OBG talks to Youcef Yousfi, Minister of Energy and Mines

Interview: Youcef Yousfi

What were the reasons behind the low participation rate in the last three tenders?

YOUCEF YOUSFI: First, we must reframe the debate on the state of Algeria’s economy that had characterised the period when the tenders were launched. As you know, like many countries we have suffered from the effects of the global economic crisis, and this has been an obstacle to the resumption of the announced growth. The world demand for oil and gas has slowed down.

Given this context, it was pretty tough for companies to commit themselves to acquiring reserves, and therefore future productions will have trouble selling on short-term nearby markets. The limited number of bids is also likely due to several reasons. First, the financial crisis has pushed some companies to reduce their investments, by refocusing or by selling subsidiaries or assets.

The poor performance is also linked to the difficult regional environment, which is characterised by political instability in some petroleum-producing and -exporting countries, as well as the declining trend in both exploration efforts and major research investments from oil companies.

Finally, some companies changed their strategies completely and began to prefer less risky projects, such as acquisitions. In any case, regular contacts have been introduced with all operators before the launch of each bidding round.

How will the new hydrocarbons law improve the attractiveness of the Algerian energy sector?

YOUSFI: One of our main concerns is to put in place processes and procedures for attracting foreign investors to further strengthen the development of the research sector and the exploitation of hydrocarbons. We must also open new horizons by diversifying the volume of exchanges of experiences through, for instance, association with the national company, Sonatrach. Obviously, one of the new developments expected from the adjustments that have been made to the hydrocarbons law is to find space of intersection between the techno-economic interests of our partners and those of the state.

These amendments aim to implement the appropriate fiscal terms, taking into account the concerns of the companies and the fundamental interests of the state. It is this balance that has been built through the new law. In light of the technological advances achieved in the oil and gas industry, we aspire to boost the attractiveness of the national mining sector thanks to an adaptation of legal and regulatory frameworks, as well as a number of incentives to stimulate investment.

Tax incentives do not represent the only area covered by the new provisions of the hydrocarbons law; other improvements have also been made. These include focusing on exploration activities; the benefits of linking these to the granting of projects within the framework of a call for competition; and a preferential right on the renderings of surfaces and a possible extension of the research period.

How can production and exploration of oil be encouraged in under-exploited areas?

YOUSFI: In the new legal framework, in addition to tax incentives that are provided for all projects, it is noted that tax areas corresponding to little-explored blocks or those with complex geology characteristics are no longer frozen; they can change towards a less-taxed direction. On the other hand, the duration of exploration is no longer set to two years, and there is a possibility of extension for two additional years upon operator request.

We continue to intensify the country’s exploration effort, both in onshore and offshore plots. Regarding the encouragement of production in such areas, intensification of service activities is necessary for this upstream segment. The transport sector will thus see an extension of the pipeline network.