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Growing Algeria's oil and gas reserves the priority for Sonatrach's new CEO

Highlights

Kamel-Eddine takes over as Algeria adopts new petroleum law

New code cuts corporate tax by more than 20%

Algeria in desperate need to grow reserves and exports

Algiers — Sonatrach's main priorities will be to increase Algeria's hydrocarbon reserves and to boost its oil and gas exports, the state-owned company's new CEO Chikhi Kamel-Eddine said late Sunday at a press conference.

Kamel-Eddine also said he is hopeful that the country's new petroleum law will consolidate Algeria's attractiveness in the oil and gas sector and reverse years of declining foreign investment.

"The efforts must be focused on research and development, exploration and revaluation of the company's proven reserves to compensate for the volumes consumed so far, and increase these reserves in order to guarantee the long-term energy security of our country," said Kamel-Eddine, who replaced Hachichi Rachid as the head of the company late last week.

On November 7, the National People's Assembly adopted a new hydrocarbons law that revises upstream contract terms and tax rates to make the oil and gas sector more attractive to foreign investors.

"This new legal and fiscal framework will undoubtedly be an attractive asset for capital and technology and will consolidate Algeria's attractiveness in terms of foreign direct investment and its competitive capacity in an environment marked by stiff competition," he added.

The old law had failed to attract new international investors, and hydrocarbon production and exports have dropped significantly since 2008, while national consumption has doubled since 2000.

TAX CUTS

The new law will reduce the tax burden by over 20%, according to Sonatrach?s vice president Toufik Hakkar.

Before the adoption of the new law, the tax rate was as much as 85% but "we have moved to a fiscal weight around 60-65%, which is the world average in this area," said Hakkar late Sunday in an interview with the Algeria Press Service.

"This significant drop in the tax burden is due to the reduction of the three main taxes in the Algerian tax system on hydrocarbons, which is the production levy, the Petroleum Income Tax (TRP) and Complementary Income Tax (ICR)," he added.

Drafting of the new law had triggered protests by citizens, who said the ruling elite were ramrodding through a bill without input from the general population.

Low oil and gas prices have led to a financial crisis that has affected the country's budget, 60% of which comes from hydrocarbon exports.

Compared with the previous laws of 2005 and 2013, the new law gives new incentives to international companies in terms of taxation and the legal content of contracts.

Algeria has conventional natural gas reserves of 159 Tcf and recoverable shale gas reserves of 707 Tcf, according to official data.

--Illies Sahar, newsdesk@spglobal.com

--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com