 Spearheading
the Reforms Process |
The economy opening process prevailing in the country
is even more visible in the sector of energy which
is considered as the most dominant field in the
Algerian economy. In fact , the development of this
sector and that of mines remains highly vital for
the financial stability of the country, the viability
of the external finances and the employment growth.
However, this development can't be achieved without
the contribution of the private capital, whether
national or foreigner, in order to better implement
the amazing potential of development of this sector.
The new energetic & mining policy has established
new priorities. To encourage the creation of SME's
and SMME's around different poles of activity of
the sector; improve , through the competition, the
managerial organization, the quality and the production
costs; exploit the opportunities offered by the
globalization for the local investments ( power
exportation, valorization of the gas & oil downstream
products, valorization of mining products, ..etc.)
and overseas investments as well.
| A New
Status for Sonatrach
|
In view of a more competitive market, Algeria's
energy sector, the most strategic sector of its
economy, must be thoroughly prepared and organized
to comply with the rules and regulations of world
trade.
In the gas and oil sector, the first step is to
abandon the reflexes of a centralized economy and
set favorable rules and regulations for competition
and free enterprise. "A bill was drafted
clearly separating the functions of the state and
companies. The function of the state is to govern
economic and regulatory policies, whereas companies
have a purely commercial role" explains
Mr. Chakib Khelil, Minister of energy and mines
and CEO of Sonatrach. Companies have thus the opportunity
to operate in a free competitive market.
Sonatrach, the national oil and gas management company,
will become, in this new legal framework, an operator
like other operators, i.e. a purely commercial company,
stripped of its former public powerhouse advantages.
In the wake of this restructuring policy, Analft,
a new agency, is about to see the day. Its duties
will be to grant research and exploitation permits
through calls for tender, to regulate the market
and to collect company fees. However, Analft will
mostly be in charge of promoting investment and
guaranteeing access to the market with no discriminatory
tariffs. In parallel to the reforms announced by
the Ministry
of Energy and Mines, companies of this sector
will also be trained in the future system.
Sonatrach
will be granted a new status, which will enable
it to undertake commercial operations on equal grounds
with its competitors. Along with this process, the
company's management system has to be modernized
and new technologies have to be acquired.
In the medium term, Sonatrach will open its capital:
"Our objective is to transform Sonatrach
into an international company and a leader in the
trade of gas in the Mediterranean and Atlantic region.",
states Minister Khelil. He adds that Sonatrach also
aims for near-leadership in LPG and condensate gas
commerce for these regions. Sonatrach, a company
ranked twelfth worldwide in this sector, is also
planning to expand its activities to Peru and reinforce
its presence in the North American market. For the
implementation of this expansion strategy, a partnership
policy is necessary to acquire new market shares,
and to a certain extent, to increase the company's
performance in order to face the competition. This
modernization process is the leitmotiv of Naftal
and Naftec, the two most important subsidiaries
of Sonatrach. With 80% of the market shares in the
fields of distribution, storage, transport and commercialization
of fuel, LPG, lubricants and special products, Naftal
had to initiate a process of modernization and restoration
for its facilities.
This requirement however, depends on the implementation
of industrial security and environmental standards
through the modernization and expansion of its gas-station
network, the renewal of its means of transport and
the increase of its pipe delivery capabilities.
As for Naftec, the national leader in oil-derived
product refining, it is deploying great efforts
to reduce pollution factors from fuel.
The Dynamic Aspect of Oil-Derived Products Sector
GCB, a company specialized in facilities engineering
and construction for companies in the energy sector,
is trying to integrate the spirit of competition.
Freed from the authority of Sonatrach since 1983,
GCB has had more experience in autonomous management
and is actively prepared to face more competition.
"We started preparing ourselves more than
five years ago, training our personnel and in terms
of planning and computing, etc. These measures have
been adopted in view of more greater competition
and the need to manage new challenges"
explains Mr.
Akli Tarzalt, general manager of GCB.
In the framework of this modernization, finding
partners is also a priority for GCB, in order to
take advantage of foreign technical contributions.
"Now that we have acquired civil engineering
expertise, we are looking into exporting our services.
We first turned to neighboring Libya, however we
are not interested in doing this on our own. That
is the reason why we are looking for a partner to
face competition abroad. (…) Since we do not
have experience in exports, we would like to start
with a company that has the necessary experience
and know-how" states Mr. Akli Tarzalt.
Regarding the local market, GCB is also interested
in partners and diversification of its activities.
Such is the interest of GCB in the building sector.
"Algiers is suffering from a terrible housing
crisis, we are therefore looking for a partner who
can provide the technology and construction procedures
with which we can build housing at a lesser cost"
explains the general manager of GCB.
Mr
Hadibi, CEO of BJSP, a company of oil-derived
products operating mainly in well cementing and
stimulation, is very optimistic for the future of
his sector in Algeria. This company has also freed
itself from the authority of Sonatrach in the 1980's,
to progressively acquire its independence with regards
to the government. "Controlling our production
costs is one of the main strengths of BJSP"
explains Mr. Hadibi. This strength is also present
in the quality of BJSP's partners, such as Halliburton
and Schlumberger. The objectives of BJSP are well
defined; they want to become leaders in their base
markets.
| Sonelgaz,
the expansion of the gas industry |
The industrial gas division is still expanding,
with projects carried by ambitious companies such
as Helios and Cogiz, which produce and provide 70%
of the European helium market. Last May, the call
for tender issued by Cogiz for the creation of a
plant in Skikda resulted in the possibility of a
partnership with the German Linde and possibly providing
80% of the European helium market. A study for the
construction of a third plant in 2006-2007 is already
in progress. The prospects for further growth however
are not limited to this phase. Mr.
Mahdad, CEO of Cogiz explains: " Our
ambition is to find partners who possess the expertise
and know-how to be able to prospect the European
market together and develop sectors other than helium
and nitrogen."
Of course, the oil sector, where investments are
made as contracts are being signed with Sonatrach,
remains the most important. Foreign partners are
following this sector's market evolution very closely
as it is expected to become more liberal. According
to Mr.
Ian McIntosh, general manager of Petro-Canada
North Africa, "The one thing that we
saw when we came here were the promises for change.
We are eagerly awaiting the new hydrocarbon law,
which will indeed be a positive step for Algeria.
We believe there is an opportunity to make Algeria
more attractive in terms of investment. Our position
is to be continually present in Algeria while exercising
a certain amount of caution waiting for new changes
to occur."
Sonelgaz,
the national gas and electricity company, lost its
monopoly as a result of the new
law on electricity. This large public firm will
be turned into a company that will be able to sell
its shares to investors enabling them to produce
electric power. A number of international companies
are studying partnership opportunities in the electric
sector very closely.
| Summary
of Algerian-Asian Ties |
Partnerships with European countries and the United
States of America have always been very active,
however, Algerian hydrocarbon and natural gas trade
with Asia suffers from a geographic disadvantage.
|
Witness to this is
that exports to Asia have never reached 2 million
metric tons per year.
This, however, does not prevent Sonatrach from being
present in Asia through its subsidiary SPC-Asia
(Sonatrach Petroleum Corporation Asia), which trades
from Singapore. SPC's results are good considering
that it trades an average of 12 million metric tons
per year with a profit margin of 25 million dollars
(1999).
Cooperation with Asia does not stop here: SPC and
Kawasaki Heavy Industries signed a contract for
the acquisition of two new GPL ships to be delivered
in 2000. Furthermore, a few years ago, partnership
relations with Malaysia made a great leap forward,
with the signing of a research and exploitation
contract at the oilfield of El-Hidjara-Oued-El-Maraa
with Petronas Carigali in December 1996. This contract
was for a 38 million-dollar financing plan for a
7-year cooperation period, including drilling 4
wells and training Sonatrach personnel.
The ties with Asian companies have increasingly
been strengthened. The 1998 Kuala Lumpur Fair, to
which Algeria participated, gave a positive overview
of investment intentions by a number of Asian companies
in Algeria. Hence, in April 2000, an agreement regarding
upstream oil products was signed between Sonatrach
and Petronas, and a series of projects have been
retained for petrochemical transformation with the
refinery of Skikda. In June of the same year, a
contract was backed between Sonatrach and BHP (Australia),
in association with the American company Petrofac
and the Japanese JOOC, for the development and the
operation of Ohanet (south of Algeria) oilfield.
The investment is of about 928 million dollars,
with a 30% contribution from JOOC. This project
involves building a gas and fuel plant, 236 Km of
pipelines and 47 development wells for an exploitation
period of 8 years.
In the Algerian market of oil related services,
one must note the presence of JGC, a Japanese company
operating in the important oil field of Birkine
with a 300 000 barrels/day capacity. Finally, in
May 2000, Algeria actively participated in the international
conference on LNG (liquefied natural gas) in Seoul.
In June 2003, Algeria hopes to contribute to the
world gas congress in Tokyo. A number of issues
will offer Algeria serious trade opportunities,
namely those pertaining to the environment or the
new ecological fuel GTL (gas to liquid). It is also
important to note the implication of Asian banks
to support these relations, such as the guarantees
of 50 and 80 million USD agreed to respectively
by the Crean Exion Bank and the Japan Exion Bank,
a positive political move towards Algeria, in the
same way as the recent visit of the Indonesian President
and the Chinese Prime Minister to Algeria last September.
| Increasing
Mining Production |
Before Algeria's independence in 1962, mining was
mainly oriented towards the exploitation of iron
and lead-zinc ore. An effort in the way of prospecting
during the past 30 years enabled the development
of basic geological infrastructures and the inventory
of a large number of sites, a number of which offer
genuine investment potential. Hence, on top of basic
exploitation (iron, salt, zinc, lead, marble, barite,
etc.), research studies that were carried out these
past years enabled the discovery of gold, wolfram,
tin, silver, diamond, mercury rare metals and precious
and semi precious stones.
More advanced in terms of privatization, the mining
sector is governed by a new
law passed in June 2001. It allows private investors
to exploit mines that were put in concession and
trade the resulting products freely. ORGM
(Office de Recherche en Géologie Minière,
Geological Mining Research Office), which is
a privileged instrument of this sector, possesses
a data bank on mines accessible to investors. Since
the creation of this service, three calls for tender
have been issued for the concession of mines leading
to the launching of almost seventy exploitation
projects in the north of Algeria and in the high
plateaus. At the same time, the Ministry of Energy
and Mines is looking for partners for gold processing
and exploration. Gold mines will see a continuous
production under the responsibility of the National
Gold Company Enor (Entreprise Nationale de l'Or),
which succeeded in putting 60 Kg of gold for sale
last April. In fact, similar sales are organized
regularly in Algeria. Enor has also created its
own exploitation company for the gold mine of Tirek
in the south of Algeria with a capacity of 2000
metric tons per year. A call for tender has also
been issued for the exploitation of diamond and
gold in southwestern Algeria. Other companies call
for partnerships for zinc and lead exploitation
as well as 50 small mines of marble, decorative
stone, aggregate and salt.
In the field of phosphate and iron, Ferphos
is, according to CEO
Mr. Mebarki, the typical example of Algeria's
extraordinary mining potential: "Our strength
is that we possess a huge phosphate field with reserves
of 2 billion metric tons. Our field is the only
one in the world having a 30-meter phosphate layer,
one of the most reactive worldwide. (…) We
can extract up to 4 million metric tons of raw phosphate."
In terms of partnerships, Mr. Mebarki reveals that
the association between Ferphos and Ispat LNM increased
iron production to 240 million metric tons, mainly
to the benefit of the local market. With such assets,
Ferphos can pursue its ambitious objectives: "In
the near future, we intend to launch an initial
production project for phosphoric acid and DAP in
Algeria. A second project aims to produce about
150 000 metric tons of phosphate. Regarding phosphoric
acid, we are aiming at 750 000 metric tons per day."
Explains Mr. Mebarki, who also calls for new partners:
"What we are looking for in a partner is
technology and a good market. We are open to proposals
and discussions, and we are ready to enter into
association with foreign partners, even at site
level. The new Algerian mining law is an extraordinary
advantage."
The main objective is to give momentum to the development
of the mining sector to contribute significantly
towards the stimulation of the Algerian economic.
Therefore, development objectives take into consideration
the continuous modernization efforts of production
tools, research intensification and the search for
foreign partners who possess capital, technology
and commercial networks to develop of mining activities.
| Environmental
Awareness |
The great innovation introduced by the government
in terms of energy is its responsibility regarding
environmental aspects.In addition, the main companies
of the sector, such as Sonatrach, Sonelgaz and Naftal,
have all undertaken measures for a better integration
of environmental considerations to their expansion.
Thus, M. Remini, CEO of Naftal, main actor
in the distribution of oil products and derivatives
on the national market, ensures "Naftal
is a company concerned and conscious of the importance
of the quality of life. The respect of the environment
is, in fact, one of the strategic aims of our development."
Therefore, and as an example, Naftal devotes
important resources for the collection of used oils
and is trying to generalize its products such as
LPG and unleaded petrol. M. Bensaad, assistant
general manager of Sonelgaz affirms that his
company has always taken environmental protection
into account. He explains among other things : "Sonelgaz
works a lot with associations for the environment
protection, we are developping at the south of the
country photovoltaics renewable energy; about twenty
sites are already using solar energy, and we are
also developping an activity which we think significant
for environmental protection : natural gas fuel."
The company Kenza Industry and Services is
a good example of the evolution of environmental
awareness in Algeria. Indeed this young private
company, evolving in the par-energy sector, shows
a particular dynamism in its work and in the search
for new processes combining profitability and respect
of the environment. "As for the cleaning of
storage tanks, we intend to produce a new process,
the Petrojet system, that we studied in the United
States. Indeed, instead of burying or incinerating
the sludge that is piled up in the tank, it is possible,
with this process, to recover the raw material,
that is to say crude oil or refined product. This
implies less pollution of the environment, the employees
exposed to toxic gas are more protected and a substantial
saving of time" explains Mrs Khaldi, commercial
director and co-founder of Kenza
Industry and Services . Convinced, Mrs. Khaldi
wishes to go further : "It is a project
that is bound to be successful. That is why we are
trying to make the people of Sonatrach aware of
it, at all levels : production, storage and refinery.
Indeed, it is to their advantage, while taking the
environmental aspect into account."APRUE
is the key element in this task, namely in the field
of renewable energies. In this advanced sector,
partnerships and the need for foreign expertise
is a strategic objective. Giving a broad overview
of the market. Mr.
Bouzeriba, General Manager of APRUE states:
"We are gearing our efforts towards isolated
areas, areas where conventional energy is not competitive.
It is not available and not competitive because
it needs to be transported over great distances.
These isolated areas, which are not connected, represent
about 4 or 5 % of the national territory. (…)
This entire region in Algeria needs to have access
to power, and apparently renewable energy could
be a viable alternative because it is cost effective."
The reorganization of the energy sector is extremely
important for Algeria's development and economic
growth. Besides exploration, another decisive element
for the growth of Algeria is the pipeline project
linking Algeria to Italy (Enrico Mattei), Spain
(Pedro Durran Farrecc), and ultimately, possibly
other African countries. Presently there are 11
gas pipelines and 14 oil pipelines spanning a distance
of 13 000 Km. In this expanding market, Algeria
has the advantage of a choice geo-strategic location.
In fact, that is how it has developed solid commercial
relationships with European countries, the United
States of America and its neighboring north African
countries. With regards to the mining sector, the
government is still willing to exercise its role
as owner of the sector, promoter of investment and
regulator of economic activity. However, through
the passing of a number of laws, the government
is willing to disengage from commercial activities
and increase private capital contribution for the
development of the sector. |
