Algeria can achieve energy security and growth, but Sonatrach must change
Pro: To take advantage of higher energy costs and demand, Algeria's state-owned oil and gas company will need to make these fundamental reforms.
Al-Monitor Pro Members
Gerald Kepes
President, Competitive Energy Strategies, LLC
March 2, 2023
Sonatrach CEO Toufik Hakkar was appointed in February 2020 in the face of enormous challenges: improve the lack of transparency in the Algerian NOC, reverse declining oil and gas production, secure foreign investment and develop new markets for natural gas, just as prices were collapsing. And don’t forget the energy transition.
Three years later, prices are higher, and a large, high-value market opportunity has opened up in Europe for natural gas, courtesy of Russia’s decision to continue its invasion of Ukraine. CEO Hakkar recently announced that Algeria’s natural gas resources were just waiting for Europe to show up with long-term purchase agreements. If only it were that simple.
The primary challenge facing Algeria's upstream is Sonatrach’s ability to expand its institutional capacity. Barring fundamental reform, the critical stumbling block is the insistence that it maintain a controlling stake in any producing venture. Just preceding Hakkar’s appointment, a December 2019 law modifying the legal/fiscal framework for the hydrocarbon sector was promulgated, purporting to improve the investment environment for foreign investors. But merely increasing investment will not solve these challenges, nor will higher prices. Algeria’s upstream competitive landscape must change dramatically.
