Algeria serves as a blueprint for how other gas-rich countries in Africa can leverage their resources to stimulate development across various sectors of the economy.
The country has positioned its gas sector as a key driver of economic diversification, using revenue generated from Liquefied Natural Gas (LNG) exports to advance industrialization and electrification while correspondingly bolstering sustainability through renewable energy developments.
Advancing Renewable Energy Developments
With lack of investment representing a major barrier for most African countries in their transition to a clean energy future, Algeria is leveraging revenue generated from LNG exports to enhance the contribution of renewables in the country’s energy mix. The country represents the fifth-largest LNG exporter globally, with earnings reaching a record $50 billion in 2022 alone. Gas contributes 19% of Algeria’s Gross Domestic Product growth and represents 93% of total exports. Using this revenue, the country plans to fast-track an ambitious plan to generate between 30% and 40% of electricity using renewables by 2030.
Algeria’s National Oil Company (NOC) Sonatrach already directs profits generated from the sale of oil and gas to fund its renewables strategy. The NOC increased its investment in renewable energies by 82% between 2017 and 2018 and, since then, has directed capital towards the development of large-scale solar projects in the country. The Algerian government launched two separate solar tenders in 2019 and 2022 while spearheading the development of solar manufacturing facilities in the country. Factories are now operating in the Boukherana industrial zone and the province of Ouargla.
In addition to providing capital for project rollout, the hydrocarbons sector has provided the burgeoning renewable energy sector with expertise, with firms such as Sonatrach, gas distributor and utility Sonelgaz, and the Algerian Energy Company dominating the solar and green hydrogen industries.
Sonatrach has embarked on a series of new partnerships, such as with TotalEnergies, to solarize oil and gas exploration and production sites. The two have also agreed to conduct a study assessing the potential for green hydrogen development for exports. In November 2022, the NOC also collaborated with Eni on the development of the 10MW Bir Rebaa North solar facility, as well as a renewable energy research and development institution.
As gas continues to represent a high source of revenue for the country, new renewable developments are on the horizon. Miloud Medjelled, Director at Algeria’s Ministry of Energy and Mines, states that the surge in Algerian gas exports driven by increased demand in Europe in 2023 presents an opportunity for the country to raise the funds required to reach 15,000 MW of renewables in the energy mix by 2035.
Stimulating Economic Diversification
Notwithstanding the contributions to the renewable energy sector, revenue generated from gas has enabled Algeria to accelerate economic growth and diversification. On the electrification side, gas-based power generation has equipped the country with one of the highest rates of access to electricity continent-wide, with 99.8% of the population connected.
On the infrastructure front, oil and gas investment as well as LNG exports have accelerated the construction of roads, ports, terminals, processing facilities, and other significant infrastructure developments, which are being utilized to support the growth of the Algerian economy. The industry has also enormously catalyzed industrialization, with energy-intensive industries such as manufacturing and mining benefiting from stable fuel supplies.
In addition, by attracting foreign direct investments into the country, the hydrocarbons sector continues to boost employment creation and the flow of technology and capital, all of which are vital to support the growth of other industries such as agriculture, education, and health.
As other countries such as Mozambique, Namibia, South Africa, Senegal, Mauritania, and more advance large-scale gas projects, Algeria serves as a great example of how gas can be used to accelerate economic growth and climate resilience.
