Page 4 - AfrOil Week 17 2020

AfrOil COMMENTARY AfrOil
Low oil prices pose
steep risks for Algeria
The North African state is both politically and economically vulnerable to bear markets
Algeria’s shale gas plans began sparking protests several years ago
WHAT:
The collapse of world oil prices is putting pressure on Algeria.
WHY:
The country is not in a position to assuage the concerns expressed by the Hirak movement and its supporters.
WHAT NEXT:
Algeria may see another wave of protests once the coronavirus lockdown is lifted..
THE collapse of world crude prices is not good news for any producing country that depends heavily on oil revenues. States in this position are now facing the prospect of fiscal disaster and economic ruin. In the short term, they can no longer earn enough to justify continued explo- ration and development; in the longer term, they may have a harder time securing the credits they need to keep the industry running and holding the attention of risk-averse investors.
But the stakes are even higher in countries that are facing political instability as well as financial trouble. This essay will examine the implications of falling oil prices for one such state: Algeria.
Background
Algeria became a producer of hydrocarbons in the early 1960s, before it obtained independence
from France in 1962. Its oil industry was ini- tially dominated by French entities, but the Algerian government established Sonatrach as the national oil company (NOC) in 1963 and then embarked upon a gradual process of nationalisation.
That process came to an end in 1971, when Sonatrach reached an agreement with French investors in Algerian oilfields on the transfer of assets to the state.
It ensured that Algiers reaped most of the benefits in subsequent years, when interna- tional oil companies (IOCs) took an interest in the country’s natural gas.
These benefits, in turn, helped Algeria’s gov- ernment survive (and even secure a position of relative macroeconomic stability) despite multi-
ple bouts of political instability. But they also left
the country in a position of dependence. 
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w w w . N E W S B A S E . c o m Week 17 29•April•2020