeply rooted that reforms will
come only slowly. After the first whirlwind of change, the
slow pace of reform and rebuilding has caused frustration,
leading observers to speak of how the 'Arab Spring' turned
into the 'Islamist Winter'.
North Africa's oil and gas sector is critically important
to the region's economic health, and also to government
stability and basic function, since the governments run the
energy industry and derive a major share of their operating
revenue from it. Yet for all of its importance, the North
African governments receive very poor 'grades' when it
comes to how they manage their resources. When
evaluated according to the criteria of the Resource
Governance Index, the two main producers, Libya and
Algeria, received failing scores, and Egypt received a 'weak'
score. Libya ranked 55
th
out of 58 countries examined, with
consistently low scores attributed to decades of
mismanagement and corruption. Yet in a way there is cause
for optimism. The same inefficiency and corruption that
typified the energy industry was endemic across the
government, and this was its eventual undoing. The new
regimes hope to change this and build stronger, healthier
economies, and the same principles that improve overall
governance of the countries will improve governance of
the energy industries. Although the changes may take time,
and the sirocco winds may have weakened, it can be hoped
that a gentler breeze will fill the sails and transport North
Africa's energy' sector to smoother seas. ill
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I