© 2018 by Robert Person.  The views expressed on this website are my own and do not represent the official policy of the U.S. Army, Department of Defense, or U.S. Government.

william.moorhead
Mar 26, 2019

Exxon's talks to tap Algeria shale gas falter due to unrest (Reuters)

 

 

With a global boom in natural gas, companies and countries alike are looking to cooperate to strike a lucrative deal. Recently, ExxonMobil has engaged in talks with the Algerian government on acquiring the rights to develop a shale gas field in Ahnet basin, negotiating with both the government and the state-owned oil company, Sonatrach. However, these talks have stopped because of political unrest in the country, where protests against the sitting president (President Abdelaziz Bouteflika) have raged for a month. With ExxonMobil backing out, this is another loss for the Algerian government and Sonatrach, who have searched for multiple foreign to invest in and develop its gas and oil reserves. As political conditions deteriorating, it appears as if economic conditions may soon follow.

 

 

If they were able to make a deal, ExxonMobil's investment into Algeria could have helped the regime improve its political stability. With an economy dominated by oil and gas, Algeria has a natural resource at its disposal that can bring in massive amounts of wealth. However, in order to get these rents, Algeria needed foreign direct investment from ExxonMobil. Should the deal have panned out, ExxonMobil would have pumped in big investments into Algeria, and it would have created administrative and technical jobs that would give experience and industry-specific knowledge to Algerians, who could then use their skills to help Sonatrach. The improved economy from a developed oil industry would fund the government handsomely; however, this funding in lieu of taxes creates a rentier effect, which may worsen the already poor political conditions. Should the political situation improve in Algeria, it may be likely that ExxonMobil or another foreign investor attempts to invest in the state, as they have important locational advantages, such as a wealth of oil and proximity to Europe's largest Mediterranean ports. Until Algeria creates political stability, though, it is unlikely ExxonMobil or any foreign oil company will seriously consider FDI in Algeria.

 

https://www.reuters.com/article/us-algeria-protests-exxon-mobil-idUSKCN1R11G8

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