Algerian state energy company Sonatrach has begun discussions with ExxonMobil Corp (XOM) and others in order to begin offshore oil drilling. While the Algerian company has experience drilling land-based wells, it needs to partner with an experienced offshore producer in order to take advantage of these oil resources. (See also: Exxon Mobil Sells 60% Stake in Nigeria Unit.)
Recent seismic scans have revealed potential oil reserves off the eastern coast of the city of Bejaia and the western port of Oran. With lower oil prices forcing the company to focus on developing mature wells in the Sahara Desert, offshore rigs could open up new growth opportunities.
Exxon has exploration and production operations in 36 countries around the world and is the largest non-state oil company in the world. It operates offshore rigs throughout Africa, including previous shale oil operations in Algeria and offshore rigs in Nigeria. Its long history of technological development and deepwater production make it an attractive partner. (See also: Exxon Mobil Makes High Quality Discoveries.)
The OPEC-member nation is also talking with Anadarko Petroleum Corp (APC) and Eni (E). Algeria has struggled to attract interest from external oil companies due to its tough terms and allegations of bribery. In the fall of 2012, Eni was accused of paying Algerian officials bribes of around $268 million.
The Algerian oil industry also suffers from occasional instability and violence. In 2016, a plant run by a partnership between BP plc (BP) and Norway’s Statoil (STO) was hit by three rockets fired by an Al-Qaeda offshoot, Islamic Maghreb. In 2013, around 40 workers at a BP plant were killed when a hostage situation initiated by Al-Qaeda affiliated fighters ended when the Algerian military moved in.
Currently, Sonatrach has announced no details about when projects are likely to begin. If Exxon lands this project, it will help solidify the company as a premier partner for offshore operations. It certainly has the technology and competence to operate in that area, but so much of this deal depends on local political factors.