Economics Affairs

Bill on hydrocarbons: Legal framework for investment

APS - 14 October 2019

ALGIERS- The bill on hydrocarbons, adopted Sunday by the Council of ministers, constitutes a legal framework in favor of the development of investment in the energy sectors, including mining, by making it more attractive for foreign partners.

A revision of the legal system of hydrocarbons, notably at the contractual and fiscal levels, has become a necessity, given the decrease in oil and gas production that Algeria has recorded in recent years and the growing rise in the national consumption.

It is important to remember from the communiqué of the Council of ministers that maintaining the current legal system will lead Algeria to “structural deficit between the supply and the demand as from 2025.”

To avoid this, the new provisions in the future law on hydrocarbons will allow strengthening the economic, financial and technical role of the national hydrocarbon company Sonatrach, being the only national signatory party of oil agreements with investors, and to affirm its monopoly on pipeline transport activity.”

In order to preserve the national interest and sovereignty, the rule 51/49% governing foreign investment in Algeria was maintained for “all the agreements, considering that the national wealth is the nation’s property that must be exploited optimally for its benefit.” The same rule was lifted for the non-hydrocarbon sectors, considered as non-strategic. A “big interest” was attached by the bill to health, security and environment as part of the “respect” for sustainable development principles.

Through this new legal framework, the offshore exploitation operations will be extended which is a first for Algeria, requiring partners with experience, financial resources and the necessary technologies.

The partnership will enable Algeria to share the risks relating to prospecting operations, assumed currently only by Sonatrach, to renew its reserves and relaunch production activities, contributing thereby to the preservation of its energy security and the implementation of economic development projects.