London — Six weeks into his job, Algerian energy minister Abdelmadjid Attar has no time to lose.
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The coronavirus pandemic has walloped Algeria's already stretched finances and put even more stress on its lifeblood oil and gas industry.
A long-delayed hydrocarbons law aimed at attracting badly needed foreign capital has yet to be implemented, and state-owned oil company Sonatrach still suffers from deeply embedded corruption, the legacy of rampant political interference.
The government is hoping that the 74-year-old Attar, a well-known consultant who was Sonatrach's CEO from 1997 to 1999, will be able to leverage his technocratic experience and clean reputation to rescue the sector and lead it back to growth.
"It is clear that expanding oil and gas reserves of the country is a key priority," Attar said in an interview. "I am a geologist and I have spent many years in exploration. I believe that Algeria's hydrocarbon potential is huge, both onshore and offshore."
Algeria has been an OPEC member since 1969 and is the third largest supplier of pipeline gas to Europe, with hydrocarbon exports providing 60% of the country's budget.
Attar will be able to highlight Algeria's global stature, as he holds the rotating presidency of both OPEC and the Gas Exporting Countries Forum's ministerial meeting this year.
But Algeria's own crude production has been declining from years of underinvestment, from a peak of 1.4 million b/d in 2008 to around 1 million b/d in early 2020, before OPEC and its allies imposed drastic quotas due to the COVID-19 oil market collapse. Algeria will hold output at 864,000 b/d through the end of the year, under the OPEC+ agreement.
Algerian gas production has likewise slumped. Output in the first five months of 2020 totaled 35.14 Bcm, compared with 42.32 Bcm in the same period of 2017, according to the Joint Organizations Data Initiative.
Algeria is banking on its revamped hydrocarbons law, passed late last year, to revive the sector once the pandemic subsides. The controversial measure lowers royalty and tax rates that international oil companies had seen as a major impediment to investment.
Detractors said the legislation fails to protect Algeria's fiscal interests, but Attar said it is "aligned with best practices in the world" and would allow Sonatrach to benefit from external technical expertise.
Over the past several weeks, Sonatrach has signed a flurry of memorandums of understanding with ExxonMobil, Chevron, Eni, Lukoil and several other international heavyweights to explore upstream partnerships.
Turning those MOUs into actual investment will require timely implementation of the hydrocarbons law, and even so could be a challenge, as many oil companies retrench from the market crash and slash their budgets. Attar said he has ordered his staff to finalize the law's regulatory texts that, among other things, set out prequalification terms.
"I have set a very tight deadline for this task," he said. "A large exchange of views with operating companies will help ensure that regulatory texts do offer the most favorable environment."
Alice Gower, director of geopolitics and security with consultancy Azure Strategy, said while the law is a good start, IOCs may still be frustrated by the government's requirement that Sonatrach retain a majority stake in all upstream projects.
The ministry must also grapple with factors outside of its control. The government, in power since December, remains fragile, and popular protests -- suspended since the COVID-19 outbreak -- over President Abdelmadjid Tebboune's perceived ties to his deposed strongman predecessor Abdulaziz Bouteflika may yet re-emerge.
"Concerns over legislative uncertainty, political instability and the country's dire economic situation will be on the minds of IOCs, as will the security environment," Gower said, citing the 2013 terrorist attack on the Amenas gas plant.
Attar became Algeria's fifth energy minister in four years, when he was tapped by Tebboune on June 23 in a cabinet shuffle.
The president has ordered a comprehensive audit of Sonatrach, and Attar, with his experience and even temperament, is widely seen as a solid choice to lead the efforts.
"He knows the industry and is sufficiently old so as to not be tied up in the usual corruption and political games that have so damaged Sonatrach in the past," said Charles Gurdon, a managing director of consultancy Menas Associates. "He will probably try and turn the corporation into a leaner and more efficient beast. But that could take some time."
Gurdon said speculation swirls that Attar could oust Sonatrach CEO Toufik Hakkar and hold both that role and the minister post.
Attar declined to comment on the company's performance under Hakkar. But he said in addition to expanding its reserves, he would like to see Sonatrach slim down its cost structure to cope with the lower price environment, as well as carve out a greater presence in petrochemicals.
He said he would also be working closely with his counterpart in the newly created Department of Energy Transition and New Energies to lower domestic fossil fuel consumption.
The COVID-19 pandemic has upended energy markets, and Sonatrach must adapt to new realities while it serves as a socioeconomic generator for the country, said Attar, who headed the company during the 1998 oil crisis, when Brent crude prices plunged from $17/b to near $10/b.
Convincing IOCs to invest in Algeria is the primary objective.
"It is always better to invest when costs are low and produce when prices are high," Attar said. "We are today in this configuration, and we welcome companies that are innovative, pursue operational excellence, and have a long-term vision of the industry."
Algeria by the numbers
Source: OPEC Annual Statistical Bulletin