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BMI View: Crude and gas output is expected to rise over the course of our forecast period, although oil

production is likely to be hampered by OPEC quotas. Despite a large potential for exploration, we believe that

unless new basins (or significant fields in already-known basins) are discovered, reserves could very well peak

this decade.

Main trends and developments we highlight for Algeria’s oil and gas sector are as follows:

BMI expects oil production to increase from approximately 2,083,000b/d in 2011 to 2,654,000 in

2021, as ambitious new projects - mostly located in the Berkine basin - come onstream. Production

will be further boosted by increase in output at major fields, such as Hassi Messaoud, and by

enhanced recovery rates.

Consumption of crude is likely to rise steadily, with an annual average growth rate of 3.3% forecast

during the period 2011-2021. This is partly in line with the expected GDP growth rate, although we

expect energy intensity to increase towards the end of the forecast period. We therefore anticipate that

consumption will rise from an estimated 327,000 b/d in 2011, to hit 454,000 b/d by 2021.

BMI forecasts that gas production will increase from 85.0 bcm in 2011 to 142.4 bcm by 2021, as

ambitious new projects - mostly located in the Ahnet and Illizi basins - come onstream. Production

will be further boosted by increase in output at major fields such as Hassi R’mel and by enhanced

recovery rates, as is expected in the In Salah Gas Project.

Gas demand is set to rise steadily on the back of stolid economic growth. BMI forecasts average

growth of 5.4% from 2011 to 2015. We therefore anticipate that consumption will rise from an

estimated 32.0 bcm in 2011, to hit 54.1 bcm by 2021.

Unless sizeable fields are discovered in already-known basins –the country’s main basins which

include the Erg Occidental-Ahnet, Erg Oriental-Berkine,Illizi and In Salah basin all have substantial

discovery potential- or unless new basins are discovered in the north or in the Mediterranean offshore,

we expect reserves to peak this decade. Oil reserves are forecasted to peak at about 12.5bn barrels

in 2013 and gas reserves are expected to peak at 4.8 trn cubic metres in 2014. However, there is a

substantial upside risk to recoverable gas reserves in the form of untapped shale resources.

In terms of infrastructure, several upgrades at the Skikda, Arzew and Algiers refinery are expected to

come onstream with an added increased capacity from a proposed greenstream refinery towards the

end of the period.

Algeria’s dependence on oil prices leads to high volatility in the country’s export revenues. Our assumptions of

a slower growth in China, a faltering recovery in the US and a worsening eurozone debt crisis, clearly pose a

threat to global demand. As a result, we assume OPEC basket oil prices to fall from US$101.90 per barrel (bbl)

in 2011 to US$99.38/bbl in 2012, thus creating a downside risk for Algeria’s macroeconomic outlook.