An Algerian official has partly blamed the financial crisis for a lower-than-expected number of oil and gas exploration license bids last week.
His comment is the latest evidence that the global financial turmoil -and a related drop in oil prices- is hindering the search for future hydrocarbon resources.
The International Energy Agency recently warned that such a trend could lead to a scarcity of oil and gas in the coming years and a steep rise in energy prices.
"The financial environment has certainly influenced the strategies of companies" who decided against bidding, Sid Ali Betata, president of the National Agency for Valorization of Hydrocarbon Resources, told Dow Jones Newswires in an interview late Wednesday.
It's "not just the price (but) the financial crisis and its impact on sources of financing," Betata said. "That's down to the difficulty of finding financing" for long-term projects such as exploration as "equity capital is now focused on investments with (short-term) cash flow" prospects, he said.
Betata pointed out that the tender process, the first of its kind since the agency was officially created in 2005, started in July -at a time when oil prices peaked to $147 a barrel.
A total of 50 companies assessed the geological data of the prospective acreage, the official said. But when the offer process was completed Saturday "at a time characterized by the financial crisis" and a $100 drop in oil prices, only four blocks received offers, Betata said. That meant 11 other licenses didn't receive any bids, he said.
The four winners were E.ON AG (EOAN.XE) unit E.ON Ruhrgas AG and OAO Gazprom (GAZP.RS) -both of which were making their first foray into Algeria - and BG Group PLC (BG.LN) and ENI SpA (E). The blocks also received an offer from a consortium of GDF Suez (GSZ.FR) and Thailand's PTT (PTTEP.TH) and a separate bid from a consortium made up of Total SA (TOT) and Cepsa.
Rosneft (ROSN.RS), Talisman, Royal Dutch Shell PLC (RDSB.LN), BP PLC (BP) and Repsol YPF (REP) were expected to make an offer but didn't submit any bid in the end, Betata said. Many smaller companies, in particular financial investors, also failed to bid probably because of the scarcity of funding, he said.
But consultancy Eurasia Group has also said nationalist, "aggressive terms further discouraged bidders." Betata denied that, saying "operators have shown strong appreciation" for the new licensing terms.
The latter gives a 51% stake to state company Sonatrach but also an operator's role to foreign companies during the exploration phase. The official said the tender was part of a learning curve and that the agency was studying the results to get lessons from it.
"We have installed the rails. We have not reached our normal pace but we have kicked off the journey," the official said. The Algerian subsoil "has not revealed all its secrets. Out of 1.5 million square kilometers (of prospects), only 45% has been explored," Betata added.