Tunisia’s energy sector is attracting growing interest from international firms looking for dependable returns, despite oil and gas output that is dwarfed by its neighbours Libya and Algeria, according to Reuters.
Tunisia produced 2.9 billion cubic metres of natural gas in 2008 — a drop in the ocean compared to the 86.5 billion cubic metres pumped by Algeria last year.
But some international oil and gas companies say that while the volumes are low, Tunisia’s favourable business climate compares well with the tougher environment in its neighbours.
“It ticks all the boxes that companies are looking for in a place to invest,” said Ian Perks, President of BG Tunisia, the local arm of London-listed gas producer BG.
“It’s got political stability, good economic growth, sound economic policy, sanctity of contract, we have a very good relationship with all the stakeholders here,” he told Reuters.
In a sign of the increased interest, investment in Tunisian exploration has gone up from just over $100 million in 2005 to $400 million last year, according to state energy company ETAP.
The largest producer of gas in Tunisia, BG supplies about 40 percent of domestic demand and it put its total investment by the middle of this year at more than $3 billion.
Italy’s ENI, Austrian energy group OMV and British energy services firm Petrofac Plc, which is a partner in an offshore concession, are among the 55 firms operating in Tunisia.
They are likely to be joined by others. “We keep on looking at opportunities in Tunisia,” said Manfred Boeckmann, a senior executive with German utility RWE.
“I do hope and am quite confident this will result in some acreage in the mid-term,” he told the Energy Exchange North Africa Oil and Gas summit in Tunis at the end of last month.
Tunisia’s business-friendly climate contrasts with the challenges in Algeria and Libya, where international energy firms have faced a toughening of contract terms and more assertive national oil companies.
Tunisian prospects under exploration or earmarked for exploration in the Sahara desert are part of the same geological structure as world-class fields next door in Algeria and Libya.
Already, Tunisia has been successful at growing production, said Craig McMahon, lead analyst for the Middle East and North Africa with consultancy Wood Mackenzie.
“Tunisia actually boasts the highest exploration success rate in North Africa for the last 10 years,” he told the conference in the Tunisian capital.
The state energy firm is so confident about increasing production that it says that from the end of 2012 it will become a net exporter of gas, pumping 4 million cubic metres a day via an undersea pipeline to Italy.
Some energy analysts say that growing domestic demand could eat up much of the increased output, leaving little for export.
But selling gas inside Tunisia is profitable too because prices are comparable to those on the international market.
“For us, whether we export or whether we sell domestically, it’s not the main driver for us, it’s the economics that’s the driver,” said BG’s Perks.
“We’re very bullish about the economy here. It’s been resilient to the financial crisis and so (we have) a growing domestic market, we’re looking to supply that market,” he said