Algiers — Algeria's state-owned Sonatrach is being asked to halve its 2020 spending budget from $14 billion to just $7 billion due to the oil price slump, the country's president Abdelmadjid Tebboune said Sunday.
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According to a statement from the Algerian Council of Ministers, Tebboune also slammed the country's long-standing dependence on oil and gas exports, saying it had made Algeria's economy especially vulnerable in the face of the global coronavirus outbreak.
Tebboune said Algeria had already lost $1 billion in oil and gas export revenues in the first two months of 2020 due to the fall in oil prices and the slump in demand triggered by the coronavirus.
He said Algeria had to "seriously prepare to overcome the aftermath of the global economic crisis."
The situation, he said, was "an opportunity for us to realize the vulnerability of our national economy due to our decades of negligence."
Calling on Algeria to "free itself" from dependence on oil and gas revenues, Tebboune said it was "imperative to put an end to the bad practices that the period of financial affluence has instilled, like waste, laziness, and overconsumption."
New hydrocarbon law
Sonatrach had hoped to enter a period of increased spending following the entry into force in January of Algeria's new hydrocarbon law.
According to sources, interest from international companies in taking an upstream position in Algeria has been high in recent months thanks to the new law.
Earlier this month, Sonatrach agreed a memorandum of understanding with US major Chevron under which the two sides would discuss joint opportunities in the North African country's upstream.
Sonatrach already held preliminary talks with Chevron and fellow US major ExxonMobil in 2019 about upstream projects as Algeria looks to reverse declining foreign upstream investment.
Algeria's new hydrocarbon law is considered essential for restoring the attractiveness of the sector against the background of low oil and gas prices, and increased competition among producing countries to attract new investors.
The change in hydrocarbon law comes as production from Algeria's oil and gas sector -- the mainstay of its economy -- continues to decline.
Oil production in the country has fallen over the past few years, averaging just 1 million b/d in February, according to S&P Global Platts data.
Algeria's pipeline gas exports to Spain and Italy fell by more than 11 Bcm year on year in 2019 to just 21.1 Bcm, according to S&P Global Platts Analytics data, only partly offset by higher LNG exports, which rose by almost 2 Bcm to 16.4 Bcm of gas equivalent.