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Sonatrach seeks to improve image

By Walid Ramzi for Magharebia in Algiers

Algeria's state-owned petrol company is attempting to move beyond past scandals and boost energy production.
The new management at Algeria's state energy company Sonatrach is trying to overcome the negative effects of recent financial scandals and corruption.

The company's top executives were arrested last year on corruption charges, including then-CEO Mohamed Meziane, his two sons and several of his associates.

Speaking for the first time since assuming the top post in May, CEO Nourredine Cherouati said that "there is no Sonatrach case, but there are cases of people".

" Sonatrach still operates and its functioning does not depend on the absence or presence of a person or another," he added at the January 24th event.

The Sonatrach chief refused to give an estimate of losses incurred by cases of corruption and financial embezzlements, but he admitted that "there were disorders in Sonatrach during the first trimester of 2010".

Cherouati said that Sonatrach earned $55.7 billion in 2010 from a production of 222.5 million tonnes of oil. The company hopes to boost oil production to 243 million tonnes by early 2014.

Algeria has enough production capacity of liquefied natural gas to meet demand, Cherouati said in a letter to partners who had expressed concern over supplies. The company aims to send a strong signal to foreign companies active in the hydrocarbon sector.

The new leadership has adopted a series of measures and amendments to the system of management, the structure of transactions, as well as employment, especially since some of the criticisms had been directed to the previous administration, after having employed some people without taking into account the adopted procedures.

The Sonatrach scandal was "serious and unacceptable", Energy Minister Youcef Yousfi said in a January 3rd interview.

"I regret some of the excesses and illegal matters that were committed," the minster added, while avoiding comment on the details of the case.

Yousfi also announced the reinforcement of internal controls in Sonatrach , especially those related to expenses. He said, "The supervision within the company will increase during 2011," adding that the state is determined to relentlessly fight against illegal practices.

The Energy Minister confirmed that his ministerial department would intervene in staffing, project grants, as well as editing tenders, terms and conditions. Yousfi also pointed that the majority of the workers in Sonatrach are trustworthy and live off their monthly salaries.

To overcome the crisis that shook the company last year, the president director general of Sonatrach announced the launch of an investment programme in 2011. He explained that the company's investments reached $14 billion in 2010, a 7% increase over 2009.

Cherouati said that these investments would increase slightly next year, to implement the new policy. He added the company hopes to Algeria's reserves of exploitable oil through focusing on exploration.

Furthermore, the Medgaz pipeline will begin operation in February, exporting up to 8 billion cubic meters of natural gas per year directly to Spain. The 1050km long pipeline cost 900 million euros to build. A second project is planned to allow gas exports to Italy via Sardinia.

Sonatrach has also developed a series of projects for refining petrochemicals. The volume of investments during the period between 2011 and 2015 is estimated to be more than 42 billion euros, with half dedicated to exploration and exploitation.

Experts believe that the projects being developed by Sonatrach are intended to improve the image of a company that has been severely damaged, especially since many oil companies were waiting for the new management's reaction.

" Sonatrach is facing several challenges, the most important is to erase the negative image left by the former chief Mohamed Meziane, and to reassure the company's officials who feared being replaced during the campaign of new clean hands," media and economic specialist Kamal Hadef said.

He added, "The laws made by the former minister, Chakib Khelil, in the management of tenders and the use of compromise system, are the main reasons behind the multiplicity of illegal transactions. Many of these transactions were concluded outside the legal framework adopted by the government, which is the law of public procurements, which interferes with the instructions of the former minister."

© Magharebia.com 2011