Page 5 - AfrOil Week 42 2019

AfrOil COMMENTARY AfrOil
 It added: “The revision of the current legal and fiscalregimeisnolongerachoice,butaneces- sity, to adapt to the new global energy order characterised by abundant supply, lower prices and a gradual introduction of renewable ener- gies into the energy mix.”
Taxes and contracts
Reform is necessary partly because Algeria’s current tax regime undercuts the viability of efforts to exploit new fields, the company said. The proposed law offers foreign investors more favourable terms, it noted.
“The new law is vital for Sonatrach to ena- ble it to develop the discoveries made in recent years,” the statement read.
Sonatrach also pointed to problems with existing contract law, saying that investors were having to wait too long – 10 years, on average – to bring new fields through the exploration stage and into production. It suggested that conditions would improve under the draft law, which revises the terms of production-sharing deals and offers more flexible contracts. “This overhaul is urgent, given the situation of our reserves, long-term production profiles and the time [needed] to implement new projects,” it said.
The statement went on to say that the pro- posed changes would allow Sonatrach to serve both domestic consumers and the export mar- ket more effectively. Without reform, it said, the company will not be able to develop new gas fields capable of supplying the home market without cutting into exports.
The new law could also help Algeria realise its ambition of bringing unconventional hydrocar- bon reserves on stream, Sonatrach added. “The country’s potential for hydrocarbon reserves remains important for both conventional and unconventional resources,” it said. “Despite this potential, foreign companies have shown little interest in exploration, judging by the modest
results of the four tenders organised under the [Bouteflikaregime].”
The opposition
The company’s remarks are unlikely to sway crit- ics, who have found multiple reasons to dispar- age the draft legislation.
As noted above, some of Bensalah’s oppo- nents say the law is designed primarily to attract investment from major international oil com- panies (IOCs) that are likely to lend the interim president enough support to remain in power. Many protesters view this scenario as a problem, arguing that Bensalah, along with his backers in the army, has unacceptably close ties to the Bouteflika regime.
Other critics have highlighted reports that the draft law aims to overhaul the domestic energy pricing schedule. They have alleged that the caretaker government is looking to lift sub- sidies on motor fuel and electricity prices, saying that this move would inevitably lead to massive price increases that would strain most consum- ers’ resources.
Representatives of the caretaker government have answered critics by suggesting that the draft legislation will help Algeria find the new reserves and generate the additional revenues it needs to overcome the economic troubles that sparked demonstrations against Bouteflika’s regime. They have asserted that the proposed law is similar enough to the hydrocarbon law introduced in 1986 that it is likely to lead to a wave of new discoveries, as occurred during the 1990s.
The debate between the two sides is not likely to be settled in the near future. Instead, the protests will probably ensure that the care- taker government does not succeed in gaining approval for the draft law before the elections set for December 12. As a result, the winners will have to take another look at the question of how best to utilise Algeria’s oil and gas resources.™
“ probably ensure
The protests will
that the caretaker government does not gain approval for the draft
law before the elections set for December 12
PIPELINES & TRANSPORT
Sudan, Ethiopia agree to build joint oil pipeline
SUDAN/ETHIOPIA
THE governments of Sudan and Ethiopia are planning to work together to build a crude oil pipeline capable of serving both countries.
The two sides reached agreement on the pro- ject during a recent meeting between Ethiopia’s Minister of Water, Irrigation and Electricity Seleshi Bekele and Sudanese Minister of Energy and Mining Adel Mohamed Ibrahim in Addis Ababa, Sudan News Agency (SUNA) reported earlier this month. Ibrahim was part of a dele- gation accompanying Sudanese Prime Minister Abdalla Hamdok on an official visit to the Ethi- opian capital, the agency said.
Ibrahim said after the meeting that both Khartoum and Addis Ababa were ready to work with Juba to expand the scope of the pro- ject. Ethiopia and Sudan intend to invite South Sudan to “co-establish another branch of the pipeline to extend it to reach the state of South Sudanforthebenefitofthepeopleoftheregion,” he stated.
“The Ethiopian side is very interested and enthusiastic about this project, and we will start to implement it soon after the completion of partnership procedures,” he added, according to SUNA.
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