From The Wall Street Journal
A contentious political transition in Algeria is creating uncertainty around a number of foreign investment deals in Africa’s largest natural gas-producing country.
In recent weeks, Exxon Mobil Corp. has held off on signing a preliminary deal with Algeria’s state-run Sonatrach, and companies including BP PLC and Norway’s Equinor have expressed concern about how Algeria’s political turmoil might affect oil and gas production.
Algeria relies heavily on oil and gas production and needs an infusion of outside investment to reverse the production declines that have resulted from punitive contractual terms and heavy bureaucracy. Betting on tax incentives and pledges of reform from the administration of longtime President Abdelaziz Bouteflika, companies including Exxon Mobil, Anadarko Petroleum Corp. and Italy’s Eni SpA are in talks to sign agreements that tap the country’s reserves of shale gas, the third-largest outside the U.S.
But after a 20-year rule, the 82-year-old president has agreed not to stand for re-election in Algeria’s next presidential contest. The head of state has also postponed the date of the contest indefinitely, sparking accusations from the opposition that he and his backers intend to cling in power without electoral challenge. Protesters had been pushing for a new leader independent from Mr. Bouteflika’s influence and are now seeking a loosening of media restrictions to ensure that presidential elections are free and fair. The government has yet to reach an understanding with the opposition about the timing of the next elections, and they haven’t agreed on a possible successor.
Amid the uncertainty, many foreign investors have delayed their commitments to new investment. Exxon Mobil was close to clinching an early shale exploration deal in Algeria with Sonatrach, but the U.S. oil giant didn’t sign a preliminary agreement as planned when they met with Sonatrach officials in Houston about a week ago, according to an Algerian oil official and another person familiar with the discussions.
A spokeswoman for Exxon Mobil and a Sonatrach press official declined to comment.
The U.S. oil giant has been looking at the sprawling Tinrhert oil-field complex in southeastern Algeria, where the government wants 128 wells to be drilled, the Sonatrach official said.
A contentious political transition in Algeria is creating uncertainty around a number of foreign investment deals in Africa’s largest natural gas-producing country.
In recent weeks, Exxon Mobil Corp. XOM +1.05% has held off on signing a preliminary deal with Algeria’s state-run Sonatrach, and companies including BP PLC and Norway’s EquinorAS EQNR +1.51% A have expressed concern about how Algeria’s political turmoil might affect oil and gas production.
Algeria relies heavily on oil and gas production and needs an infusion of outside investment to reverse the production declines that have resulted from punitive contractual terms and heavy bureaucracy. Betting on tax incentives and pledges of reform from the administration of longtime President Abdelaziz Bouteflika, companies including Exxon Mobil, Anadarko Petroleum Corp. and Italy’s Eni SpA are in talks to sign agreements that tap the country’s reserves of shale gas, the third-largest outside the U.S.
But after a 20-year rule, the 82-year-old president has agreed not to stand for re-election in Algeria’s next presidential contest. The head of state has also postponed the date of the contest indefinitely, sparking accusations from the opposition that he and his backers intend to cling in power without electoral challenge. Protesters had been pushing for a new leader independent from Mr. Bouteflika’s influence and are now seeking a loosening of media restrictions to ensure that presidential elections are free and fair. The government has yet to reach an understanding with the opposition about the timing of the next elections, and they haven’t agreed on a possible successor.
Amid the uncertainty, many foreign investors have delayed their commitments to new investment. Exxon Mobil was close to clinching an early shale exploration deal in Algeria with Sonatrach, but the U.S. oil giant didn’t sign a preliminary agreement as planned when they met with Sonatrach officials in Houston about a week ago, according to an Algerian oil official and another person familiar with the discussions.
A spokeswoman for Exxon Mobil and a Sonatrach press official declined to comment.
The U.S. oil giant has been looking at the sprawling Tinrhert oil-field complex in southeastern Algeria, where the government wants 128 wells to be drilled, the Sonatrach official said.
Opposition politicians and oil-industry employees are ruling out that option. They say it would hurt Algeria’s main source of revenue. “Petroleum is the wealth of the people,” said Sonatrach trade-unionist Abdellah Medjkane.
The political uncertainty surrounding Algeria’s president also casts doubt on the chief executive of the state oil company. President Bouteflika appointed Mr. Kaddour as Sonatrach’s CEO in 2017, hoping to revive the company’s flagging fortunes. The CEO has set up a restructuring and investment program that promised $67 billion of additional revenue, thanks to cost savings and boosted output over the next decade.
Mr. Kaddour is so closely tied to the Bouteflika presidency that he would likely be forced out in the case of change of administration, said an official at the company and consultants who work with oil companies in the country. That would complicate matters for foreign investors seeking attractive contractual terms while trying to navigate the country’s arcane power circles.
“Sonatrach is the State and the State is Sonatrach,” said Denis Florin, of Lavoisier Conseil, a management consulting firm that advises French companies in the Middle East. “We are entering a period of uncertainty in the decision-making networks.”
A rising assertiveness of civic movements could impact shale projects, which use hydraulic fracturing to draw oil and gas out of the ground. Protesters have called the projects as environmentally damaging. They also have complained that the country’s oil and gas revenue trickles down in a way that rewards the richest citizens and the poorest get less, said Sofiane Djilali, the coordinator of protest movement Mouwatana. “The current system is opaque and feeds a carnivorous administration.”
He said the oil sector would be run more transparently if the opposition takes over.
