Algerias reformist Energy Minister Chakib Khelil has been removed from his post, with the man he replaced, Yusuf Yousfi, taking his place at the helm of the countrys oil industry, it was announced on 28 May. Dr Khelils departure follows a major corruption investigation, which saw the removal of a number of senior executives at state firm Sonatrach, and the minister increasingly targeted by Algerias media. The move came about as part of a wider cabinet reshuffle that also saw Algerias Interior Minister Nur al-Din Zerhuni sidelined to the newly created post of Deputy Prime Minister.
The new energy minister is viewed as a safe pair of hands. Mr Yousfi had a long and successful career with Sonatrach, culminating in his appointment as CEO in 1985. He is credited with restructuring the state firm and opening up Algerias upstream sector to foreign investment in the 1980s. He had a spell in the 1990s as an advisor to Qatari Energy and Industry Minister 'Abd Allah al-'Attiyah, before returning to Algeria in 1996 to take up the post of head of the office of the then president Liamine Zeroual. He was one of the creators of the RND party, which Mr Zeroual headed and is now led by current Algerian prime minister Ahmad Ouyahia. Mr Yousfi was appointed minister in 1997, a post he held until 1999, when Mr Bouteflika replaced him with Dr Khelil, who had become increasingly influential as a presidential oil advisor.
While Mr Yousfi may have opened up Algeria to foreign oil companies, his track record suggests he will maintain a strong role for Sonatrach. There is also thought to be a possibility that he will push for changes to the new Sonatrach management that was appointed without his involvement (MEES, 10 May). There have been reports that the former vice-president of Sonatrach marketing Ali Hached could make a comeback. Certainly Yousfi appreciates Ali Hacheds qualities, argues one Algerian oil veteran. However, another former Sonatrach employee says that Mr Yousfi would also value the qualities of Sonatrachs newly appointed head of marketing, Yamina Hamdi, who led negotiations following the LNG supply contract cancellation by US pipeline firm Panhandle Eastern in the early 1980s, which eventually saw Sonatrach take a direct role in LNG marketing to the US.
Dr Khelils sudden departure lends weight to reports that Sonatrachs new management team was appointed with limited input from him. Nur al-Din Cherouati is Sonatrachs new president, following the launch of the graft investigation into Muhammad Meziane and the jailing of two of his sons. Investigations also continue into Sonatrachs former head of marketing, Chawki Rahal, while the firms vice-president for the upstream, Belkacem Boumedienne, and its head of transportation, Banamar Zenasni, remain in prison, sources say (MEES, 22 February). Their places have been taken by Ms Hamdi, Said Shahnoun and Allaoua Saidani, respectively. 'Abd al-Qadir Benchouia took over from Mr 'Abd al-Hafidh al-Feghouli as vice-president for the downstream, who was also briefly acting CEO, in the interim between Mr Meziane and Mr Cherouati.
Catalyst For Change
Mr Yousfi faces the twin challenges of re-energizing the demoralized national oil and gas sector and rebuilding trust with foreign oil companies, whose confidence has been dented by months of inactivity in the wake of the investigations and who are seeking an improved investment climate. Progress on the next upstream bidding round, expected to be awarded later this year, is being viewed as a litmus test for investors, who will be hoping for improved terms from the previous round, which attracted tepid interest. And further delays beyond a September start-up of the already held up 8 bcm/year Medgas pipeline would also be a strong signal that Mr Yousfi is facing serious internal issues (MEES, 17 May).
But the first indication of how determined the new leadership is to shake the sector out of its torpor is likely to be the speed with which Mr Yousfi ratifies the development plan for the 2.92 bcm/y Repsol-led Reggane Nord gas project. Approving the project is the last piece in a planned 9 bcm/y first phase of Algerias Southwest Gas project, which entails development of a new gas-rich province (MEES, 22 February). Hydrocarbon regulator Alnaft has given Repsols proposed development plan its approval, albeit several months late, and all that is needed is the ministerial signature and publication in the national bulletin for the project to go ahead .
Mixed Legacy
While Dr Khelil leaves behind a troubled oil sector, he can also claim a solid body of achievement. His tenure can be divided into two phases; the first through to around 2006 saw Algeria bring in substantial foreign investment and boost oil production capacity from under 1mn b/d in 1999 to around 1.4mn b/d. It is hard to overstate the significance of this contribution to his country, given the oil price rise over the period. Gas and NGL output also soared with key projects, the BP-led 9 bcm/y In Saleh and 9 bcm/y In Amenas wet gas developments and the 7 bcm/y BHP Billiton-led Ohanet development, all coming on stream in this period. Algerian contracts were emulated by other producers, with Saudi Arabia drawing extensively on the In Amenas model contract for its revamped strategic gas initiative and Libya similarly learning much from Algerian upstream bidding rounds in the formulation of its EPSA upstream opening. Dr Khelil was also an influential figure within OPEC, holding the organizations presidency in 2008, at a critical time for the organization, and hosting a number of pivotal OPEC meetings notably the February 2004 Algiers meeting and the December 2008 Oran meeting.
The second half of Dr Khelils reign saw some of these achievements unravel. He is seen to have alienated both unions and management by trying to force through an overly ambitious hydrocarbon law, which critics say reduced Sonatrachs role in Algerias oil sector to that of virtual onlooker. A revamped law imposed on Dr Khelil saw new taxes imposed on foreign operators, drastically reducing Algerias attractions as an oil investment destination. Plans for capacity output boosts to 2mn b/d had to be abandoned, amid rising geological concerns over development at the 350,000 b/d Hassi Messaoud field, which was central to the capacity drive. And a 85 bcm/y gas exports target has had to be repeatedly put back. Dr Khelil can claim that his political opponents had a hand in blocking his reforms, but his successor faces major problems. Soaring domestic gas and oil demand will cut into exports and revenues unless new supply is brought on stream. This new supply will have to come from more geologically challenging reservoirs, which will need the expertise of foreign oil companies, and they are currently less than enthusiastic about the tough regulatory and taxation structure brought in under Dr Khelil, albeit against his wishes.
Copyright MEES 2010.
