Algeria export crude oil in exchange for the diesel fuel

Algeria’s largest oil and gas firm, Sonatrach is planning to import 2 million tons of diesel oil in exchange for crude oil, in a move aimed at enabling the country to meet up its soaring local demand in fuel, Sonatrach CEO Abdelhamid Zerguine told Al Arabiya.

“The surge in domestic consumption will require the company to import two million tons of diesel - up by 700,000 tons from 2011 - and 500,000 tons of petrol this year”, Zerguine said on Thursday.

Algerian fuel imports have shot up in recent years -- rising to 2.3 million tons in 2011, from just 1.3 million tons in 2010 -- with particularly strong demand for cheap diesel, on which the industrial and farming sectors depend. Diesel oil imports are expected to reach 2 million tons in 2012, the equivalent of an increase of 700,000 tons.

Rising demand of gasoline and refined products is expected to surface during next summer, as indicators on growing demand start to appear in April, Algerian government will import diesel fuel and gasoline to cover any shortfall caused by declining domestic refining capacity, due to poor equipment and rising local demand following an explosion in the number vehicles, which climbed 300% during the last ten years.

According to preliminary figures from the Algerian Customs National Centre of information and statistics, which reported import bill for passenger cars to reach about 48.15 percent, as it moved from 157.16 billion Algerian dinars ($1.922) billion during the first six months of 2011 to 233.55 billion Algerian dinars ($2.856) billion during the same period of the current year, which is estimated to be more than $ 3.15 billion.

Despite Algeria’s growing fuel imports cost - Sonatrach spent $2 billion on diesel and petrol imports last year - it posted a $15.8 billion trade surplus in the first half of 2012, according to official figures published on Wednesday.

But major energy sector projects have suffered severe delays, compounded, according to analysts, by a 2009 corruption scandal at the top of the company that led to the jailing of a former Sonatrach CEO and caused decision-making paralysis.

The North African oil and gas exporter has for years been seeking to revamp and expand its ageing refineries, which together have a capacity to process 22 million tons per year of crude oil.

Speaking during a trip to the Skikda refinery, Algeria’s largest, Zerguine told AFP that Sonatrach’s vast renovation program to upgrade its three main refineries, along with plans to build four new ones, would enable the country to boost its refining capacity to 42 million tons a year within five years.

He said the long-term target was to achieve a refining capacity of 52 million tons a year.