Algerian parliament partly renationalizes oil and gas

16 Oct, 2006

The Algerian national assembly Sunday reasserted sovereignty over the nation's natural resources by giving the state-owned Sonatrach company majority control in all oil and gas contracts. It also voted to impose a special tax on foreign oil companies of up to 50 percent on all profits on petroleum beyond the level of 30 dollars a barrel.
A March, 2005 law sought to liberalise the market and attract new investments by allowing foreign companies to compete independently in the Algerian market rather than having to work in partnership with Sonatrach, and to control most of the reserves they discovered.
The law said they could keep up to 70 percent of reserves they discovered, or 100 percent if Sonatrach expressed no interest in them.
But in an amendment to the 2005 law, the assembly said Sonatrach must retain at least 51 percent in all contracts with foreign companies. The Algerian state nationalised the oil and gas industry in 1971 and handed over all operations to Sonatrach. However, the government began to look abroad in the 1990s because of lack of investment. It allowed American and European companies to compete in the market in partnership with Sonatrach without conceding control to them.
Former Prime Minister Ahmed Ouyahia said the 2005 law was intended to end Sonotrach's monopoly and bring more investment and wealth into the country, and at the same time improve Algeria's chances of joining the World Trade Organisation. But the change in the law drew such fiery opposition from nationalist quarters and unions that President Abdelaziz Bouteflika was obliged to put it on hold.
Other amendments give Sonatrach the monopoly right to transport oil and gas by pipeline, and ban any resort to international arbitration in the case of conflict between Sonatrach and its foreign partners. The law now states that any dispute will be in the competence of Algerian courts. Foreign companies associated with Sonatrach will be taxed on extraordinary profits for any month in which the price of crude oil exceeds 30 dollars on international markets. The tax is retroactive to August 1.
The minister of energy and mines, Chakib Khelil, said Algeria earned 40 billion dollars from oil and gas exports in the first nine months of this year, and has unprecedented cash reserves of 70 billion dollars, according to the finance ministry. Petroleum constitutes the country's main wealth and accounts for 97 percent of its export revenues. Although he supported the 2005 law, Khelil said recently that the amendments would permit "the enlargement and reinforcement of the state's control over hydrocarbon reserves, their rational use and their preservation for future generations." He said it will give Sonotrach full control of prospecting, exploitation, pipeline transport and refining.
Khelil told reporters, as reported by the Algerian press agency APS, that the amendments would "reinforce the role of the state in the control of the (oil and gas) sector, which will have a positive effect for future generations."

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