New Algeria Energy Law Gives Sonatrach Key Role

Posted 16 October 2006 @ 08:13 am EET     Print     Reprint     E-Mail     Comments

ALGIERS (Reuters) - The Algerian parliament has endorsed a new energy law giving state-owned oil and gas company Sonatrach a key role in the upstream oil and gas industry and imposing a windfall tax on foreign energy companies.

The new law includes granting Sonatrach at least 51 percent share in every oil and gas exploration contract awarded to foreign companies. It also makes it compulsory for Sonatrach to participate in every oil and gas exploitation deal, and entitles the company to own at least 51 percent in every oil-refining plant joint venture.

"It is a gain for the public good as that (law) will reinforce the state's role in monitoring the sector. This will have a positive effect on future generation," Energy and Mines Minister Chakib Khelil said after the legislative body passed the bill late on Saturday.

The new law also imposes a windfall tax ranging from 5 to 50 percent on excess profits every time Brent crude averages over $30 a barrel, Khelil said. "All production sharing agreements (including those signed in the past) will be subject to an exceptional tax on exceptional profits. That depends on the level of production," he said.

The law also increased the level of participation Sonatrach could claim in production-sharing agreements with foreign companies to 51 percent from 20 to 30 percent in the 2005 legislation. The government says the law is aimed at slowing the pace of exploration and preserving resources in Algeria, an OPEC member country, which announced 12 oil and gas discoveries for the first half of 2006 against nine for the whole of 2005 and 13 the previous year.

The government had said the new legislation would not affect a plan to increase output to two million barrels per day (bpd) by 2010, from 1.5 million bpd now, and to export 85 billion cubic metres (bcm) of gas in the next five years from 62 bcm currently.

The biggest foreign operator in Algeria is U.S. Anadarko Petroleum Corp. Others include Royal Dutch Shell, BP, BHP Billiton, ENI and Hess Corp.. The law will take effect early next year after executive decrees on the practical aspects of implementing the legislation are published.