Fury as Algeria adopts controversial energy law

Fury as Algeria adopts controversial energy law
Algeria's parliament has adopted a law aimed at boosting oil and gas investments, but many think it will leave the country's resources open to exploitation by foreign companies.
3 min read
15 November, 2019
Algerians are demanding change [Getty]
Algeria's parliament on Thursday adopted a controversial law aimed at boosting investment in the oil and gas sector, state media said, as activists warned that multinational companies would plunder the country's wealth.

The National Popular Assembly vote came ahead of a presidential election due to take place in December.

Although the text has not been officially published, the plan has stirred passions among a months-old anti-regime protest movement that fears "the nation's wealth" is being sold off to foreign oil companies.

The activists distrust any decisions taken by a regime in place since Algeria's independence from France in 1962, and have demanded the ouster of the entire ruling elite along with sweeping reforms.

Algeria is Africa's third-largest oil producer and a top 10 global gas producer.

Experts say the new law is expected to keep Algeria's oil and gas wealth firmly in the hands of the state.

While the text makes "adjustments" to the legislation, "the broad direction of Algerian policy on oil and gas is absolutely not called into question," said industry expert Francis Perrin.

The legislation will guarantee that state-owned oil company Sonatrach has a majority stake in all projects involving foreign players, said Perrin, director of research at the French Institute for International and Strategic Affairs.

Comment: Algerians will keep rejecting elections until they are fair and free

The law aims to "make the legislative and tax framework more attractive, simple and flexible, to draw more (foreign) investments in the oil and gas sector," he added.

After the law was passed, the official APS news agency reported that the head of Sonatrach Rachid Hachichi had been sacked by interim president Abdelkader Bensalah, only seven months into the job.

APS did not say why Hachichi was removed as head of the vast oil firm, but said he had been replaced by geologist Kamal-Eddine Chikhi, was head of partnerships at the firm since 2018. 

Borrowing abroad

Many Algerians suspect those in power plan to hand over Algerian natural resources to foreign firms, having already "squandered" oil revenues, said Paris-based economics professor El Mouhoub Mouhoud.

"These opinions are a testament to the current government's lack of credibility in the eyes of the people," said Mouhoud.

Nevertheless, everything "suggests that in this new draft law, the mineral title (rights to underground resources) stays in the hands of the state, while exploitation and investment operations can be shared," he added.

Oil and gas production steadily declined after the previous law was adopted in 2005, as has foreign firms' interest in Algerian resources.

On Thursday, parliament also adopted a law allowing Algeria to borrow abroad for the first time in decades, as well as lifting the 49 percent cap for foreign ownership of firms in "non-strategic sectors", the official APS news agency said.

The 2020 Finance Law is aimed at helping Algeria deal with a budget deficit estimated at some 11.5 billion euros ($12.7 billion).

It stipulates that foreign loans could be brokered "in case of need and in a selective fashion to finance economic and structural projects," APS said.

The law also puts an end to measures in place since 2009 which limited foreign companies to having a 49 percent stake in Algerian firms, with the state holding a controlling 51 percent.

Lifting the cap, APS said, would help "improve (foreign) investments".

Algeria's oil and gas exports make up 95 percent of external revenue and contribute 60 percent of the state budget, but falling oil prices have hit the country's economy hard.

In late 2018, analysts at the International Crisis Group estimated that urgent reforms were needed to diversify the economy to avoid a crisis in 2019.

It said the country can count on an external debt lower than two percent of GDP and on support from partners.

Agencies contributed to this report.

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