north african oil & gas 201401

8/13/2019 North African Oil & Gas 201401

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Figure 1 High rates of unemployment and youthunemployment .. . . - -

- Algeria- Egypt- libya- Mo rocco

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2000 2002 2004 2006 2008 2010 2012

Figure 2. North African gasoline prices relative toUK 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 achallenge. Gaining the consensus needed to implement reformshas been time consuming. Unfortunately, the delays causefrustration, whi ch in turn makes consensus more difficult to reach.Some observers have even lamented that the Arab Spring hasturned into the 'Islamist Winter', not just in North Africa but also inthe Middle East, where violence in Syria has reached crisisproportions.

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 thecoast. The smaller, coastally oriented countries of Tunisia andMorocco have 17 and 19 arable land. The Sahara Desertcontinues to expand. Desertification is a major problem, impedingagricultural activity in much of he inland area. Moreover, theresidents of the inland desert areas often have little to do withtheir more urbanised coastal counterpar ts, and they may largely beexcluded from participation in the new governments. This alsocontributes to internal strife.

North Africa's most populous country is Egypt, w ith85.3 million people, accounting for nearly half of the region'spopulation. Algeria's population is 38 .1 m ll ion, followed byMorocco with 32 .6 million people, Tunisia with 10.8 million, andLibya with 6 million. Libya is the only country that had a recentdrop in population, related to the civil war.The age structure isyoung, with only approximately 4 - 7 of he North Africanpopulation aged 65 years and older. Literacy rates are below theworld average, with a wide disparity between male literacy ratesand female li teracy rates.

2013 HYDROCARBONENGINEERING

Figure 1 displays the high rates of unemployment and youth(ages 15 - 24) unemployment in the North African countries, asestimated by the CIA World Factbook. The data are 2012 estimates,with the exception of Libya, for which no youth unemploymentrates are available, and the overall unemployment rate of 30 is anestimate for 2004. Unemployment is viewed as an increasinglycritical social problem. Tunisia's rebell ion in January 2011 was in factattributed largely to unemployment and frustration among youngpeople. Total unemployment is estimated at 17.4 ,and it is anextremely high 30.7 for young people aged 15 - 24 , including manywho have college degrees. Tunisia's government had been led for23 years by President Zine el-Abidine Ben Ali , who had pledgedmany improvements in prosperity, education, health care, andsocial stability. But the realities continually f ell shor t of thepromises. By the end of 2010, a college educated 26 year oldnamed Muhammad Bouazizi protes ted in a self immolation that setoff such a rebellion that President Ben Ali had to leave the country.The Tunisian rebel lion is regarded as a starting point for therebellions that spread in Egypt, Libya, Morocco and Algeria.The 2011 Egyptian Revolution began with a popular uprising onJanuary 25 th and the revolution is ongoing. On February th afterweeks of protests and demonstrations, Egyptian President HosniMubarak resigned from office. Egyptians were unhappy with manyof the same social issues seen in Tunisia: high unemployment, lowwages, inflation, police brutality, and politi cal censorship. Thesesame problems plagued other North African countries.There was awave of protests, including self immolations, in Algeria, where theprotests grew stronger after the Egyptian Revolution removedPresident Mubarek. The successor, President Muhammad Morsi,was elected in 2012, but he too was ousted in 2013, and the countryremains in flu x.

The civil war in Libya escalated rapidly. A series of peacefulprotests in early 2011 were countered with crushing force byColonel Qaddafi's troops. The protests escalated into a widespreaduprising, and the rebel forces set up a rival seat of government inBenghazi, naming themselves the National Transitional Council. Therebels were backed by NATO, and the civil war ended only whenColonel Qaddafi was slain in October 2011. Yet the provisionalgovernment has struggled ever since to forge unity among thedisparate tribes, regions and parties that make up the country.Security has not been restored, and armed militias remain active. InSeptember 2012, the US Embassy in Benghazi was attacked byheavily armed militants, and the US Ambassador,). ChristopherStevens, was assassinated. At the time of this writi ng, a year haspassed, and although arrests have been made, the investigation hasnot been concluded. Important oil export infrastructure has beenblockaded, cutting into vital oil export revenues. The Libyangovernment received of its revenues from the oil and gasindustry in 2011, underscoring the critical need for a healthyflow of oi l :

North Africa s oil and natural gasresources and productionKey role of oil and gas revenuesThe social and political turmoil in North Africa has hampereddevelopments in the oil and gas industry. Because oil and gascontribute so much to the local economies, this is having a cyclicalimpact on the ability of governments to meet the expectations ofthe citizenry. According to the Economist Intelligence Unit, oil and

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- Egypt, Arab Rep.- Libya

MoroccoTunisia

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2000 2002 2004 2006 2008 2010

Figure 3 North African pump prices for dieselrelative to U prices.

Figure 4. North Africa proved oil reserves,billion bbls.51 2300

Figure 5 North Africa proved gas reserves,billion ft3

geria E lYpt

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gas

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b; om -------- ---------------,.......N. Africa of World Gas Reserves___ N. Africa of World Oil Reserve s1' 10.Q1

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Figure 6. North Africa: Falling share of global oiland gas reserves.

December 2013 HYDROCARBON _ _____ NGIN RING

revenues in 2011 accounted for 10% of government revenue inEgypt, 67% of government revenues in Algeria, and a whopping 91%of government revenues in Libya. For the governments now intransition in North Africa, reviving and stimulating the hydrocarbonindustry is critical.

Pricing issuesIt is typical for oil and gas rich countries to use the revenues fromthe hydrocarbon sector to subsidise other sectors and programs. Itis also common or governments to subsidise fuel prices.This isviewed as a way of sharing the wealth with the citizens. But it alsocreates its own set of market problems. For example, demand forthe subsidised fuel or fuels may grow so disproportionately thatthe pattern of fuel demand is skewed and encourages inefficientenergy use .The domesti c refining industry may not be able tosatisfy the lopsided pattern of demand, and subsidised fuel pricesmay discourage the investment needed to change this. Subsidisedfuels may also be smuggled out of the country, giving rise toorganised crime. Eventually, the government bill for fuel subsidiesmay outweigh the benefits, yet removing long standing subsidiesmay be tantamount to politi cal suicide.

All of the North African governments subsidise gasoline anddiesel prices. Figure 2 compares the pump price of gasoline inNorth African countries with the price in the UK , as reported bythe World Bank. In 2012, the average price for gasoline in the UKwas US 2.17/ltr, above the prices in all of he North Africacountries, usually by orders of magnitude: 4.8 times as high as theEgyptian price, 7.5 times as high as the Algerian price, and even 18.1times as high as the Libyan price of a mere 12 cents/ltr As noted,oil and gas revenues ove rwhelmingly dominate the governmentbudgets in Libya and Algeria. These two countries have the mostheavily subsidised gasoline in the region, with gasoline priced atonly US 0 12/ltr in Libya and US 0 29/ltr in Algeria.

Figure 3 compares the pump price of diesel in North Africawith the price in the UK . The US 2 27/ltr price in the UK in 2012was 13.4 times as high as the Algerian price ofUS 0 17/ltr and 22.7 times as high as the US 0 10/ltr seenin Libya.

Resource governancePetroleum and natural gas are critical to the North Africaneconomy. Yet the presence of oil and gas reserves may nottranslate directly into economic health, even in countriesconsidered resource rich. A group known R-S the Revenue WatchInstitute recently released their report, The 2073 ResourceGovernance Index The Resource Governance Index, or RGI, wasdeveloped to evaluate the governance of the oil, gas and miningindustries in 58 countries. These 58 countries produce 85% of theworld's oil, 80 of he world's copper and 90 of he world'sdiamonds . The premise is that good governance of resourceextraction industries is critical to long term economic success. Theevaluation cri teria were organised into categories of Institutionaland Legal Setting, Reporting Practices, Safeguards and QualityControls, and Enabling Environment. Despite the importance ofresourceextraction in North Africa, Algeria received a 'failing'score of 38, ranking 4sth out of the 58 countries. Egypt received a'weak' score of 43, placing 38 th out of 58 countries. Moroccoreceived a 'partial' score of 53, ranking 25 th out of 58 countries.Libya received a 'failing' score of19, ranking 55th out of 58countries.The report noted that Libya's very low scores on all


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- North Aftica Gas Production of0 2 Total Africa

- North frica Oil Production of0 1 Total Africa

Figure 7 North Africa s falling share of African oiland gas output

measures reflected decades of corruption and inefficiency,obviously a difficult system to reform.

On the whole, however, the RGI study establishes thatresource governance is difficult around the world, not ust in NorthAfrica. The Resource Watch group concluded that '80% ofgovernments fail to achieve good governance in their extractivesectors . Yet while North Africa is not alone in grappling with thisproblem, the consequences in this region have been severe, andthere is little doubt that poor governance of the oil and gasindustry is part and parcel of the overall poor governance thatfomented the Arab Spring protests. Logically, therefore, it isdoubtful that the political and economic reforms now underwaywill be able to succeed without serious attent ion given to the oiland gas sectors.

Losing ground: il and gas reservesOil was discovered in Algeria in 1956, shortly befc;>re the Suez Crisis.Oil was discovered in Libya in 1959. Libya joined OPEC in 1962, andAlgeria joined in 1969. North African oil and gas resources wereviewed historically as a strategic alternative to Persian Gulfproducers. Oil exports had the added advantage that Suez Canaltransit was not required to reach the markets of Europe and theAmericas. North Africa quickly became a premier oil centre, with ahost of foreign companies participating. But its dominance iswaning, and investment is needed or it will continue to loseground.

North African proved oil reserves by country, January 2013, areshown in Figure 4, as reported by the Oil nd as Journal (OGJ).Libya s oil reserves account for nearly three quarters of the regionaltotal, at 48 billion bbls. Algerian reserves also are considerable at12.2 billion bbls, followed by Egypt, with reserves listed at 4.4 billionbbls. For the five countries, total oil reserves are 64.9 billi on bbls,slightly more than half of otal African continent oil reserves.

Algeria, Libya and Egypt also possess the majority of NorthAfricas natural gas resource, approximately 54% of which is locatedin Algeria, followed by 26% in Egypt. Figure 5 shows North Africasproved gas reserves as reported by OGY Until recently, natural gasreserves had been growing significantly, particularly with new findsin Egypt. Egypt launched LNG exports in 2005, exporting 7.6 billionm3 that year. Libya s national oil company had been working toexpand natural gas reserves, and it hoped to nearly double reservesto 100 trillion ft3 but the civil war derailed these plans.

In recent years, North Africa s additions to oil and natural gasreserves have lagged relative to the rest of the world. According to

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0.6 0.57\.4 \ / Alge ria - Eeypt - li bya0 2 ~ /Figure 8. Recent North African crude production.

Figure 9. North African crude/NGL productiontrend 1965 - 2012.

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Figure 10. North Africa falling share of Africannatural gas output.

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Figure 11 Dwindling North Africa LNG exports.


the data series maintained by BP, North Africas share of global gasreserves was fairly steady at approximately 5 from 2003 to 2007.However, during the five years from 2007 to 2012, North Africasshare has fallen to 4.3 of global reserves. North Africa s share ofglobal oil reserves had been on an upward trend, growing from 4.1in 2003 to 4.3 in 2007, but this share fell to 3.9 in 2012.Thesefalling shares are shown in Figure 6.Oil and natural gas production: Also flaggingAs North Africas share of oil and gas reserves have fallen, oil andnatural gas production has fallen also. Figure 7 shows North Africa sfalling share of output relative to total African output. In 1970,North Africa produced 92 of total African natural gas plus 79 ofAfrican crude oil. These shares have fallen conSiderably. By 2012,North Africa accounted for 71 of the continent s natural gasoutput and only 42 of the crude output. In 2011, the drop inLibyan crude production had caused North Africa s share to dropto just 34 .

Figure 8 provides a closer look at the impact of the Libyan civilwar on oil production by displaying quarterly production asreported by the International Energy Agency (lEA). In the firstquarter of 2011, Libyan output was 1.13 million bpd. By the secondquarter, it had plummeted to 0.12 million bpd, and it fell to a meretrickle of 0.04 million bpd in the 3rd quarter. By October, Sirte hadfallen and Colonel Qaddafi had been slain. Crude productionbegan to be restored, and it averaged 0.57 million bpd in thefourth quarter. In 2012 , output hit a peak ofl.43 million bpd beforesubsiding to 1.31 million bpd in the second quarter of 2013. Libyanofficials affirm that they will be able to boost crude production to2 million bpd by 2017. By the third quarter of 2013, however,output fell once again, as striking workers blocked Sharara andElephant oil fields and terminals in western Libya.This helped todrive up the international oil price. As of the time of this writing,an agreement has been reached that is intended restore Libyanproduction.

Algerian crude production was in the range of1.26 - 1.28 million bpa in 201l, but it fell to 1.14 million bpd in thesecond quarter of 2013. Egyptian crude production declinedmodestly from 0.7 million bpd in the first quarter of 2011 to0.67 million bpd in the third quarter of 2012, but it recovered andaveraged 0.72 million bpd in the second quarter of 2013.

Figure 9 shows the long term trend in crude and NGLproduction for the four main North African producers,1965 - 2012 , per BP. Libyan production hit a.peak of nearly3.4 million bpd in 1970, but output collapsed to 1.0 million bpd in1987. When sanctions were lifted in 2003, some international firmsreturned 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 itneared 2.0 million bpd from during the 2005 - 2008 period. Someof the strength in liqUids output has been the result of increasednatural gas production and processing. Output fell to 1.67 millionbpd in 2012. Egyptian oil production was only 0.1 million bpd in1965, bu t output began to grow in the late 1970s, reaching a peakof 0.94 million bpd in 1993. Production trended down gently until2005, when the production decline was reversed . Output in 2012was approximately 0.73 million bpd .Tunisian output has beenroughly stable in the range of 70 000 - 80 000 bpd over the pastdecade, though recent years have shown a slight downturn.


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Algeria 5 497 5 0 6Egypt 9 794 95 39 0Libya 5 378 4 0 0Morocco 2 155 27 0 5Tunisia 34 0 0 0

0 0 0 0Total 22 1858 140 39Cracking: Distillation ratio 4.5

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Figure 12 North Africa active rotary rigs, monthly2007 - 2013.

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Gasolineg: S .

libya Output 2011 li bV l Demand

Figure 13 Libyan refined product output versusdemand

North Africa is the key natural gas producing region inAfrica, but as is the case with oil, its overall share of productionis declining. Figure 10 shows natural gas production in Algeria,Libya and Egypt from 2002 through 2012, along with theirpercentage share of total African output . Algeria is the mainproducer, and its natural gas production had been trendingupward until the middle of the decade, when it stagnated andbegan to slide. From its peak of 88.2 biHion m3 in 2005, Algerianproduction fell to 81.5 billion m3 in 2012.

Egyptian gas production, as noted, had been growingstrongly, climbing from 27.3 billion m3 in 2002 to 62 .7 billion m3in 2009. This leveled off and declined slightly to 60.9 billion m3in 2012. Libyan output also had been expanding in the postsanction years, reaching 15.9 billion m3 in 2008, but productionstagnated by the late 2000s, and it dipped to 7.9 billion m3 in


0 90 0 0 83 3 534 84 9 27 208 8 200 20 0 0 43 30 27 0 0 53 2 20 3 0 0 0 0 00 0 0 0 0 0 034 224 9 27 387 14 30

2011 before recovering somewhat to 12.2 billion m3 in 2012.Overall, in 2002, these three natural gas producers accountedfor 82% of African output but their share fell to 7 in 2012 .

Egypt started exporting LNG in 2005. Exports rose to14.8 billion m3 in 2006, but soon they began to slide, and by2012 Egyptian LNG exports totaled only 6.7 billion m3. Algeriais the premier LNG expor ter in the region, but its LNG exportshave also fallen steadily. Algeria exported 27 .9 billion m3 ofLNG in 2003, but exports fell to 15.3 billion m3 in 2012 . Figure

illustrates this decline. In 2004, Algerian LNG exports of24 .8 billion m3 were slightly larger than Qatari exports of24.1 billion m3. By 2012, Qatar 's growth in LNG exports hadeclipsed not only Algeria but all of North Africa, amountingto 105.4 billion m3, 6.9 times as much as Algerian exports and4.8 times as much as total North African exports.

In early 2002, spot prices for Brent crude oil were in thevicinity of US 20/bbl. They marched upward and spiked atapproximately US 133 for the month of July 2008. Much ofthe world fell into recession, and Brent spot prjces collapsedby late 2008. Yet prices recovered, and they have remained atover US 100/ bbl since early 20ll. This type of price horizonhas stimulated a great deal of interest in exploration andproduction . Much of the enthusiasm has bypassed NorthAfrica, however. Figure 12 displays the number of activedrilling rigs in Algeria, Egypt, Libya and Tunisia each monthfrom January 2007 through August 2013, as tracked by BakerHughes. Although oil prices were rising strongly in the 2007 -2008 period, the number of active rigs increased noticeablyonly in Egypt. When the oil price collapsed in late 2009,active rigs in Egypt fell. When prices began to recover, thenumber of active rigs in Egypt recovered as well. Yet despitethe continued strength of oil prices, the number of active rigsleveled off and began to fall in 2012, in conjunction with therise in politi cal unrest and the ousting of the newly electedPresident.

Tunisia typically has had only three to five rotary rigsactive, but in August 2013 , only one rig remained active. From2007 until early 2011, Libya had 10 - 20 active rigs , and thisdropped to zero during the civil war. Rigs were reactivatedsince then, and there were 15 active as of August 2013. Algeriahas seen a recent rise in active rigs, which had been in therange of 25 - 30 for most of 2000 through 20ll. In August 2013,Baker Hughes reported 49 active rigs . Perhaps notcoincidentally, the Arab Spr ing protests did not unseat thehead of state, Abdelaziz Bouteflika, who has ruled since 1999.Despite suffering a stroke earlier in 2013, he remains in power,


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and many believe that he will be able to hand pick a successorwhen elections are held next in April 2014 .

The oil and gas sectors remain high ly active, therefore, butthey are losing ground relative to competitors at a time whenthey could be growing. Governments have been taking steps toincrease international participation, but some investors are wary.For example, Algeria amended its hydrocarbon laws in early 2012 toattract more foreign investment, and Parliament approved thechanges in January 2013. But this progress was set back by militantattacks on Algeria's Amenas LNG plant, which claimed over 60militant and worker lives and shut down the facility. The Amenasplant is located inland and near the border with Libya raisingsecurity concerns. In fact, some of the recent interest in explorationand development in Morocco, which is far less oil and gas pronethan many areas in Algeria and Libya, has stemmed from the ideathat Moroccan installations will be safer.North Africa s refining industryRecent events have affected refinery plansMirroring the situation seen in the upstream oil and gas sector,the social and political changes sweeping North Africa also havedetracted from the downstream sector. There have been anumber of refinery upgrades, expansions, and even grassrootsprojects planned in North Africa, but the past two years haveproven challenging, and many projects have been postponed orshelved. Algeria, for example, developed an ambitiousdownstream plan that includes rehabilitation and expansion of itsthree largest refineries (Arzew, Algiers, and Skikda), a condensatesplitting refinery at Skikda, a fuel oil conversion unit at Skikda

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674AtgeriaOutput Algeria Dema nd

Figure 14. Algerian refined product output versusdem nd

(80 000 bpd capacity,) and four new grassroots refineries nowenvisioned at 100 000 bpd each. Over the past two years, mostefforts have focused on the Skikda refinery, which often hasbeen closed or running at low utilisation rates duringmaintenance and upgrades. These are planned to add 30 000bpd of nameplate capacity, a catalytic reformer, and ahydrotreater . There have been a variety of technical problems,unfortunately, plus a fire and an explosion, and gasoline importshave grown. As of the third quarter of 2013 , Skikda's crudecapacity was increased to 335 000 bpd, and crude runs areexpected to rise for the remainder of the year. The Arzewrefinery also has been partially shut down for maintenance andrepairs in 2011 and 2012 which reduced gasoline output. The

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Soralchin refinery reportedly reduced its runs in 2012 overdisputes concerning profitability.

Libya's Ras Lanuf refinery also has been run at lowutilisation rates since the civil war, with problems gettingcrude deliveries and disagreements between thegovernment and the refinery operator. At 220 000 bpd , RasLanuf is Libya's largest refinery . Some of the protests in2012 resulted in a blockade of the Ras Lanuf port. The RasLanuf refinery reopened in late 2012, but closed again inearly 2013 because of technical problems at the refinery,power outages, plus a strike by workers at the Port. Therewas also a brief shutdown at the Zawiya refinery, caused bya worker 's strike. Libyan officials have announced that theywill expand Libya's refinery capacity from its current 0.38million bpd to 1 million bpd within the next six years , buteven the capacity that now exists is subject to closure orlow utilisation rates because of security concerns along thesupply chain.

Table 2 provides a summary of North Africa's refiningindustry, partly as reported by OGJ with additions andcorrections provided by Trans-Energy Research Associates,Inc. Total crude capacity is 1 858 000 bpd. The industrylacks technological sophistication, with a cracking todistillation ratio of only 4.5 . North Africa 's refining sectorremains in need of investment and attention to raise itssophistication and competitiveness. The region 's refiningindustry is long established, but it more or less operated inthe same business environment as the upstream sector, andi t too would benefit from more investment and moreopenness . As an example, consider the capability of theAlgerian and Libyan refining industries to meet domesticdemand.

lgerian and Libyan refinery outputversus dem nd .As noted, all of the North African oil producing countriessubsidise domestic fuel prices, Libya and Algeria to anextreme degree. The Libyan gasoline price was only12 cents/ltr in 2012, and diesel prices were only 10 cents/ltr. Algerian gasoline was priced at 29 cents/ltr , whilediesel was priced at 17 cents/ltr. Unsurprisingly, thedemand pattern is skewed toward gasoline and diesel inboth countries. And despite the fact that nameplaterefinery capacity is greater than domestic demand , bothcountries are net importers of gasoline and diesel. Thereare plans to expand refinery capacity in both countries. Butit can be seen that it is not so mud ) the amount ofcapacity, but the type of capacity and how it is utilised,that determines how well the industry will be able to meetdomestic demand .

Figure 13 compares refined product output withproduct demand in Libya, and Figure 14 shows the sameinformation for Algeria, as reported by OPEC. Algerianrefined product output was 501 300 bpd in 2011, whileproduct demand was 329 400 l e v i n g a surplus of 7900 bpd of refined product. Libyan refined product outputwas 473 200 bpd, while demand was 231 400 bpd , leaving asurplus of241 800 bpd. The surplus output is a roughestimate of potential product exports . However, Algerianoutput was only 41 gasoline plus diesel , whereas Algeriandemand was 74.2 gasoline plus diesel. Libyan refinery

December 2013 HYDROC RBON

production was only 20.4 gasolin e and diesel, whereasthe demand pattern was78.1 gasoline and diesel. In net terms, therefore, Algerianeeded imports of 16 100 bpd of gasoline plus 22 800 bpdof diesel. Libya needed 80100 bpd of gasoline imports and4100 bpd of diesel imports. The exports were primarilylower value products such as fuel oil. As noted, an80000 bpd fuel oil conversion unit has been planned inAlgeria, as well as a condensate splitter, which wouldcreate a lighter output slate, but many plans and goals havebeen set back.Conclusion A we keningbreeze?The winds , like a sirocco , have swept through North Africa,bringing changes of leadership in Tunisia, Libya, and Egyptonce again . This included an end to the infamous Qaddafiregime in Libya. Protests and demonstrations have takenplace in Algeria and Morocco as well. The ageing presidentof Algeria held on to power, but may hand over the reinsto a successor in early 2014 . The King of Morocco allowedpeaceful demonstrations and has made many concessionstoward more open government. Throughout North Africaand in the Middle East, this movement became known asthe 'Arab Spring' . The situations vary from country tocountry, but there are many commonalities in what thepeople are protesting: high levels of unemployment, awidening gap between rich and poor, crime, violence , andcorruption. The people s disaffection stems from a longstanding failure of the governments to deliver on promises.Some of the economic problems, however, wereexacerbated by the global economic downturn, which localgovernments were powerless to combat . Other social andpolitical ailments were so deeply rooted that reforms willcome only slowly . After the first whirlwind of change, theslow pace of reform and rebuilding has caused frustration,leading observers to speak of how the 'Arab Spring' turnedinto the Islamist Winter '.

North Africa's oil and gas sector is critically importantto the region's economic health, and also to governmentstability and basic function, since the governments run theenergy industry and derive a major share of their operatingrevenue from it. Yet for all of its importance , the NorthAfrican governments receive very poor 'grades ' when itcomes to how they manage their n ~ t u r l resources. Whenevaluated according to the criteria of the ResourceGovernance Index, the two main producers, Libya andAlgeria, received failing scores, and Egypt received a weak'score. Libya ranked 55 t out of 58 countries examined, withconsistently low scores attributed to decades ofmismanagement and corruption. Yet in a way there is causefor optimism. The same inefficiency and corruption thattypified the energy industry was endemic across thegovernment, and this was its eventual undoing. The newregimes hope to change this and build stronger, healthiereconomies, and the same principles that improve overallgovernance of the countries will improve governance ofthe energy industries. Although the changes may take time,and the sirocco winds may have weakened, it can be hopedthat a gentler breeze will fill the sails and transport NorthAfrica s energy sector to smoother seas . ill

north african oil & gas 201401

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