Opec member Algeria expects its energy production and exports to shrink in 2011, pushing earnings from oil and gas down 4.5 per cent on the forecast for this year, the finance ministry said.

Revenues from oil and gas sales abroad are set to decline to $42.2 billion from the $44.2 billion forecast for this year, according to a document drafted by the finance ministry which was obtained by Reuters.

The forecasts in the document for 2010 and 2011 are both made on the basis of a nominal average price for crude oil of $60 per barrel, excluding the influence of price fluctuations on the forecast revenues.

Asked to explain the forecast drop in earnings for 2011, Finance Minister Karim Djoudi told Reuters: "It's because, regarding quantities, production and exports will decline."     Algeria supplies about a fifth of Europe's energy needs and is also the world's eighth largest crude exporter.

The energy ministry did not respond to telephone calls seeking comment, and finance ministry officials did not offer any explanation for the forecast drop in energy output.

Fall in global demand

However, energy analysts have said Algeria could cut exports in response to low global demand and prices, especially for natural gas and liquefied natural gas (LNG), preferring to hold onto its reserves until prices recover.

Algeria's LNG production capacity has also been cut by as much as 20 per cent by an accident.

Algerian Energy Minister Youcef Yousfi has said though that LNG capacity would be back to normal in a few months, and it was not clear if the reduced capacity was a factor in the finance ministry's forecast for 2011.

The finance ministry document, which was circulated to members of parliament before debates on the 2011 draft budget, forecast that the economic output of Algeria's energy sector would shrink 0.8 per cent next year.

That will be the third successive year of negative growth for the energy sector, the document showed. Overall, Algeria's gross domestic product is forecast to grow 4 per cent in 2011.

In previous years, the finance ministry has revised its energy revenue forecasts after the budget was adopted to take account of higher-than-expected world oil prices.

Algeria's energy strategy until now has focused on heavy investment in increasing LNG capacity.

But global demand for LNG has slumped because of the economic downturn and the emergence of non-conventional gas, leaving Algeria facing a shrunken market for its exports.

Any reduction in energy revenues is likely to have a significant impact on the economy of Algeria, a country of about 35 million people, as oil and gas accounts for more than 95 per cent of its total exports. – Reuters