Algeria's Sonatrach signs upstream MOUs with Turkey's TPAO, Russia's Zarubezhneft

London — Algeria's state-owned Sonatrach said Thursday it has signed preliminary deals with Turkey's TPAO and Russia's Zarubezhneft with a view to cooperation in the country's upstream.

Algeria has vowed to increase exploration activity together with international partners following the implementation of a new hydrocarbon law in January, which offers more a favorable tax regime to potential investors.

Sonatrach said it had signed memoranda of understanding with both TPAO and Zarubezhneft that would allow for talks on opportunities in the Algerian upstream following the entry into force of the new hydrocarbon law.

"These two MOUs confirm the renewed dynamism in the Algerian upstream sector against the background of the attractive terms introduced by the new hydrocarbon law," it said.

The two new MOUs follow a first in mid-March with US major Chevron under which the two sides said they would also discuss joint opportunities in the upstream.

Sonatrach last year held preliminary talks with Chevron and fellow US major ExxonMobil as it looks to reverse the trend of falling international interest.

Sonatrach has said that the legal reform was urgently needed given the time it takes to implement new projects, pointing to the average time of 10 years between winning an exploration license and moving it to production.

Government officials have said the legislation would mark a return to provisions in the 1986 hydrocarbons law, which led to significant discoveries in the 1990s, before changes to the regulations in the mid-2000s caused investment to tail off.

2020 spending

However, Sonatrach's efforts this year to boost upstream work will be hampered by a reduced spending budget imposed by President Abdelmadjid Tebboune.

CEO Toufik Hakkar -- who took over as head of Sonatrach in early February and was the main architect of the new hydrocarbon law -- said in late March the company would postpone projects that are not of an urgent nature.

Sonatrach has been tasked with halving its spending this year to $7 billion from an originally planned $14 billion.

Hakkar said Sonatrach had already started implementing a capital reduction program "to improve the performance of the company in the current year and secure tax revenue to the treasury."