Oil giant Chevron Corp. is is looking to seal an energy exploration deal with Algeria, as the North African country steps up efforts to replace sanctioned Russian supplies in nearby Europe, according to people familiar with the matter.
Over the past decade, U.S. companies have pulled back from operations in oil-and-gas-rich Middle Eastern and African countries they viewed as politically risky to focus on booming shale production at home.
Yet Chevron, which is the world’s second-largest Western oil company by market capitalization, recently revived talks to invest in Algeria, people familiar with the matter said. Chevron signed a memorandum of understanding with state-run company Sonatrach to investigate natural-gas opportunities in 2020 but progress had been slow until recently.
Algeria holds bigger shale gas resources than the U.S. In the past two months, Chevron has sent representatives in government relations, security and business development to the capital Algiers, some of whom have met Algerian officials, the people familiar with the matter said. The company has also hired consultants to assess the country’s shale and non-shale gas resources and its contractual terms, and to map its power circles, the people said.
Tapping Middle Eastern and African natural-gas reserves has become a priority to replace sanctioned Russian gas in Europe for Chevron, which is touting huge discoveries of the resource in Egypt and Israel.
Chevron, of San Ramon, Calif., is hoping to leverage technologies developed in U.S. shale to develop the same type of reserves in Algeria, the people said. The move comes as companies such as Exxon Mobil Corp. say American shale production is slowing amid rising costs.
Meanwhile, Algeria holds the third-largest recoverable shale resources in the world, with 707 trillion cubic feet, according to the Energy Information Administration. That is behind China and Argentina, but bigger than the U.S.’s 623 trillion cubic feet.
A spokeswoman for Chevron declined to comment on specific business opportunities, but said the oil major had an agreement with the state agency to access data on the Ahnet, Gourara and Berkine Basins, three of Algeria’s biggest natural-gas reservoirs.
“Algeria holds a world-class petroleum system with significant potential for conventional and unconventional oil-and-gas exploration,” the spokeswoman said.
European majors Eni SpA, TotalEnergies SA, BP PLC and Royal Dutch Shell PLC, among others, have struck accords to develop natural gas all around the Mediterranean, including in Algeria, Libya, Egypt, Cyprus and Lebanon. They are seeking to substitute sanctioned supplies from Russia, historically Europe’s biggest gas supplier. The companies are also seeking a source of energy that is considered less polluting than oil and coal.
Chevron stands out as a rare American company aggressively competing for natural gas on a terrain dominated by Europeans.
Western “companies are showing renewed interest in Algeria and other North African nations at a time of rocketing demand,” said Geoff Porter, president of U.S.-based North Africa Risk Consulting, which advises foreign investors in the region.
In mid-January, Chevron said it made a “significant” gas discovery in Egypt’s East Mediterranean. Egypt says the find could hold 3.5 trillion cubic feet of gas—bigger than the reserves of an entire country such as Colombia. The company also has gas resources off Cyprus and a stake in the giant Leviathan field in Israeli waters.
“The region needs gas, both regionally in the Middle East, but also then obviously options to try to get that gas into Europe,” Mike Wirth, Chevron’s chief executive told analysts at the company’s annual results in January.
U.S. companies have retreated from their global operations in recent years. Chevron’s international output fell 3% last year following the expiration of concessions in Thailand and Indonesia. Since 2019, it has unloaded assets in Azerbaijan, Denmark, the U.K. and Brazil, among other places.
Yet last month, Chevron said it had boosted production in Venezuela by 40,000 barrels a day after the U.S. granted it a new license to pump oil there, after years of strict sanctions. The company is also in talks to develop a 600,000-barrels-a-day field in Iraq.