Anxiety in Algeria hits oil and gas investment

Add keywords here to make this summary more specific to a topic.Strict Scan [?] On 10 May, for the twelfth consecutive Friday, hundreds of thousands of Algerians flooded the narrow streets around the capital’s Central Post Office, demanding the departure of the country’s ruling elite. Similar demonstrations were held in Oran, Constantine and Annaba, the country’s major cities, with protesters braving the blazing Ramadan sun to make their voices heard. Mutual trust is in short supply after the last six weeks saw the ousting of the country’s president after 20 years in power and a flurry of dismissals, including the chief of the country’s state energy company, Sonatrach, which sent shockwaves through global energy markets. The interim government, led by president Abdelkader Bensalah and traditional regime supporters, lacks the legitimacy and resources to push through economic and energy sector reform that will make the country more attractive to investors. The former head of Sonatrach, Abdelmoumen Ould Kaddour led sweeping changes to the country’s energy laws, including the 2006 hydrocarbons law mandating that Sonatrach hold at least a 51% participating share in any upstream project, and a 20% royalty on production, among other things. With rates of inflation and unemployment rapidly rising to 3.5% and 30% respectively this year, the country is headed for economic disaster, says Anthony Skinner, director of global risk firm Verisk Maplecroft. “Algeria’s fundamental economic picture [is] rapidly moving towards an economic crisis, and in order to try and offset, to the extent possible, an economic train crash, Algeria needs to boost production, especially of gas,” he explains. “To boost production, and also to maximise export revenues, it needs to not only expand the footprint of international oil companies [IOCs] that are already in the country, but also attract IOCs that do not currently have investments in Algeria.” If Algeria is to attract IOCs to their rich Amenas gas basin, the country needs a functioning government that can close deals and enact reforms to the energy laws. With the government mired in political crisis, oil and gas investors are staying away and those already in the country are looking for a way out. “There are some companies I know who are considering leaving, as they say they cannot be involved in a country with this many issues and level of corruption,” the investor says. “The oil and gas companies are so concerned about stability they will not invest in the country,” says the investor. In 2018, Algeria produced more than 1m barrels per day of oil and 135bn cubic metres of gas per year, with oil reserves estimated at 12bn barrels. Whoever ends up running the country, whether Le Pouvoir or an extended transitional government featuring protest leaders, they’ll “Have a fight on their hands,” he says.
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