FEATURE: Algeria on track to complete hydrocarbon law implementation by end-Q1

London — Algeria is on track to complete by the end of March the approval of the implementing texts of its new hydrocarbon law, which it is hoped will then kick-start a new wave of upstream developments in the North African country.

The new hydrocarbons law -- first announced in late 2019 but as yet unimplemented -- is considered essential for restoring the attractiveness of Algeria's stagnating upstream sector, offering improved fiscal terms for investors.

"The texts of the hydrocarbons law are being published as they are adopted by the government," an Algerian industry source close to the matter told S&P Global Platts.

"It is reasonable to say that all texts will be published at the end of the first quarter if this pace is maintained," the source said.

In total, there are around 40 texts that still need to be adopted, with some 30 already finalized.

Nine preliminary agreements with international majors were signed by state-owned Sonatrach in 2020 with a view to translation into concrete projects once the law is implemented.

The first deal was with US major Chevron and was followed by MOUs with Turkey's TPAO, Russia's Zarubezhneft, the US' ExxonMobil, Russia's Lukoil, Italy's Eni, Spain's Cepsa, Austria's OMV, and Germany's Wintershall Dea.

Sonatrach also signed at the end of January this year an MOU with the US' Occidental Petroleum, Eni and France's Total on new opportunities at the producing 404 and 208 blocks in the Berkine Basin.

Bidding rounds

Energy minister Abdelmadjid Attar said in late January that the finalization of the implementing texts would allow Algeria's state-owned regulator Alnaft to launch new exploration licensing by the end of June, depending on the situation around the coronavirus pandemic.

He said Algeria would launch a "new campaign" to promote the advantages of the law as soon as the implementing texts were finalized.

Algerian government officials have said the new legislation would mark a return to provisions in the 1986 hydrocarbons law, which led to significant discoveries in the 1990s, before changes to the regulations in the mid-2000s saw investment tail off.

The results of the last four bidding rounds launched by Alnaft have been acknowledged as disappointments and evidence of the poor profitability of projects offered under the tax regime of the former hydrocarbon law.

In Algeria's 2008 round, the first after the North African country amended its oil and gas law to increase the state's role in its upstream, just four blocks were awarded out of more than a dozen on offer.

Things got worse in subsequent rounds -- in 2009 only three blocks were picked up, and then in 2011 two were awarded.

A revamped system was launched in 2013, but a round held the following year saw just four blocks awarded out of 31 on offer.

According to Algerian industry officials, there are many high-potential fields in the country whose development has been put on hold.

That, and years of underinvestment, has seen Algeria's oil production decline from a peak of 1.4 million b/d in 2008 to around 1 million b/d in early 2020, before OPEC and its allies imposed drastic quotas due to the oil market collapse caused by COVID-19.

Algeria is now producing around 860,000 b/d, according to S&P Global Platts data.

Algeria's gas exports are also falling. Last year, its pipeline supplies to Spain and Italy in 2020 fell by 2.8% year on year to 20.5 Bcm, down from 21.1 Bcm in 2019, according to S&P Global Platts Analytics data.

Its LNG exports also fell, by 8.8% year on year to 14.94 Bcm.