The new Law of Hydrocarbons in Algeria: distinguishing economic time from political time was enacted despite concurrent street demonstrations against it. It was debated at length by Professor Abderrahmane MEBTOUL, International Expert, in interviews to Radio Algeria International – Paris France on 04/11/2019, to Algerian Radio Channel-3 and to Radio France International on 05/11/2019. Here are some excerpts of each.
Question – 1. Will Algeria with high domestic consumption be able to meet its international commitments?
Indeed, if we take natural gas, domestic consumption is likely to exceed 60 billion cubic meters of gas by 2030 and 100 billion cubic meters of gas between 2035/2040, the Ministry of Energy has announced the depletion of reserves would be at about 60%. An urgent need to review the current energy policy and move towards a clean energy transition policy that revolves around four axes, to meet its international commitments.
-First: an energy efficiency policy (energy sobriety) that affects all sectors and households by reviewing construction methods, cars/trucks fleet consumption, energy-intensive industrial units; the simple referring to a policy of targeted subsidies, but which do not penalize the disadvantaged, existing new technologies that save about 30% of energy consumption.
-Secondly: the development of renewable energies whose cost has fallen by more than 50% for both thermal and photovoltaics, where Algeria has significant potential.
-Thirdly: to continue to invest in upstream, which can make discoveries as part of a win-win partnership, SONATRACH with lower prices and physical production, which has dropped significantly since 2008, technological or financial capabilities, but no longer have to be deluded by large deposits like Hassi-Messaoud or Hassi-Ramel.
-Fourthly: avoid precipitation whilst developing SHALE oil and gas, Algeria having the third world reservoir, only by 2025, as I recommended to the authorities of the country, through this study with experts pending new technologies that replace hydraulic fracturing, saving freshwater and injecting more than 90% of the chemicals into wells, thus protecting the environment, but requiring in-depth social dialogue.
To answer your question directly, I highlighted the points at the 5 + 5 Meeting of Algeria, Morocco, Tunisia, Mauritania, Libya with France, Italy, Spain, Portugal, Malta in Marseille in June 2019. I had the honour of chairing the Energy Transition’s workshop in which the subject of a clean energy transition policy, and the modification by Algeria, a major energy player in the Mediterranean basin, as it has always done, to meet its international commitments by 2030.
Question – 2. Will the amendment of this law attract foreign investors?
Depending on several factors, such as:
-First: the revision of this law as I have pointed out since its enactment at the beginning of 2013 is unsuited to the current situation, in particular the tax component and the nature of the contracts in which Sonatrach supports the majority of the financing, the world having evolved from where the importance of its revision to take account of new global energy changes.
-Secondly: however, a law is only a legal instrument, being a necessary but sufficient condition of the attractiveness of foreign investment, where any company attracted by direct profit rate, and also as long as the level of foreign exchange reserves is high. Depending on the business environment where Algeria was in the latest report of the World Bank of 2019 was very poorly classified because of its paralyzing bureaucracy, corruption, financial and unsuitable socio-educational systems.
-Thirdly: the political climate is decisive, and according to international observers no serious investor would engage in Algeria without the resolution of the political crisis, political stability especially in a country like Algeria, where politics and economics are intertwined, being a determining factor in the attractiveness of a foreign investment.
-Fourthly: as I have just pointed out recently, to your colleagues on France 24 television, and several Algerian websites and daily newspapers, it would be desirable to postpone the adoption of this law after the presidential election. Only a president and a legitimate government can secure the future of the country where this resource, directly and indirectly, provides about 98% of the country’s foreign exchange resources. Some company executives fear that a new president would challenge this law, which would be passed by a transitional government, responsible for current affairs, while legal stability is a golden rule for all investor.
-Fifth: to answer this second question directly, the positive impact of this law would depend on the future global energy map, the entry of new producers and the sale price on the world market both of oil and gas returning at the cost of production in Algeria therefore to a new strategic management of SONATRACH and the impacts would not be felt only in three to four years, subject to the lifting of environmental constraints. Why this haste, which risks further sharpening social tensions in the run-up to the presidential election, thus possibly harming the voting turnout?