Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

My Logins

All Customer Logins
S&P Global Commodity Insights
  • S&P Global
  • S&P Dow Jones Indices
  • S&P Global Market Intelligence
  • S&P Global Mobility
  • S&P Global Commodity Insights
  • S&P Global Ratings
  • S&P Global Sustainable1
Close
Discover more about S&P Global’s offerings.
Investor Relations
  • Investor Relations Overview
  • Presentations
  • Investor Fact Book
  • News Releases
  • Quarterly Earnings
  • SEC Filings & Reports
  • Executive Committee
  • Merger Information
  • Governance
  • Stock & Dividends
  • Shareholder Services
  • Contact
English
  • Español
  • 中文网站
  • Português
  • 한국어
  • हिंदी
  • English (Australia)
  • 日本語
Support
  • Get Support
  • System Notifications
  • Delivery Platforms
  • Regulatory Engagement
Login
  • Commodity Insights Login
  • Access IHS Markit Products
Register
  • Commodities
  • Products & Services
  • Methodology
  • Market Insights
  • Energy Transition
  • Events
  • S&P Global
  • S&P Dow Jones Indices
  • S&P Global Market Intelligence
  • S&P Global Mobility
  • S&P Global Commodity Insights
  • S&P Global Ratings
  • S&P Global Sustainable1
  • Oil Upstream LNG Natural Gas Electric Power Coal Shipping Petrochemicals Metals Agriculture
    Latest in Commodities
    Listen: Europe’s solar revival dream overshadowed by harsh new realities

    This episode takes you into the German Solar Valley, which was once the world’s largest production...

    China gas demand becomes more feasible at low LNG prices but challenges persist

    China's natural gas demand is becoming more feasible with Asian LNG spot prices dropping below the...

    India's BPCL future oil, refining landscape to feature much larger petrochemicals footprint

    India's Bharat Petroleum Corp. has crafted out a major expansion strategy that will see the...

  • Oil LNG Natural Gas Electric Power Coal Shipping Petrochemicals Metals Agriculture Energy Transition
    I Need
    Advisory Solutions/Consulting Market Insights and Analytics Commodity Prices and Essential Market Data Real-Time News, Prices and Analysis Maps and Geospatial Data Forward Curves and Risk Valuation Data
    Data and Distribution
  • Our Methodology Methodology & Specifications Price Assessments Subscriber Notes Price Symbols Symbol Search & Directories Corrections Complaints
    References
    Market On Close Index Sourced Data (Survey) Methodology Review & Change MOC Participation Guidelines Holiday SEE ALL REFERENCE TOOLS
  • Latest News Headlines All Topics Videos Podcasts Special Reports Infographics Insights Magazine Insight Blog    Research & Analysis Top 250 Rankings   
    Latest in Market Insights
  • PLATTS ANALYTICS PRODUCT PLATFORM
    ACCESS ANALYTICS HUB
  • All Events Webinars Conferences Methodology Education Training and eLearning Forums Global Energy Awards    Global Metals Awards   
    Featured Events
    Forums Seoul Commodity Market Insights Forum
    • 20 Jun 2023
    • Seoul, Korea
    Forums APPEC 2023
    • 20 Jun 2023
    • Seoul, Korea
    Forums Navigating the Future: Energy Transition & Carbon Markets at APPEC
    • 20 Jun 2023
    • Seoul, Korea
BLOG Aug 31, 2022

Algeria’s Law Governing Hydrocarbon Activities and Its Implementing Decrees: Notes for Investors

Contributor Image
Alessandro Bacci

Introduction

Algeria's Law No. 19-13 of 11 December 2019 modified the country's legal/fiscal framework for the hydrocarbons sector. The law reintroduced Production Sharing Contracts (PSCs) and Risk Service Contracts (RSCs) so that prospective contractors are now offered participation contracts (royalty and tax contracts involving a participation between Sonatrach, Algeria's national oil company (NOC), and one or more co-contractors (partner/s)), PSCs, or RSCs.

Overall, the point of the law was to have a more attractive upstream legal/fiscal framework after some years of scarce foreign investments in Algeria's hydrocarbons sector. For more information about Law No. 19-13, please see our legal insight article "Algeria's 2019 Hydrocarbons Law - An Assessment Two Years On" (published in December 2021).

After the enactment of Law No. 19-13, in the period 2020-2021, Algeria passed more than 40 decrees covering various aspects of the hydrocarbons sector as reformed by Law No. 19-13. This article provides some notes about Law No. 19-13 and some of the decrees, clarifying some of the more important points within them and, at the same time, identifying points that still need additional clarification because they are open to different interpretations.

The Transition Period for Contracts Concluded Before Law No. 19-13

Art 230 of Law No. 19-13 states that, apart from the contracts converted to the terms of Law No. 19-13 under Art 231, all mineral titles, permits, authorisations, hydrocarbon contracts, and concessions for pipeline transportation issued or concluded before the publication date of Law No. 19-13 in the Official Gazette, including participation contracts based on Law No. 86-14 and the parallel and related contracts concluded based on Law No. 05-07, still apply according to their original terms and conditions.

Art 231 of Law No. 19-13 states that contractors to exploration and/or exploitation hydrocarbon contracts based on Law No. 05-07, i.e., participation contracts, could request the application of the terms of Law No. 19-13 to their contracts on the condition that no production based on a development plan had occurred before 24 February 2013. However, the National Agency for the Valorisation of Hydrocarbon Resources (ALNAFT) had to receive the request for the application of Law No. 19-13 to these existing contracts within a year of the publication of Law No. 19-13.

The Cost Carry Forward Mechanism for the New PSCs

Law No. 19-13 does not provide any details on what the cost carry forward mechanism might be for PSCs under the new law. Despite Algeria having recently started to sign, through direct negotiations with the interested companies, new PSCs (for example, in March 2022, Eni signed, under the terms of Law No. 19-13, a new PSC for the basin of Berkine South), the country has yet to provide a model PSC based on Law No. 19-13. For the investors this is a key point because with hydrocarbon projects the initial years have capital-intensive requirements.

The 2004 Model PSC may offer some guidance in this regard. It may be that the carry forward mechanism under a Law No. 19-13 PSC would work in the same way, i.e., if the 49% share of production passed to the contractor were insufficient for the contractor to recover its costs (including any costs from carrying Sonatrach), these costs would be carried forward to be recovered in the following year(s). In Algeria, Sonatrach must have with participation contracts, PSCs, and RSCs, respectively, a minimum 51% share in the partnership, at least 51% of the hydrocarbon production, and at least 51% of the value of the production. Yet only a model PSC based on Law No. 19-13 may confirm this point.

Transferring Rights and Obligations

Art 205 of Law No. 19-13 states that, in Algeria, the transferring co-contractor must pay an administrative tax for any transfer of rights and obligations. The administrative tax is a non-deductible transfer payment equal to 1% of the value of the transaction, and the transferor pays it.

Direct Transfer of Rights and Obligations

Art 2 of Decree No. 21-98 states that the contracting parties may transfer any or part of their rights and obligations held under the hydrocarbon contract between them or to any other person according to the conditions of ALNAFT's award and the hydrocarbon contract.

In relation to participation contracts, Sonatrach may transfer any or part of its rights and obligations corresponding to the difference between the shareholding held and the minimum 51% shareholding mandatory for Sonatrach to hold by Law No. 19-13 (Arts 96-100 and 205).

In relation to PSCs and RSCs, Sonatrach may transfer any or part of its rights and obligations corresponding to its percentual participating shareholding in the financing of upstream operations.

Indirect Transfer of Rights and Obligations

Art 11 of Decree No. 21-98 states that theco-contracting party must notify the minister in charge of hydrocarbons of any change of control affecting the co-contractor directly or indirectly. Art 14 states that if the change of control is incompatible with the co-contractor maintaining its participation shareholding, the minister in charge of hydrocarbons will notify the co-contractor whose rights and obligations will be transferred with priority to Sonatrach or distributed in equal shares among the other contractors. If no contracting party desires to accept the rights and obligations of the co-contractor deemed to be now in an incompatibility position because of the change of control, Sonatrach will obtain all the co-contractor's shareholding.

Conclusion

Law No. 19-13 and its implementing decrees have modified, one more time, Algeria's legal/fiscal framework for the hydrocarbons sector. The goal of this reform was to spur foreign direct investment (FDI) in the hydrocarbons sector. Until now, the results have been mixed, with increased interest in Algeria's hydrocarbons sector over the first six months of 2022 probably due more to the current Russia-Ukraine conflict than to the reform of the legal/fiscal framework for the hydrocarbons sector. The resulting system is not simple, as the country, for contracts involving contractors other than Sonatrach, is now going to manage three different types of hydrocarbon contracts, which is not an easy task. Moreover, while the enacted decrees have provided some clarification on some points that were not defined in Law No. 19-13, the decrees are many in number, and some fiscal calculations are quite complex.

This article is an excerpt from the longer, more detailed legal insight "Some Notes for Investors in Algeria About Law No. 19-13 of 11 December 2019 and Its Implementing Decrees" which was published on July 1, 2022, and it is available only to our subscribers.

***

Want to learn more on this topic and access similar reports? Try free access to the Upstream Oil and Gas Demo Hub to explore selected energy research, analysis, and insights, in one integrated platform.

Activate Free Membership

Posted 31 August 2022 by Alessandro Bacci, Senior Petroleum Legal Analyst, PEPS, S&P Global Commodity Insights



This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.

Previous Next
Recommended for you

Energy Solutions
Consulting
Upstream Oil & Gas

Upstream Demo Hub

Explore selected energy research, analysis, and insights, in one integrated platform.
Activate Free Membership
Related Posts
VIEW ALL
Blog May 30, 2023

India’s draft carbon market framework: Building stakeholder confidence

Blog May 30, 2023

Is the Americas offshore wind industry the next big market for Offshore Supply Vessels?

Blog May 25, 2023

How will global investments in clean energy evolve to 2030?

VIEW ALL

Follow Us

Mar 23
SPGlobalEnergy@SPGlobalEnergy

RT @SPGCIPetchems: Our #SPWPC Panel on Energy Transition 'The Increasing Interaction between Chemicals, Refining and Agri' Is well underway…

Mar 23
Jan 25
SPGlobalEnergy@SPGlobalEnergy

RT @SPGSustainable1: In our most recent report, we outline nine trends we see rising in prominence in the #sustainability landscape during…

Jan 25
Dec 31
SPGlobalEnergy@SPGlobalEnergy

𝗛𝗮𝗽𝗽𝘆 𝗡𝗲𝘄 𝗬𝗲𝗮𝗿! 𝗧𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 - A new journey for a new year! This account will be retired tomorrow. To keep up to da… https://t.co/Qaj4sgwJHx

Dec 31
Dec 30
SPGlobalEnergy@SPGlobalEnergy

𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝗡𝗲𝘄𝘀! 𝗧𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 - This account will be retired in 2 days. To keep up to date with the latest… https://t.co/nB3tSHqnt5

Dec 30
{"items" : [ {"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"https://www.facebook.com/sharer.php?u=http%3a%2f%2fwww.spglobal.com%2fcommodityinsights%2fen%2fci%2fresearch-analysis%2falgerias-law-governing-hydrocarbon-activities-no-1913-of-11-de.html","enabled":true},{"name":"twitter","url":"https://twitter.com/intent/tweet?url=http%3a%2f%2fwww.spglobal.com%2fcommodityinsights%2fen%2fci%2fresearch-analysis%2falgerias-law-governing-hydrocarbon-activities-no-1913-of-11-de.html&text=Algeria%e2%80%99s+Law+Governing+Hydrocarbon+Activities+and+Its+Implementing+Decrees%3a+Notes+for+Investors++%7c+S%26P+Global+","enabled":true},{"name":"linkedin","url":"https://www.linkedin.com/sharing/share-offsite/?url=http%3a%2f%2fwww.spglobal.com%2fcommodityinsights%2fen%2fci%2fresearch-analysis%2falgerias-law-governing-hydrocarbon-activities-no-1913-of-11-de.html","enabled":true},{"name":"email","url":"?subject=Algeria’s Law Governing Hydrocarbon Activities and Its Implementing Decrees: Notes for Investors | S&P Global &body=http%3a%2f%2fwww.spglobal.com%2fcommodityinsights%2fen%2fci%2fresearch-analysis%2falgerias-law-governing-hydrocarbon-activities-no-1913-of-11-de.html","enabled":true},{"name":"whatsapp","url":"https://api.whatsapp.com/send?text=Algeria%e2%80%99s+Law+Governing+Hydrocarbon+Activities+and+Its+Implementing+Decrees%3a+Notes+for+Investors++%7c+S%26P+Global+ http%3a%2f%2fwww.spglobal.com%2fcommodityinsights%2fen%2fci%2fresearch-analysis%2falgerias-law-governing-hydrocarbon-activities-no-1913-of-11-de.html","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"} ]}
Filter Sort
  • About S&P Global Commodity Insights
  • Media Center
  • Advertisers
  • Locations
  • Get Support
  • Contact Us
  • Careers
  • Corporate Responsibility
  • History
  • Investor Relations
  • Leadership
  • Glossary
  • © 2023 by S&P Global Inc. All rights reserved.
  • Terms of Use
  • Do Not Sell My Personal Information
  • Privacy Policy & Cookie Notice
  • Site Map