The Algerian Hydrocarbons Regulations

The hydrocarbons sector is the backbone of the Algerian economy,

accounting for roughly 60% of revenues, 30% of GDP, and over 95% of

export earnings. Algeria has the 8th largest reserves of natural

gas in the world, is the 4th largest gas exporter and ranks 15th in

oil reserves.

The new hydrocarbon regime implemented in 2005 sought to

liberalise the Algerian oil exploration and exploitation industry,

in particular, by relieving the state's national oil company,

Sonatrach, of its public regulatory function and by simplifying

considerably the hydrocarbons legal and tax regime. However, the

market liberalisation aspirations of the 2005 law have been

significantly constrained by presidential amendments made to the

new law in July 2006.

The most important amendments to the hydrocarbons legal regime

are considered in this article. First, the two agencies created:

l'Agence Nationale de Contrôle et de Régulation

des Activités dans le domaine des Hydrocarbures (responsible

for implementing and enforcing technical regulations) and

l'Agence Nationale pour la Valorisation des Ressources en

Hydrocarbures (responsible for promotion of the petroleum industry

and the creation of petroleum contracts). And secondly, the three

main legal instruments created: the prospecting licence, the

exploration/exploitation contract, and the pipeline transportation

concession.

The new fiscal regime, and in particular, the new

'hydrocarbons taxes' applicable to international oil

companies in partnership with Sonatrach (a partnership prescribed

by the 2005 law), are considered in this article. Also, the 7th

licensing round held in 2008, which was disappointingly

undersubscribed, is discussed as well as the new 2nd national and

international licensing round, which was launched in July 2009.

To view the article in full, please see

below:

Full Article

Algeria was lauded in the past for the liberal terms it offered

to international oil companies (IOCs) and the transparency of its

bid rounds. After amendments were made to the Hydrocarbons Law in

2006, voices of dissent became louder.

In July 2008, Algeria launched its 7th licensing round but only

4 exploration licences (of 16 initially offered) were awarded.

Algeria blamed the economic turmoil but most IOCs found that the

current hydrocarbons regime was not attractive for foreign

companies.

A year later in July 2009, l'Agence Nationale pour la

Valorisation des Ressources en Hydrocarbures launched its 2nd

licensing round. The public opening of the bids will take place on

20 December 2009 and will be highly anticipated.

1. A promising Hydrocarbons Law – a disappointing

Presidential Order

In 2005, the Hydrocarbons Law No 05-07 dated 28 April 2005 came

into force and replaced Law No 86-14 dated 19 August 1986. This new

law made significant changes to the rules governing the petroleum

industry in Algeria.

The 1986 Law established the monopoly of the Algerian State over

hydrocarbons exploration, exploitation and transportation

activities. The Algerian State, acting through its national oil

company, Sonatrach, could only entrust these activities to Algerian

companies. IOCs could not, therefore, carry out hydrocarbons

exploration and exploitation activities except through a

partnership with Sonatrach.

The 2005 Hydrocarbons Law was seen as a major liberalisation of

the petroleum activities by setting up two new agencies, relieving

Sonatrach from its public regulatory capacities and

responsibilities and simplifying the hydrocarbons legal and tax

regime. However, President A Bouteflika significantly amended the

2005 Hydrocarbons Law by Presidential Order No 06-10 dated 29 July

2006. The institutional framework and the new contractual regime

set up by the 2005 Hydrocarbons Law have remained unchanged but the

market liberalisation has been almost entirely abandoned.

1.1 New public entities replacing Sonatrach

Due to the liberalisation process and in order to avoid

permanent conflicts of interest, the 2005 Hydrocarbons Law created

two new public...