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Energy : Algeria
July 15th 2024

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Content
1. Summary
1.1 Overview

1.2 Energy policy

1.3 Oil and gas

1.4 Electricity

1.5 Coal

1.6 Nuclear

1.7 Renewable energy

1.8 Risk and opportunities

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Overview
Algeria | Energy | Overview

July 15th 2024

Despite attempts to encourage greater diversification, Algeria's economy will remain dominated by the
oil and gas sector throughout EIU's 2024‑33 forecast period. Hydrocarbons generate over 90% of
export earnings and nearly two-thirds of the state budget.
Supported by growing gas production and exports, driven by strong European interest and investment
in Algeria's gas sector as Europe seeks to replace Russian supplies, economic growth accelerated in
2023. We expect growth to remain strong in 2024 but to slow in the coming years as declining oil and
gas prices limit government spending in the state-dominated economy, despite increases in gas
production and exports.
The government continues to hope that the country's new hydrocarbons law, promulgated in 2019, and
Europe's thirst for new sources of oil and gas since Russia's invasion of Ukraine in 2022 will stimulate
foreign investment. Algeria's prospective hydrocarbons regions (which cover more than 1.7m sq km)
remain significantly underexplored, presenting major opportunities, and a substantial increase in
foreign investment was evident in 2022‑23. However, it was driven by a small number of companies,
and relatively few firm deals have thus far been signed under the new law, reflecting chronic political
and bureaucratic obstacles.
Algeria's renewables development plans have moved extremely slowly, owing to plentiful hydrocarbons
reserves and lack of political will. A sudden flurry of solar project awards in early 2024 belatedly
delivered on government pledges to accelerate renewables development, but we expect renewables to
constitute only a small proportion of electricity production even by 2033.
We forecast that total energy consumption will grow by an annual average of 1% in 2024‑33, reflecting
the offsetting forces of relatively healthy GDP growth and efficiency improvements that will reduce
energy intensity.
Energy: key indicators
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
GDP (US$ bn at market exchange rates) 195c 211 240 254 267 281 297 318
Real GDP (% change, year on year) 3.2c 4.1 3.8 3.2 2.7 2.2 2.0 2.3
Population (m) 46.1 47.0 48.0 49.0 50.0 51.0 52.0 54.8
Population (% change, year on year) 2.0 2.0 2.0 2.0 2.0 2.0 2.0 1.0
Gross domestic energy consumption (ktoe) 66,001 65,846 66,919 68,168 69,017 69,580 69,952 72,565
Gross domestic energy consumption (% change, year on
year) 2.8 -0.2 1.6 1.9 1.2 0.8 0.5 0.8
Note. Forecasts for all dates are available via EIU's data tool.
a EIU estimates. b EIU forecasts. c Actual.

Sources: EIU; World energy balances © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics, licence:
www.iea.org/t&c.

Energy policy
Algeria | Energy | Energy policy

July 15th 2024

In December 2023 Sonatrach, the state oil company, presented its latest five-year investment plan, for
2024‑28, envisaging total spending of US$50bn. Just over 70% of that budget will be devoted to oil and

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(mainly) gas exploration and production. The remainder will be mainly allocated to downstream
projects in refining, petrochemicals and liquefied natural gas (LNG), with a small portion earmarked
for "energy transition" initiatives—which will mainly focus on flare-gas recovery owing to its potential
to boost overall gas production rates.
Sonatrach's operational and financial effectiveness has been weak, with a record of political
interference, corruption and long project delays. In October 2023 the country's president, Abdelmadjid
Tebboune, as part of an elite power struggle, dismissed Sonatrach's chief executive, Toufik Hakkar, and
a month later purged the entire management team. Chronic leadership instability and politicisation at
the firm detract severely from performance and make substantial reform of its opaque finances and
bloated payroll improbable. The company retains its long-standing status as the nation's "cash cow".
With the passage of a long-awaited new hydrocarbons law in December 2019, an important step was
taken to increase foreign investment in the energy sector. Under the legislation, foreign companies are
able to partner with Sonatrach via long-term contracts with a simpler fiscal framework and
administrative procedures. The law also offers tax incentives to encourage relatively challenging
upstream activities, such as the development of small or complex fields, unconventional reserves and
underexplored regions.
The 49% limit on foreign shareholdings in domestic hydrocarbons ventures remains a deterrent for
investment, but the more attractive terms have drawn in investors as European states have rushed to
develop potential alternatives to Russian imports, and will continue to do so while both factors persist.
Contracts can be awarded via tenders launched by the state's regulatory body or through direct
negotiations with Sonatrach.
The new law reintroduces deals based on production sharing, under which foreign companies usually
bear the entire cost of exploration and production, but are compensated with a share of production.
Eni (Italy), Occidental (US), Pertamina (Indonesia), Repsol (Spain), Sinopec (China) and TotalEnergies
(France) signed contracts based on the new framework in 2022‑23, and PTTEP (Thailand) is in lengthy
negotiations to follow suit. New deals might also be based on participating interests, which set the
financing obligations and output share of Sonatrach and its partners according to their respective
stakes in a project. Also offered are risk services contracts, under which Sonatrach owns any
hydrocarbons produced and reimburses its partners for the services provided—these are intended for
use where the presence and economic viability of the prospective resources is more uncertain and are
relevant to planned shale gas development.
Algeria has limited short-term scope to expand oil output and thus benefits from a collective market
management policy driven by Saudi Arabia that prioritises defending high prices over maximising
production, and it has joined the kingdom and several other producers in announcing successive
"voluntary cuts" to its crude oil production since November 2022, in addition to those mandated under
the OPEC+ agreement. The various cuts have lowered the country's output ceiling to
908,000 barrels/day (b/d), where it will remain until end-September 2024, before rising in monthly
increments to 959,000 b/d in October 2025. The country has been compliant so far, and crude output
is therefore expected to decline in 2024 to an average of about 910,000 b/d.
Successive governments have set, revised and missed renewable energy goals. In February 2020 the
installed renewables capacity target was revised down to 4 GW by 2024 and 15 GW by 2035, but by
December 2023 only about 590 MW had come on stream. However, contracts on projects that would
add a combined 3 GW, tendered in 2021 and 2023, were signed in March 2024, possibly auguring an
acceleration, spurred by the potential for renewables to satisfy increases in domestic energy
consumption and free up gas for export.

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Oil and gas

Algeria | Energy | Oil and gas

July 15th 2024

Oil demand
We expect gross consumption of petroleum products to remain broadly flat in 2024, after higher use in
the power generation sector—probably to substitute gas consumption within the sector to free up gas
for export—drove an unusual surge in oil consumption in 2023.
We forecast that Algeria's oil consumption will grow by an annual average of 1.1% over the forecast
period. Increasing take-up of electric vehicles (EVs), supported by government policy as a means of
increasing oil exports and reducing the costs of refined product imports, will very slowly dampen
demand growth in the latter years; in November 2022 the authorities banned the import of diesel-
fuelled cars (currently about 40% of the total fleet) and obliged local manufacturers to start producing
at least one EV range—aimed at reducing the foreign exchange expended on overseas vehicles and at
making the country a centre for EV production. The expansion of liquids-based petrochemicals
production will have a countervailing effect.
Oil consumption
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
Oil consumption (ktoe) 22,325 23,451 23,487 23,596 23,928 24,374 24,726 26,139
Oil consumption (% change, year on year) 3.5 5.0 0.2 0.5 1.4 1.9 1.4 1.1
Passenger-car stock (per 1,000 population) 88 87 86 86 86 86 86 91
a EIU estimates. b EIU forecasts.

Sources: EIU; World energy balances © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics, licence:
www.iea.org/t&c.

Gas demand
We expect natural gas consumption to grow by 2.6% in 2024, mainly supported by a recovery in gas-
fired power generation and by increased consumption within the residential sector.
As the government extends the gas and electricity distribution network, the bulk of power plants
remain gas-fired, and as efforts to develop the local gas-based petrochemicals sector bear fruit, we
expect gas demand to continue to increase over the long term, by an annual average of 0.6% in
2025‑33.
Also supporting long-term demand, Sonatrach highlighted the intended revival of long-stalled
petrochemicals projects when unveiling its 2024‑28 investment plan, and the main contract for the
long-planned STEP Polymers project was awarded in 2023, comprising a 550,000-tonnes/year propane
dehydrogenation/polypropylene complex at Arzew, a downstream energy hub on the
Mediterranean coast.
Natural gas consumption
2022a 2023b 2024c 2025c 2026c 2027c 2028c 2033c
Natural gas consumption (ktoe) 43,382 42,125 43,216 44,409 44,912 44,946 44,904 45,592
Natural gas consumption (% change, year on year) 2.3 -2.9 2.6 2.8 1.1 0.1 -0.1 0.4
a Actual. b EIU estimates. c EIU forecasts.

Sources: EIU; World energy balances © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics, licence:
www.iea.org/t&c.

Oil supply

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Algeria's proven crude oil reserves stood at 12.2bn barrels at end-2020, according to the Energy
Institute's Statistical Review of World Energy 2024. Crude oil production capacity had been in steady
decline during the 2010s, as local fields matured, infrastructure degraded and investment in
exploration slowed.
However, there has been a small boost to production capacity this decade as several projects expand or
begin. These include the expansion of the Hassi R'Mel and Tinrhert gasfields (which produce
additional condensate), commissioned in 2022; the Hassi Bir Rekaiz project in the Berkine Basin,
developed by PTTEP, phase one of which came on stream in June 2022 and has a production target of
13,000 b/d, with phase two due to raise output to 50,000-60,000 b/d by 2026/27 (a final investment
decision awaits agreement on the terms to convert the contract to one governed by the new
hydrocarbons law); and Eni's Zemlet el‑Arbi concession in the Berkine North Basin (which came on
stream in November 2022 and has a capacity of 10,000 b/d).
High prices have also stimulated exploration activity, leading to several oil discoveries. In March and
July 2022 Eni and Sonatrach announced finds in the Berkine North Basin, and in April 2023 Sonatrach
announced six discoveries across the Amguid Messaoud, Berkine, Illizi and Oued Mya basins,
comprising a mix of oil, gas and condensate, followed by an announcement in May 2024 that another
eight finds had been made. We expect a further modest upturn in capacity and output during the
forecast period as the fruits of the current intensification of exploration activity are realised and
OPEC+ cuts are eased, taking production to about 1.4m b/d (including crude and natural gas liquids)
in 2033.
About 80% of domestic hydrocarbons production is owned and managed by Sonatrach. Although
Algeria's taxes and royalties are considered high by global standards, and its bureaucracy onerous and
often politicised, international (mainly European) oil companies—including Eni, TotalEnergies,
Equinor (Norway), Repsol, and Shell (UK)—have a considerable presence in its oil sector. Harbour
Energy (UK) acquired the sizeable Algerian portfolio of Wintershall (Germany) during a corporate
takeover agreed in December 2023.
In July 2022 Sonatrach signed a 25-year extension to its production-sharing contract (PSC) with Eni,
Occidental (US) and TotalEnergies for blocks 404a and 208 in the Berkine Basin, encompassing
execution of a US$4bn development project designed to produce 1bn barrels of oil equivalent (boe). In
October 2022 a 25-year PSC was signed with Sinopec to develop the mature Zarzaitine oilfield in the
Illizi Basin, to extract an estimated total of 95m barrels. In June 2023 Pertamina signed a similar deal
calling for investment of US$800m in two blocks (currently producing about 35,000 b/d) in the
Menzel Lejmat area of the Berkine Basin, aimed at extracting a cumulative 150m boe.
The Hassi Messaoud oilfield, discovered in 1956, is Algeria's largest. Output peaked at 720,000 b/d in
1977. It currently produces about 350,000 b/d, and a series of recovery projects are being carried out to
maintain output rates.
Algeria's six refineries, all wholly owned and managed by Sonatrach, have processing capacity of
657,000 b/d of crude oil and condensates; actual throughput is slightly lower, owing to a mismatch
between refinery configuration and local demand. About three-quarters of output is exported, but
imports have been growing in recent years as a result of this mismatch.
In 2012 Sonatrach announced plans to invest US$14bn to build five greenfield refineries, but only one
has reached the construction phase, with a US$3.7bn, 52‑month contract awarded in 2020 to a
Spanish-South Korean joint venture to build the 110,000-b/d Hassi Messaoud refinery, and this
remained on hold in mid-2024, reportedly owing to intergovernmental tensions with Spain. A
US$3.2bn contract awarded to Larsen & Toubro (India) in August 2023 to add a hydrocracking unit at
the 355,000‑b/d Skikda refinery, the country's largest, was cancelled later that year, again reportedly on

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political grounds. A new naphtha-reforming unit at the 87,000‑b/d Arzew plant, intended to produce
27,000 b/d of petrol, is also planned.
Oil production
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
Crude oil and NGL production ('000 b/d) 1,420 1,165 1,086 1,131 1,183 1,227 1,265 1,383
Crude oil production ('000 b/d) 1,134 930 867 903 945 980 1,010 1,104
Crude oil production (% change, year on year) 8.3 -17.9 -6.8 4.2 4.6 3.7 3.1 1.2
a EIU estimates. b EIU forecasts.

Sources: EIU; Oil information © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics, licence: www.iea.org/t&c.

Gas supply
Algeria had 2.4trn cu metres of natural gas reserves, the second largest in Africa (after Nigeria), at end-
2020, according to the Energy Institute.
After years of production volatility as new upstream investment struggled to keep pace with declines at
maturing fields, gas production reached 101.5bn cu metres—about 87m tonnes of oil equivalent (toe)—
in 2023, almost a record high, as the fast-tracking of development projects and a surge in European
investment, triggered by a price spike and the EU's rush since early 2022 to find alternatives to Russian
supply, bore fruit.
We expect production to continue expanding in 2024, as prices remain relatively strong and further
development projects come on stream (although associated gas availability will fall owing to lower oil
output), and to rise throughout the forecast period as a result of foreign investment in upstream
development as the new hydrocarbons law beds in and as European companies strive to secure
supplies for their home markets, outweighing the impact of natural decline at older assets.
However, these longer-term prospects will depend heavily on the government's ability to attract
sufficient foreign investment, as lower prices and international decarbonisation pressures lead
international firms to prioritise countries with easier operating environments, and as new supplies from
Qatar and the eastern Mediterranean come on stream, increasing competition to gain access to the
European market.
Exports are expected to rise marginally during the forecast period as new upstream production comes
on stream and weaker economic growth moderates domestic demand. Exports hit a record of about
52bn cu metres in 2023, comprising about 13.5m tonnes of LNG and about 35bn cu metres of
piped gas.
Sonatrach is working with foreign companies to maintain output at ageing gasfields, especially at
Hassi R'Mel (the country's largest), and develop new ones. In July 2023 TotalEnergies agreed to expand
the Tin Fouyé Tabankort II and Tin Fouyé Tabankort Sud fields in the south-east by two-thirds, to
about 100,000 boe/day by 2026, and in April 2024 it signed a Memorandum of Understanding (MoU)
with Sonatrach setting out a work programme for the appraisal and development of gas resources in
the north-east of Timimoun province. In May 2024 Sonatrach awarded a US$2.3bn contract to Maire
Tecnimont (Italy) and Baker Hughes (US) to install new compression facilities at Hassi R'Mel, aimed at
maintaining plateau output at 188m cu metres/day.
Reflecting increased exploration investment by Sonatrach and its partners, a series of discoveries have
been announced in 2022‑24. In June 2022 the state firm announced the discovery of a new formation
at Hassi R'Mel, containing an estimated 340bn cu metres of gas, which was fast-tracked into
production in November of that year, adding 3.65bn cu metres/year of capacity. The following month,
the company announced two further finds in the south-west, followed in April 2023 and May 2024 by
news of a total of 14 finds, including a mix of oil and gas, across the country.
In September 2022 Eni solidified its leading position in Algeria's upstream gas industry by buying BP's
assets in the country. These comprised stakes of 45.9% and 33.2% respectively in the In Amenas and In

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Salah gas concessions, which produced a combined 11.2bn cu metres in 2021.

Sonatrach has four LNG export facilities with a cumulative send-out capacity of 56m cu metres/y.
Cargoes are sold mainly to southern Europe. In November 2023 Sonatrach extended a long-running
deal to supply 4.4bn cu metres/y to Turkey (its largest LNG customer in 2023) by three years,
until 2027, and in April 2024 agreed to extend a deal to supply 2m t/y to France (its second-largest
customer) via TotalEnergies until 2025.
Until recently, Algeria used three pipelines to send its gas to Europe. However, in October 2021 the
government opted not to renew the 25‑year contract for the 13.5bn‑cu-metres/y Maghreb-Europe gas
pipeline, which runs from the Hassi R'Mel gasfield to Spain via Morocco (which earned transit fees in
kind), owing to worsening diplomatic relations with its North African neighbour.
The Medgaz pipeline, which connects the Hassi R'Mel gasfield directly to Spain, has a capacity of
10bn cu metres/y, and the TransMed (or Enrico Mattei) gas pipeline, which runs from the Hassi R'Mel
gasfield to Italy through Tunisia, has a capacity of 33.5bn cu metres/y. In the second half of 2022,
reflecting high global prices and the urgency of European need, Sonatrach succeeded in negotiating
new gas prices on supply contracts with Engie (France), Enel (Italy) and Naturgy (Spain). However,
talks with the French firm about increasing volumes stalled in 2023 amid deteriorating diplomatic
relations. In April 2022 Sonatrach and Eni signed a long-term contract to increase gas exports to Italy
via the TransMed pipeline by 9bn cu metres/y by 2024 (implying total exports of 30bn cu metres/y),
but the total in 2023 fell slightly, to 23bn cu metres. In February 2024 Sonatrach signed a deal with
VNG (Germany) for the supply of an undisclosed volume of pipeline gas, its first with a German
importer.
In February 2022 the governments of Algeria, Niger and Nigeria signed a deal to build a US$13bn
pipeline to carry 30bn cu metres/y of Nigerian gas across the Sahara, reviving a project long proposed
in various forms but stalled until recently by tensions between Algeria and Niger. The pipeline would
run 4,128 km from Nigeria's Delta state to Hassi R'Mel, from where the gas would be transported to
Europe via existing infrastructure. A new MoU formalising the plan was signed in July 2022. However,
the security, financing and bureaucratic obstacles would be daunting, and the military coup in Niger in
July 2023 and severe delays to a critical internal pipeline in Nigeria have cast fresh doubt on the
project.
Official estimates claim that Algeria holds 20trn cu metres of technically recoverable shale gas.
Attempts to exploit those reserves have stalled, for reasons including domestic protests and a lack of
water in the relevant areas. However, in the second quarter of 2024, after years of on-off discussions,
Chevron and ExxonMobil (two US oil majors) signed separate agreements with Sonatrach for the
possible development of hydrocarbons resources, including shale gas (in which both firms have
expertise), in the far south of the country.
Natural gas production
2022a 2023b 2024c 2025c 2026c 2027c 2028c 2033c
Natural gas production (ktoe) 86,128 87,290 88,090 88,890 89,690 90,090 90,490 92,490
Natural gas production (% change, year on year) -3.4 1.3 0.9 0.9 0.9 0.4 0.4 0.4
a Actual. b EIU estimates. c EIU forecasts.

Sources: EIU; Natural gas information © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics, licence:
www.iea.org/t&c.

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Electricity
Algeria | Energy | Electricity

July 15th 2024

We expect electricity consumption to grow by an annual average of 0.9% in 2024‑33 to reach

86,756 GWh in 2033. Industrial and residential demand growth will remain robust as the government
expands the transmission and distribution network while retaining subsidies to avoid social unrest.
Installed generation capacity reached an estimated 23.6 GW at end-2023, and peak demand stands at
about 18 GW; combustible fuels accounted for just over 97%. This comfortable cushion is the result of
a major expansion programme that was initiated in the early 2010s following severe power cuts and is
still at the tail-end of implementation, following long delays to several projects. In March 2023 a
1.2‑GW gas-fired combined-cycle plant in the Cap Djinet region of Boumerdès, a northern province,
was completed, followed in July 2024 by the first 450 MW of power coming on stream at the
1,450‑MW plant under construction at Mostaganem, also in the north. However, in June 2024 Duro
Felguera (Spain) announced the suspension of work on the delayed 1,250‑MW Djelfa plant, citing
scope changes since the award of the contract ten years earlier and political tensions frustrating
negotiations. In April Sonelgaz, the state gas and power supplier, expanded its domestic turbine-
manufacturing partnership with GE Vernova (US) to encompass equipment required to strengthen the
grid, to prevent the repeat of summertime power cuts and to facilitate the connection of planned
renewables-based facilities.
Electricity consumption, capacity and generation
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
Electricity consumption (GWh) 77,653 79,165 80,309 81,312 82,211 82,963 83,666 86,756
Electricity consumption (% change, year on
year) 3.2 1.9 1.4 1.2 1.1 0.9 0.8 0.8
Capacity and generation
Total electricity capacity (MW) 22,366 23,566 24,066 25,066 26,241 27,916 29,466 37,466
Total electricity generation (GWh) 86,124 87,843 89,591 91,127 92,463 93,438 94,597 98,639
Total electricity generation (% change, year
on year) 0.9 2.0 2.0 1.7 1.5 1.1 1.2 0.8
Electricity capacity: combustible fuels
(MW)c 21,767 22,967 23,417 24,417 25,092 25,767 26,267 28,267
Electricity generation: combustible fuels
(GWh) 85,418 87,138 88,845 90,418 91,109 90,827 90,773 88,441
Electricity mix
Electricity generation: combustible fuels (%
of total) 99.2 99.2 99.2 99.2 98.5 97.2 96.0 89.0
Electricity generation: nuclear (% of total) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Electricity generation: hydro (% of total) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Electricity generation: non-hydro
renewables (% of total) 0.8 0.8 0.8 0.8 1.5 2.8 4.0 11.0
a EIU estimates. b EIU forecasts. c From 2000 onwards, capacity derived from biomass and waste is included.

Sources: EIU; World energy statistics, Electricity information and World energy balances © OECD/IEA 2024 IEA statistics,
www.iea.org/data-and-statistics, licence: www.iea.org/t&c.

Sonelgaz is heavily indebted and would struggle to access international commercial finance at
reasonable rates to fund expansion plans. It has instead stepped up collaboration with development
finance institutions, including the US Trade and Development Agency and the African Development
Bank, which financed a contract tendered by Sonatrach in mid-2023 to advise on potential solar
projects. The EU's burgeoning interest in importing clean energy from its North African near-

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neighbours could also unlock funds. (Algeria joined the European Bank for Reconstruction and
Development in 2021.) In October 2023 the government and the EU agreed to accelerate discussions
about an electricity interconnection, which, the Algerian energy minister later elaborated, is envisaged
as taking the form of a submarine cable running via Sardinia to Italy carrying 1,000-2,000 MW, as part
of a broader ongoing energy co-operation dialogue. A 500‑MW interconnection with Tunisia is
currently in operation.

Coal
Algeria | Energy | Coal

July 15th 2024

Demand
Coal consumption (mainly by industry) remained extremely low in 2023. We expect coal to continue to
play only a negligible role in Algeria's energy mix in 2024‑33.
Coal consumption
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
Coal consumption (ktoe) 220 198 177 160 145 130 117 71
Coal consumption (% change, year on year) -23.4c -10.2 -10.3 -9.9 -9.5 -9.8 -9.9 -9.1
a EIU estimates. b EIU forecasts. c Actual.

Sources: EIU; Coal information and World energy balances © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics,
licence: www.iea.org/t&c.

Supply
Algeria has not produced coal since the colonial era, and around 208m tonnes remain unexploited in
western Algeria, but production is highly unlikely to resume in 2024‑33, given the difficulty of raising
international finance for coal projects and ample oil and gas reserves.

Nuclear
Algeria | Energy | Nuclear

July 15th 2024

No nuclear power plants exist in Algeria, although two research reactors—the 15‑MW Es-Salam and
1‑MW Nur units—are in operation. In 2014 the government announced that the country's first
commercial-scale plant would be commissioned by 2029, but no tangible progress has yet been made,
and the plan is unlikely to proceed.

Renewable energy
Algeria | Energy | Renewables

July 15th 2024

In February 2020 the government set a new target to have 15 GW of renewables capacity installed by
2035, mainly solar, up from just under 600 MW at end-2023. We expect the target to be missed.

Hydro

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Installed hydropower capacity stood at 129 MW at end-2023, according to the International

Renewable Energy Agency (Irena), generating about 0.1% of the country's electricity. The hydropower
plants are mainly in the north, where rainfall is much higher. We expect hydropower to continue to
make only a minimal contribution to electricity supply in 2024‑33 as an (increasingly) unsuitable
climate and the far greater potential of alternative renewables sources militate against further
expansion.

Wind
Algeria's only wind farm, the 10-MW Kabertène facility, was commissioned in June 2014. Progress has
stalled, despite a recent survey by the International Finance Corporation assessing the country as
having the highest wind power potential in Africa, at 7.7 GW, and the government's focus is on solar.
We expect only limited expansion, with wind accounting for under 1% of overall generation capacity
by 2033.
Renewable energy consumption
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
Total renewables consumption (ktoe) 63 63 67 64 119 227 332 935
Hydro 0 1 1 1 1 1 1 1
Geothermal 0 0 0 0 0 0 0 0
Solar/wind/other 60 60 64 60 116 224 328 932
Combustible renewables & waste 2 3 3 3 3 3 3 3
a EIU estimates. b EIU forecasts.

Sources: EIU; World energy balances © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-statistics, licence:
www.iea.org/t&c.

Solar
Installed solar power capacity totalled 460 MW at end-2023, generating about 0.8% of Algeria's
electricity. The country's swathes of sparsely populated desert and high irradiance offer huge solar
power potential. This remains vastly underexploited, owing largely to a lack of political will,
bureaucratic obstacles, fiscal constraints and lacklustre investor interest. Stringent local-content
legislation, aimed at developing a fledgling solar-manufacturing industry, has also deterred foreign
investors. However, progress is accelerating, with Sonelgaz awarding contracts in March to install
3 GW at plants across the country, and announcing plans to issue tenders for the same capacity in
2025‑26.
After several postponements, the Ministry of Energy Transition and Renewable Energy issued a tender
for 1 GW of solar power capacity in December 2021, offering lots of 50‑300 MW at 11 sites, initially
using the independent power producer model, and, in response to complaints at an earlier auction,
easing local-content requirements and scrapping the minimum 51% local shareholder requirement. The
auction had appeared to be on hold, and in February 2023 Sonelgaz issued a construction-only tender
for another 15 80-220-MW plants, with capacities totalling 2 GW. The company then formally awarded
all 20 contracts, on a construction-only basis, to install the entire 3 GW, in March 2024. Chinese firms
won about 1.5 GW of the work, presumably assisted by their willingness to bring financing. The
upfront cost to the government of reverting to the simple construction model leaves the planned build-
out exposed to potential budgetary cuts as oil and gas revenue declines. We expect expansion of solar
capacity to fall well short of official goals, reaching about 8 GW by 2033.

Other
In March 2023 the government unveiled a National Hydrogen Strategy geared towards meeting a
substantial proportion of Europe's import needs. It aims to produce and export 30-40 TWh of

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combined green and blue hydrogen and its derivatives by 2040. The roadmap's three phases comprise
start-up, including pilot projects (2023‑30); expansion and market creation (2030‑40); and
industrialisation and market competitiveness (2040‑50). Given Algeria's gas network connections to
Europe, the country has some advantage over regional competitors looking to move into the nascent
industry, but its weaker business environment means that it has thus far failed to attract the investor
interest seen, for example, in Morocco, Egypt and, more recently, Tunisia.
In July 2022 Engie committed to appraising opportunities for hydrogen development as part of an
11‑year gas sales agreement with Sonatrach, followed a year later by an agreement between the state
firm and TotalEnergies to co‑operate on the development of renewables and low-carbon hydrogen for
export to Europe. In December 2022 Sonatrach signed a declaration of intent to collaborate with VNG
on projects geared towards producing green hydrogen for export to Germany, starting with the joint
development of a 50‑MW pilot, followed in February 2024 by the creation of an intergovernmental
green hydrogen task force to galvanise collaboration.
Renewables capacity and generation
2022a 2023a 2024b 2025b 2026b 2027b 2028b 2033b
Electricity capacity: hydro (MW) 129 129 129 129 129 129 129 129
Electricity generation: hydro (GWh) 6 6 6 6 6 6 6 7
Electricity capacity: non-hydro renewables (MW)c 470 470 520 520 1,020 2,020 3,070 8,570
Electricity generation: non-hydro renewables
(GWh) 700 699 740 703 1,348 2,605 3,818 10,838
Non-hydro renewables
Electricity capacity: wind (MW) 10 10 10 10 10 10 60 560
Electricity generation: wind (GWh) 12 10 10 10 10 10 63 586
Electricity capacity: solar (MW) 460 460 510 510 1,010 2,010 3,010 8,010
Electricity generation: solar (GWh) 689 689 729 693 1,337 2,594 3,755 10,252
Electricity capacity: other non-hydro renewables
(MW) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Electricity generation: other non-hydro
renewables (GWh) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
a EIU estimates. b EIU forecasts. c From 2005 onwards, capacity derived from biomass and waste is excluded.

Sources: EIU; Electricity information and World energy balances © OECD/IEA 2024 IEA statistics, www.iea.org/data-and-
statistics, licence: www.iea.org/t&c.

Risk and opportunities

Algeria | Energy | Risk and return

July 15th 2024

Our risk and return scores compare the forecast and business risk for each country's energy sector
against those of 67 other countries in this service, in order to assess the future operating environment
for companies. All scores are out of 100, with 100 denoting high risk (bad) or high return (good).

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Algeria's overall scores for energy (out of 100)

Return: 60 (moderate) Risk: 66 (high)
Algeria's energy sector will offer a moderate-return and high-risk scenario during the forecast period.
Oil and gas and electricity will be the most promising subsectors. The moderate return score stems
from a steady rise in overall energy consumption and increased European demand for gas.
Political uncertainty, a sclerotic bureaucracy and entrenched suspicion of foreign involvement in
strategic industries will continue to impede investment across all subsectors. Algeria's energy sector
will remain controlled by powerful state-owned companies. Other major risks include renewed anti-
regime unrest and continued policy inconsistency, which has historically subjected investors to a
constant risk of contractual changes and frequently changing interlocutors. The government's
tendency to respond to intergovernmental tensions by penalising companies from the country
concerned is another risk.

Key risk scenarios for energy

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Algeria's scores for oil and gas (out of 100)

Return: 61 (high) Risk: 68 (high)
The oil and gas subsector will generate high returns, owing primarily to its continued dominance in the
economy in 2024‑33, buoyant short-term prices and strong European interest in increasing imports
from the country. The government aims to attract foreign investment in upstream oil and especially gas
development. Following the passage in 2019 of a new hydrocarbons law, which is more attractive to
prospective investors, Sonatrach has signed important deals with several international oil and gas
companies.
However, investor wariness, political instability and a burdensome regulatory environment will
constrain Sonatrach's ability to enlist foreign partners.

Algeria's scores for electricity (out of 100)

Return: 61 (high) Risk: 68 (high)
The electricity subsector will generate high returns. Algeria's score is the third highest in the region
(behind Saudi Arabia and Egypt). High returns will be driven by rising consumption, the government's
ambitious plans to improve the generation, transmission and distribution infrastructure, and potential
exports to Europe.
Long-term risks will remain high, because of continued weak transmission and distribution
infrastructure, the requirement to co-operate with Sonelgaz, the heavily indebted state gas and power
supplier, and the reflexive hostility of many within the political and business elite towards foreign

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commercial actors. Algeria's unstable political backdrop and state-set power tariffs, which are not fully
cost-reflective, will also impede private investment.

Algeria's scores for renewables (out of 100)

Return: 58 (moderate) Risk: 70 (high)
Renewables hold substantial development potential for Algeria, and will generate moderate returns
during the forecast period. The desire to conserve gas for export, as well as increased access to
multilateral and European finance, will support growth in the subsector.
However, risks will be higher than returns, owing to a lack of policy consistency over, and commitment
to, renewables development, inadequate infrastructure and fiscal volatility.
Algeria: risk scores weighted by energy subsector, Q2 2024
Unweighted Oil and gas Electricity Nuclear Coal Renewables
Overall risk (out of 100) 66.0 67.5 67.8 69.7 67.5 70.2
Security risk (out of 100) 50.0 51.9 51.3 59.1 52.4 55.0
Political stability (out of 100) 70.0 67.9 70.0 70.0 70.0 72.5
Government effectiveness (out of 100) 84.0 71.6 84.8 91.3 84.8 89.8
Legal & regulatory risk (out of 100) 75.0 73.8 73.6 73.7 73.6 74.4
Macroeconomic risk (out of 100) 30.0 27.8 29.2 29.5 29.2 30.4
Foreign trade & payments risk (out of 100) 71.0 69.2 72.9 77.3 72.9 73.1
Financial risk (out of 100) 75.0 75.0 71.9 71.4 68.8 73.2
Tax policy risk (out of 100) 75.0 75.0 75.0 75.0 75.0 75.0
Labour market risk (out of 100) 75.0 75.0 75.0 75.0 75.0 75.0
Infrastructure risk (out of 100) 55.0 47.0 56.0 77.6 55.8 67.9
Note. 100 = most risky.
The Operational Risk model is run once every quarter.
Source: EIU, Operational Risk.

Methodology
The risk and return scores have been calculated as below for the energy sector as a whole, and for three
subsectors: oil and gas; electricity; and renewables.
The return scores are based on our ten-year forecasts and indicate the returns that companies can
expect over that period. We calculate the scores by ranking the country's growth forecasts for energy
consumption and supply over the ten-year forecast period, compared with those for 67 other countries.

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Growth is compared in both percentage and absolute terms to avoid favouring smaller or larger
markets. For each subsector, the country's rankings on these indicators are averaged, and then
converted to a score out of 100, in order to show the market potential. For the oil and gas sector, supply
is measured in terms of forecast domestic output, not including imports. For the electricity and
renewables sector, supply is measured in terms of forecast capacity and generation.
The risk scores are taken from our Risk Briefing service, which tracks operational risks for investors
across a range of indicators, including the regulatory environment and investment potential. The full
list of indicators is shown in the "Risk scores" table above. For this report, the country's standard risk
ratings (out of 100) are taken for the overall energy assessment. For each subsector the risk scores are
weighted to emphasise factors of particular relevance, for example regulation or international trade.
Scoring descriptions (out of 100):
Very low = 0-20;
Low = 21-40;
Moderate = 41-60;
High = 61-80;
Very high = 81-100

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