Economics

What Are The Biggest Industries In Algeria?

The petroleum industry is one of the most important industries in Algeria.

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Officially known as the People's Democratic Republic of Algeria, Algeria is a country that is located in the northern region of the African continent. More specifically, the country lies in the Maghreb region on the Mediterranean coast in the northwestern region of Africa. The capital city, which is also the most populated, is Algiers. The country has an area of around 919,595 square miles, which makes it the tenth biggest state on the planet. In the African continent, Algeria is the largest country by size after South Sudan split from Sudan back in 2001. Countries and regions bordering Algeria are Tunisia, Libya, Morocco, Western Sahara, Mauritania, Mali, Niger, and the Mediterranean Sea. The country has a number of natural resources including oil and gas, solar and wind energy, mineral resources (such as gold and uranium), water, and palm deserts.

Oil and Gas

Algeria’s economy is mainly driven by the substantial reserves of petroleum, which is why the country has been a member of The Organization of the Petroleum Exporting Countries (OPEC) since 1969. Historically, these hydrocarbons have contributed about 60% of Algeria’s budget funds as well as a huge chunk (about 95%) of the country’s export revenue. In addition, 30% of the country’s gross domestic product (GDP) is accounted for by hydrocarbons. As of 2005, the U.S. Energy Information Administration stated that the proven natural gas reserves stood at a whopping 160 trillion cubic feet. These gas reserves placed Algeria in the 10th position in the world among countries that produce natural gas. In addition, the country’s oil reserves are the 16th largest in the world and third in the African continent. Due to these substantial natural resources, Algeria is the globe’s sixth largest exporter of natural gas while, in Africa, it is the leading producer of natural gas. Large petroleum fields are situated in places like the Hassi R'Mel gas field as well as the Hassi Messaoud oil field.

The most dominant oil producing firm is known as Sonatrach, which is owned by the state. As of 2016, the company had a monopoly of about 60%. In 2011, the country was able to produce about 2.9 trillion cubic feet (abbreviated Tcf) of natural gas. Despite the huge amount of petroleum products, Sonatrach reports that the majority of the country has not been explored. To increase the production of oil, the company has made partnerships with firms like Pertamina from Indonesia, Eni SpA from Italy, and the Spanish Spain Compañía Española de Petróleos SAU (CEPSA). These partnerships have generated about $9 billion worth of investment, which will increase production by around 14% between 2016 and 2019.

Locally, petroleum products are used for several things such as energy production. In the past decade, the country’s energy needs have gone up by around 7%, which means that the relevant sector needs to come up with ways to meet the need. One of the ways that the government has been doing this is by using natural gas to generate about 8,000 megawatts of extra electricity. Currently, natural gas is the main source of Algeria’s energy. In the long term, renewable sources of energy are being considered. For example, by 2030, the government wishes to have renewable sources of energy account for at least 40% of the domestic needs. Among these renewable sources, solar power has the most potential compared to the likes of wind, hydropower, geothermal, and biomass energy sources.

Most of the oil from the country, about 80%, is exported to Europe, followed by the Americas, Asia, and then Oceania. However, in recent years, the production of petroleum products has gone down. One of the reasons why the production has gone down is that the existing infrastructure of the country has been overwhelmed. At the same time, newer projects for building new infrastructure have also stagnated. In addition, the level of investment has gone down as investors are avoiding making investments in Algeria due to the strict laws and regulations. Even the amount of revenue has gone down although the contribution to the economy is still significant. For example, 2014 saw the oil and gas revenues stand at $178.93 billion while 2017 amounted to a much lower $106.29 billion. To fix some of these challenges, the government plans to invest about $78 billion into the sector from now until 2021. In addition to the investments, the Algerian government also embarked on a mission in June 2018 to revise its unfavorable laws.

Other Minerals

The state also has mineral resources including gold, lead, zinc, and silver. As of 2009, the country has gold reserves of about 173 tons while the leading firm in its mining is known as ENOR, which is part of the larger Sonatrach. In 2006, the firm was able to mine about 38,914 metric tons of gold ore. In that year, one of the leading mines was the Tirek Mine, which produced about 0.34 ounces of per metric ton of gold ore. However, the amount of gold produced by the firm in 2006 was significantly less than the production from 2005, which was about 65,718 metric tons.

In the world, the country’s gold reserves place it in the 25th position while it is 3rd among Arab nations. In Africa, no other country has as much gold as Algeria. By comparison, however, industrial and precious minerals are not as significant.

Solar

In a year, Algeria has the potential of receiving about 3,000 hours of sunshine. For this reason, the country’s potential for solar energy production is about 170 TWh in a year. Within the Middle East and North Africa zone, Algeria has one of the highest potentials for solar energy production. The first project for solar generation, which is known as Hassi R'Mel power station, was officially opened back in 2011. This hybrid plant has a solar power array with a capacity of 25 megawatts as well as a gas turbine plant with a capacity of 130 megawatts. Aside from solar power, similar projects were launched in 2011 to produce energy from other sources like the wind. By 2013, the country has a target of producing about 12 gigawatts of power from renewable sources.

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