|
 V.I.P. INTERVIEWS |
|
| Ministry of Energy and Mines |
Interview with
Mr. Chakib Khelil,
MINISTER
Web site: www.mem-algeria.org
|
One of your priorities has been to highlight the gas market. Could you expand on this strategy and its most recent developments?
As far as gas is concerned we are in the process of restoring the role of the state as owner of the hydrocarbon resources, and leaving public enterprises like SONATRACH, the national company, to play the role of a commercial entity. In this manner we eliminate the possible conflict of interest that public enterprises could have by according contracts to private companies while on the other hand being associated with that same company in its various activities. By restoring the role of the state, and creating a new agency in the state that would award this contract, we eliminate this conflict of interest, and the public enterprise will be treated like any other company and will also have to bid on contracts just like any other company.
Moreover, we would like to expedite the signing of contracts. Up to now it used to take 2 to 3 years to negotiate contracts so we would like to put in place new procedures, while leaving the same incentives currently in place for private companies in terms of our fiscal system, which is very attractive and has already attracted about twenty companies in the country. We are going to maintain that incentive, but we are also going to expedite the allocation of contracts by putting in place an automatic system where we could have bids to award contracts and draft model contracts already as part of the regulation. This would mean that we would not have to negotiate contracts, we would only negotiate the form rather than the substance. We would also like to put in place a new agency to control the application of these contracts to make the process more expedient.
It is also a goal to make it possible for companies to export gas, like SONATRACH is doing right now, and we hope that the new framework will make it much easier. We also hope to begin to export electricity, especially to Europe, which is a very important market for us, both for natural gas and for electricity. Because of the liberalisation of the European market, we believe that it offers important opportunities for Algeria in terms of gas and electricity exports. That is the reason for which we have created a new company between SONATRACH, which is the national oil company, and SONELGAZ, which is the national electricity company, that is poised to enter into joint ventures with other companies to generate power in Algeria, then to export it.
As a matter of fact we have invited bids a month ago for a new project which would produce 2000 MW, which would export 1600 MW and produce 400 MW for the local market. The idea is to have minority ownership by the public enterprises and have a majority held by private companies who would build, operate and export electricity to Europe, directly via a submarine cable or indirectly via Morocco through the existing transmission system if there is capacity. So we are in a way opening up the gas sector to increase private involvement and exportation. SONATRACH has entered into a contract with GAZ DE FRANCE. Previously they were only active in transport and distribution of natural gas, but in this agreement GAZ DE FRANCE will be involved in exploration and development with SONATRACH in Algeria to find and produce gas for exports to Europe. They will use their network to market the gas, and this agreement also includes the possibility for SONATRACH to be involved in the marketing of gas in Europe.
The creation of the SONATRACH-SONELGAZ association was also done to take advantage of the liberalisation of the gas and electricity market in Europe. The sector is going through a phase of restructuring - the big monopolies there have to be cut down into pieces, and some of these pieces will be offered for sale - so we plan to take part in the sale of these downstream companies, to be able to take advantage of the electricity and gas market in Europe. In as much as we are involved in the upstream market, we would also like to be involved in other countries with private companies. In fact, the contract with GAZ DE FRANCE includes the possibility for us to undertake exploration in other countries to explore and develop gas. SONATRACH is also negotiating in Peru to enter into a big field development, Camicea field, and we are looking for partners to join in that project. We are involved with AGIP in Yemen, and we are also involved in a petrochemical plant with BASF in Spain. SONATRACH also has a trading company in London, and we have been trading oil and petroleum product for a long time. We are also involved in marketing of LPG (Liquefied Petroleum Gas) in Europe and have recently acquired some LPG tankers for bulk transportation to European markets.
Essentially, we are opening up the gas market, making it easier for investment, eliminating barriers, and even opening up the possibilities for private companies to build gas pipelines (up to now this is something that had to be done by the national oil company, but we would like to include that in the new hydrocarbons law).
Could you give us the main points of the new electricity law that is currently being drafted and when you expect exportation to start?
As I said, we are already calling for bids, so we are advancing in the project while preparing the law. Right now, the law does not forbid us to export electricity, but it does not provide a framework for private ownership.
The new law will allow the ownership of a new producing capacity, not necessarily in association with public enterprises. It will create a new market of natural gas and electricity in Algeria, by introducing competition in production and also introducing in the long term competition in consumption or in the market.
First in production, the idea is to allow private producers to generate power and to sell it in the local market or export it. In the long term we would like the large consumers in Algeria to compete against each other for the purchase of electricity or natural gas.
Right now we have a monopoly which is SONELGAZ , the public enterprise, which is fully integrated, so the idea if we want to allow private production of electricity, we have to reorganize the public enterprise into 3 different activities: production, transmission and distribution.
We plan to have 2 or more production companies, public enterprise companies initially, so that we would see some competition between them but also with new entrants like private enterprises that would generate power.
The transmission will remain as a monopoly and it will be regulated by a regulatory commission for electricity and gas (CRAG). A new agency would be put in place to ensure that all producers, public and private, would have access to the transport system to provide the electricity or natural gas to the consumers, under equal treatment as far as access and tariffs for transport are concerned, whether it is for electricity or for natural gas; we are talking about gas pipelines about the internal market.
Then we are going to have several distribution companies still belonging to the public enterprises and which will have monopolies for their service areas because you cannot have many companies distributing electricity in the same area but those companies would be regulated as far as tariff are concerned for what we call the "captive consumers". The tariffs to be applied will also be regulated as well as the quality of service. In the long term we would like to see the large industrial consumers getting out of this monopoly and buying their electricity directly from the producer and not through the public distribution company.
The new electricity law will provide a framework for fair competition and will also put in place the necessary regulations to ensure the best service is provided and measures are taken in terms of safety of the system, and impact on the environment for instance.
We organized a national conference on electricity where we invited all the players in the national scene, but also on the international scene to participate. The pundits came out with a number of recommendations to take into account in this new law. New institutions, like the CRAG we mentioned before, will be put in place next year, which will be independent and autonomous on the financial side to implement the new program.
After the success of privatisation in the mining sector, what are the guidelines of the new law your Ministry has been very active to implement?
that is the most advanced sector as a matter of fact. The new law has already passed one of the most difficult obstacles which is the Council of Government and which includes all the ministers. Before it is actually presented to the Council of Government the law spends about a month and a half passing through the 32 ministries and being amended according to their respective comments and suggestions. Then it goes to the Council of Government. The Council of Government approved the new law, which is a big achievement, and now we are going to the Council of State, which has an advisory role and looks at the constitutionality of the new law. Lots of people believe that according to the Constitution, the mines and quarries belong to the State, that you can not give them to the private sector, but the public enterprises were working under concession agreements. The new law states the mineral resources still belong to the State but concessions can be awarded for a certain period of time, for investors to exploit the resources and to get proper return on their investment.
The new law provides a better framework for foreign investors with four major improvements; firstly, there will be no more discrimination. In the past investors had to allow 51% control by the public enterprise, not even the State, and that was a deterrent to investment, but now association is free.
Second, we are including in the law the notion of fiscal stability, just as in the hydrocarbon law; the income tax stays the same for the next thirty years under the concession contract for example, and any new tax will not be applied to you, but only to new contracts. It makes it easier to assess the initial investment, the risk and the possible return. Of course the commercial risk is still yours.
The third measure is information; so far it was controlled by a public enterprise called the Organisation for Research and Mining Geology, which did the exploration and controlled the information. Now information will be handled by a new independent agency called the National Geological Service. It is going to collect all the information and make it available to investors against payment of a fee; that will be their sole financing means. Both public and private actors will have to pay the feet to acquire the information.
The fourth element is the introduction of the mining cadastre, so when you get a permit you know exactly on what area your are allowed to work and that you are the only one holding permit for that concession.
You are now also allowed to transfer the rights of exploitation associated with the permit to a bank or another company. So if you are a small company and you do the exploration, you have low overhead costs, but then you might need some financing to exploit your concession. You can either convince a bank to finance the exploitation or create a partnership with a bigger company; you keep the title but transfer the right.
So these are the five basic advantages that we feel will make our law very competitive to attract investors and we have launched about five months ago, a call for bids for small and medium mines which has been very successful and that is really to identify the local investors. We have been able to identify up to now a large number of local investors which have invested in small and medium mines and who are able to create a lot of jobs because they are basically in the north of the country and they are dispersed through out the country. They are willing to take the risk to invest in small and medium mines and we encouraged them to create a club, a mining club, just like we have encouraged the oil companies when they arrived nine months ago to create a petroleum club so that now the companies they are going to know each other , they are going to form a powerful lobby, to lobby for a better legislation and also to break this hold that the public enterprises have on the system in Algeria.
Basically we are creating new players coming into the sector, and balancing the public enterprises lobby, which still exists and which is very powerful. We want investors all around the country to interact together to be able to create a real dialogue with the financing institutions, and to be able to do the necessary lobbying near my Ministry, or the Ministries of Environment or Justice.
We are really organising the sector not only in terms of structure, or incentives but also introducing new players with a key role to play in the progress toward free enterprise, competition and transparency.
The SONATRACH is scheduled to be privatised in 2005. Are you ready and what will the process be?
We don't like the word privatise in Algeria; we would rather talk about opening the capital. The program which was adopted last January by the Government states that we would like to open the capital of SONATRACH to private dispersed shareholders while keeping a majority in the ownership. It is not privatising, the State will remain the main owner of the SONATRACH. |
What we will do is allow SONATRACH to use resources that have been sitting there for a while; if they feel they need to sell a certain percentage, they can use it as a financing mechanism for a project, just as for example issuing bonds as they did in the past. They will decide which financing system is the best for them just as any private company. The Government won't provide any guarantees for the SONATRACH anymore in the future, it would incur to much debts for the Government and Algeria is already too indebted: 40% of our exports are used to pay that debt. So we can't keep on providing guarantees generating debts on one side and then try to cover this debt on the other side.
By encouraging SONATRACH to sell shares, to do project financing, to go into partnership, we are trying to reduce this debt. We don't want the State to be indebted on behalf of SONATRACH anymore, so we can dedicate more resources to health or education for example. We also import a lot of our food and these are the sectors that should hold priority. We need qualified human resource, and we need to provide them with adequate employment to prevent our students from leaving the country to find a job.
Could you mention some big investment opportunities in the petroleum sector?
The example I always give is Columbia which is a country which does not have the hydrocarbon resources that we have; and it is a country that have had a very bad security problems, of course much worse than what we had ten years ago in this country. In spite of this they have been able to have eighty oil companies working in Columbia. Our ambition is at least to achieve that. I mean right now we have twenty companies working, so our ambition is to be at least at the level of what Columbia is able to attract, and since we are much richer in gas, and much richer in oil, there is no reason why we can not achieve that level. We would like to see new contracts for exploration signed almost every months we would like to attract small or big companies prospecting. We would like more partnerships in selling the gas and developing its market internally in various areas like liquefaction, refining, and all downstream activities like distribution, especially our gas stations; our neighbours have better stations and provide better service although they don't have as much oil as we have. Here, the stations are under a monopoly by a subsidiary of SONATRACH, so we are planning to open up that sector to private investment for distribution and marketing to improve the quality of service, to increase the investments in that area. We are planning also to open up the sector to refining.
We have a project in the south for a new refinery and the concept is that we move away from the State deciding what projects we need to focus on, in what form they should be done, in what form we should have the private, and now we completely changed focus and let the market dictate its needs. For example we know we need a refinery in the south, so we are going to call for bids for people willing to build a refinery or to negotiate a crude oil contract, without determining the size or the location. There are some oil fields, there is a market, there is an opportunity. Maybe we are mistaken and we won't get any offer, but that is how we are going to do it also for the 2000 mega watts power project. We just told investors we want 2000 mega watts, 400 for the local market and 1600 for the export market and they will have to offer their own solution matching our situation. We have this transmission system, we have this market in Algeria, we feel there is this development ahead of us. Welcome here, look at our information, go to the data room, do your own evaluation and come back with your ideas, and then we will define what we are going to do. For example we want 400 mega watts in Algiers, we want 1600 mega watts in Oran, we want you to take 70%, we want you to sign a contract to buy gas at this price, we want you to build 2 submarine gas cable, we want you to make a deal on the electricity sale, now make us a proposal on how much you want to sell us the electricity. That is the approach we are going to use, it is no longer our engineer who are going to say how big a part needs to be, how big a turban you are going to use, and how much water you need to use. We want to take advantage of the marketing skills of the investors, of the engineering skills, of the operating skills and of the financing skills. We don't have the skills any more. We have good engineers but we don't have anybody who knows how to market, how to manage or how to find the financing. That is why we want to use that approach.
As an international expert, what is your opinion on the advancement of the reforms in Algeria today, and more specifically in the banks and in telecommunications?
Telecommunication is the most advanced program at the moment, it has gone through the whole process and the telecom law is effective. It opens telecommunications to the private sector, creates regulatory agency and also the preparation for awarding licences is very well advanced. I think it is a tremendous achievement because for the first time in Algeria the reform of a major sector has been done the correct way. We have created an industry structure that would allow competition. We have put in place a regulatory agency and we are preparing the bids for the telecom licences with the help of the world bank. This is a key sector for all future development.
For the banking sector, there is still a lot to be done. We have done a lot of progress as a lot of private banks have been allowed now like City Bank, some French banks, some Middle Eastern banks. There are also small ventures, it is not all open yet, but we need to undertake a considerable reform and go into partnership.
But we have been hearing about the bank reform for about ten years, and nothing has really happened?
Yes indeed, everything needs to be speeded up but again we have been here only for eight months, and our team can not do in one year what would take four or five years. I believe that what we did in six months in the mining sector, and in the telecom sector can be considered as a big achievement already.
This new government was nominated at the end of December, and the telecom law was passed in June, it is a big achievement to issue a new law in such a short time. I have worked for the World Bank in Latin America, and most of the main achievements took a lot more time: Fujimori came to power in 1990, the new law for hydrocarbons came in 1993; Menem came to power in 1989 and the new law for hydrocarbons came in 1994; it took 3 to 4 years also in Bolivia.That is a thing I feel very strongly about.
The banking reform is not an easy task. Hydrocarbons is tough, but banking is tougher because you have a lot of vested interest groups, and you have to deal with them. If you fail to take into account the vested interest groups, that is what you learn in the process of reform, then you fail from the start. You have to deal with the workers, the government hierarchy because some are not convinced, then you have the private local investor, and you have the private international investors. Sometimes in Latin America, the private local investors were the biggest opponents to reform and privatisation programs, because they wanted to continue benefiting in the shadow from the public enterprise system. They don't want privatisation to benefit to consumers or the state, but they want to keep the benefits for them. We have to change this process and make sure that when we get to the reform we create a real competitive, open and transparent system.
To summarize, I will say banking is complex and we should give it a little bit of time, although I do agree with you we need to speed up the process and we are trying our best to do so.
What has been the most pleasant and the most uncomfortable things you have discovered since you have become a Minister?
The pleasant thing is that I came back to my country after many years, with an experience, some skills and a knowledge that I could use for the benefit of my country, to help Algeria to follow the pace of globalisation. There is a lot to be done and if we can achieve 1% of what needs to be done, I will feel great. If I had not been involved in that process, I would have felt bad, knowing the experience I have gained and the need for reforms such as those I helped to implement in Latin America with the World Bank.
I would have felt bad if I had been left out of the process, whatever the final result, I really wanted to have the opportunity to do my best. So being given the opportunity to lead a very important sector which I have always been familiar with, has been a great honour. I found old friends I used to work with in SONATRACH, great people who worked with great courage and great dedication in a very difficult time.
I believe things have changed tremendously, and by continuing to do what we are doing, we are heading in the right direction and we are going to be successful.
Regarding the most difficult thing, I would have liked to see everybody agree on the process and see a perfect banking and telecom system, but again, it is a difficult process. I do not have anything that I would really consider as negative, from that point of view I have been given all the facilities to do the best job we can do.
To conclude what would be your final message to our readers ?
I would say Algeria is back in business, it is a great country, there is a great potential in Tourism, people are friendly, we have highly educated people, we have a tremendous university system, we have a huge market.
Algeria can also be a breach to Europe for many companies because our connections to Europe are already very strong. We are physically connected through our gas pipelines, and we will be connected through our submarine cables. We are negotiating to enter the World Trade Organisation, and also to negotiate the association with the European Union.
Algeria is also a big platform for Africa, since its independence in 1962, African countries followed in its footsteps and recognized it. We were behind the creation of the African Organisation, and we always played a role of union.
We have had long relations with Mandela in South Africa, we have old relations with Angola, Mozambique, and lots of these countries owe us money, just like Vietnam owes us money, and we are not running after them like some of the western countries trying to recover their money. We are poor but we recognize that they are poorer than us.
So we represent a way to enter Europe for Korean or Japanese investors because we have some advantages in terms of tariffs for the petroleum products, for petrochemicals for example.
But it is also a way to get access to Africa, and that is what I would like to say to your readers. We have excellent relations with the US, France, the UK, Germany and we are still working to improve them. Security has never been a problem in our sector even during the bad times, but I would say we are on the way to solve all the problems in that area within the year. Once we have established relations with Iran, things will settle down.
We have had problems because people misunderstood just like what happened in Peru. Some rebels fought there for 20 years and people in Europe had this image of a guerrilla group being against tyranny and even supported them. But then when Fujimori came to power he started explaining European countries that it was an extremist group killing indiscriminately things started to change.
We had the same type of problems, our neighbours misunderstood and supported what they thought was a popular uprising, when they were only extremists, killing children, shepherds or attacking whatever car would come up the road. This time is over and tourists are coming back. The South has always been a traditional destination for tourists, and now things are improving in the North. |
© World INvestment NEws, 2001.
This is the electronic edition of the special country report on Algeria published in Forbes Global Magazine. 12th November, 2001 Issue.
Developed by AgenciaE.Tv Communication
|
|
|
|
|
|
|
|
|
|
|
ALGERIA,
