Dubai — The decision by Algeria's ailing 82-year-old President Abdelaziz Bouteflika not to seek a fifth term after three weeks of protests may only delay energy reforms needed to encourage investment in Africa's largest country.
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The government is still working on new investor contracts for energy projects, Algerie Presse Service reported Tuesday, citing an interview with Toufik Hakkar, vice president of business at state-owned oil and gas company Sonatrach Group.
Algeria needs to become more competitive because other countries in Africa such as Egypt, Mozambique, Senegal, Angola and South Africa are becoming more attractive and encouraging the interest of very selective foreign investment companies, he said.
But with Bouteflika's withdrawal, Algeria's 41 million people and investors can only look forward to delays and more uncertainty, according to Anthony Skinner, MENA politics director at UK-based Verisk Maplecroft.
"Our base case before protests gathered momentum over the last few weeks was that the hydrocarbon law would be tabled in parliament following the April elections, but we now believe that the legislation is more likely to be pushed to the second half of this year or to 2020."
OPEC member Algeria is the third-largest provider of gas to Europe, with hydrocarbon exports providing 60% of the country's budget.
Algerian oil production averaged 1.03 million b/d in February, unchanged from January, according to the latest S&P Global Platts survey of OPEC output. It peaked at 1.40 million b/d in September 2008, but project delays and a lack of investment have caused production to suffer.
On the gas side, Algeria produced 91.2 Bcm in 2017, down slightly year on year, according to the latest BP Statistical Review of Energy.
Bouteflika, after 20 years in power, has been struggling to contain public dissatisfaction over unemployment, rising inflation and a sluggish economy wracked by lower oil prices.
A "critical factor" in the weeks ahead is whether competing factions with a group of politicians, businessmen and members of the security establishment known as le pouvoir can agree on a presidential candidate who is palatable to the population, Skinner said in a report.
One person being considered is 66-year-old former foreign minister Ramtane Lamamra, Skinner said. "Lamamra is not a safe bet for investors though since he has never led a government and it is not known how receptive he would be to sustaining the drive by NOC Sonatrach and regulator Alnaft to expand the footprint of IOCs in Algeria," he said.
Hakkar, head of the group reviewing the draft hydrocarbons law, said three investor contracts were being considered in the new draft hydrocarbons law: production-sharing, participation and risk-services, according to APS.
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The planned overhaul of future oil and natural gas contracts submitted to the prime minister in January was part of a strategy to liberalize its energy industry. Algeria has hired US consulting firms Curtis Mallet-Prevost, Colt & Mosle LLP, Hartree Partners LP and McKinsey & Company to work on the new contracts, according to APS.
Sonatrach CEO Abdelmoumen Ould Kaddour was appointed to his post in March 2017, with a mandate to implement far-reaching reforms to shake up a company hamstrung by political squabbling, a corruption case and security issues that had dented foreign investment.
Under his tenure, Sonatrach, which owns about 80% of total oil and gas production in Algeria, has signed deals to explore for domestic shale gas and bought the Augusta oil refinery in Sicily, along with three oil terminals, providing an outlet for Algeria's crude oil. In October, the company inked an agreement with Eni and Total to explore offshore Algeria.
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