READING THE RUNES OF THE OIL MARKET, THIS POWERFUL PORTFOLIO COMES WITH A HEAVY RESPONSIBILITY
ENERGY MINISTRY

Deregulation of the market will open up opportunities in exploration and refining

When the Algerian government fixes its annual budget, the biggest single factor it has to take into account is the world price of a barrel of oil. But as no one can know in advance exactly what that will be, the best that can be done is intelligent guesswork, based on a deep knowledge of global market conditions. Hence the crucial importance of having the right person in the job of Minister of Energy and Mines – a portfolio that currently brings with it the presidency of the giant state hydrocarbons company, Sonatrach.

Since 1999, that powerful position has been held by Dr. Chakib Khelil, who has a PhD in Petroleum Engineering from Texas A&M University. President Bouteflika head-hunted Dr. Khelil in Washington, where he had been working with distinction at the World Bank on oil issues and energy policy in Latin America.
His mandate now includes developing Sonatrach’s international business strategy, as well as seeing the company through a period of radical reform that will lead to a separation of its commercial activities from the more regulatory functions associated with government.

This will lead to a deliberate weakening of Sonatrach’s monopoly position in a number of its activities, as well as the opening up of more upstream and downstream activities to outside capital and participation. In fact, compared with several other OPEC member states, Algeria already allows far more direct foreign involvement – not least from the United States – thanks to legal changes in 1991. New laws will take that process much further.
Dr. Khelil has already served a term as President of OPEC, so he is a past master at oil diplomacy. One of his current aims is to get his colleagues around the world to agree to allow Algeria to increase its production quota. However, he also believes that other sectors need more investment funds – not all of which can be raised abroad. The government’s ambitious program to modernize the economy and bring social benefits to the country’s growing population will be extremely costly.

DR. KHELIL believes that Algeria has a responsibility to play a wider role in the development of the African energy sector

An exclusive interview with Dr. Chakib Khelil, Minister of Energy and Mines and CEO of Sonatrach

Q: Many people see Sonatrach refocusing on purely commercial activities as evidence of the government’s will to open up the Algerian economy. Is that how you see things?

Dr. Khelil: Yes, of course. Two years ago, we put into place a policy designed to enable us to reach our objective of increasing government revenue, diversifying these revenues and improving the quality of our personnel.
The new Mining Law also provides for three percent of energy taxes to go to local authorities. That should prevent any resentment over resources being exploited in one region and being spent in other regions.

Q: Will the new law be something to excite the interest of American companies?

Dr. Khelil: The existing law is already attractive, because many American firms already invested heavily in Algeria during the 1990s. We in Algeria greatly appreciate these American investments – all the more so because the American firms stayed when others left during the difficult times that our country experienced.
What the new law does is basically to separate what the role of the State is, in terms of awarding contracts, from the purely commercial activities of Sonatrach. This new procedure has drawn a lot of interest from countries throughout the world, as they are now assured of finding a level playing field here in Algeria.

Q: What effect has the move to more transparency in the awarding of contracts had within Sonatrach itself?

Dr. Khelil: This goal of transparency is also present in the appointment of highly-placed executives in Sonatrach and its subsidiaries. For each position, there is now open competition, and people are selected on the basis of merit alone. That is how we have selected the new CEOs of NAFTAL and NAFTEC. This represents a whole policy change.

Q: What do you see as the main advantages for the company of all the changes taking place?

Dr. Khelil: Sonatrach itself will feel lighter, delivered of the burden of playing the role of a state agency. It will be given the means truly to become an international company. In 10 years’ time, maybe 30 percent of our
revenue will come from our international operations.
Algeria has a lot of natural resources, but nobody knows at the moment how long they will last. Sonatrach is already operating in Peru, Spain, Yemen, Sudan and Niger, not forgetting the numerous projects that have been set up between Algeria and Europe and also the proposed gas pipeline that will link Algeria and Nigeria.

Q: Does that mean that Sonatrach can be a vector towards deeper regional integration?

Dr. Khelil: I do think that Sonatrach has an important role to play in this regard. It is clear that some of our neighbors need the petroleum products that we produce, or even professional training. Many African leaders in the oil and gas fields have been trained in Algeria, with scholarships from the Algerian government.
Here at Sonatrach, we don’t operate like other companies. We involve African countries, and they work with us as fully-fledged partners. We have a different approach to business, which takes into account our social responsibilities. Co-operation with Africa is not a luxury, but a must.