Chevron inches lower after report of revived talks with Algeria

By Geoffrey Smith 

Investing.com -- Chevron (NYSE:CVX) stock opened lower on Monday despite a report suggesting it is reviving talks to exploit some of the world's largest reserves of natural gas shale.

The Wall Street Journal said Chevron - which announced record profits and a $75 billion buyback last week - is to resume talks with Algeria, in a move that could in the long term offer an alternative to Russian pipeline gas for Europe, as well as allowing Chevron to leverage the expertise with shale technologies that it has developed in the U.S. market.

Algeria is estimated by the Energy Information Administration to have reserves of as much as 707 trillion cubic feet of gas, more than the U.S. and only behind China and Argentina in terms of total reserves. Almost all of those reserves are under the unpopulated wastes of the Sahara desert, meaning that the disruption to human settlements from drilling-related earthquakes is greatly reduced.

The WSJ cited unnamed people familiar with the matter as saying that Chevron had recently revived talks that had gone cold since the 2020 signing of a memorandum of understanding with the North African country. 

A spokeswoman for Chevron confirmed to the WSJ that the company has an agreement with state oil and gas concern Sonatrach to access data on the Ahnet-Gourara and Berkine Basins, three of Algeria’s biggest natural gas reservoirs.

Algeria has increased its shipments of natural gas to Italy sharply over the last year as European buyers have desperately scrambled to replace Russian suppliers. However, it cut supplies to Spain in a diplomatic dispute over the status of Western Sahara, which has been occupied by Morocco for the last 50 years. 

Europe's security of supply has been shaken by the Kremlin's invasion of Ukraine a year ago. While it is expected to get through the current winter without the need for rationing thanks to a streak of unusually warm weather, analysts warn that it still faces stiff challenges in replacing what was previously its biggest source of imports.

"While the EU has made a political decision to eliminate its dependence on Russian gas ‘well before 2030’, it is not in control of either the scale or the timing of this process," Katja Yafimava, an analyst with the Oxford Institute for Energy Studies, said in a report published on Monday. "Next winter...could be significantly more challenging if Russian gas supplies were to decrease further or stop altogether, especially if accompanied by rising China LNG demand, interruptions of other supplies, and cold winter temperatures."