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Algeria further opens petroleum business, permits private capital

December 8, 1997

ALGIERS, Algeria (AP) _ Hoping to attract more foreign investment, the government has further eased its monopoly of the petroleum industry, plans to sell bonds for the state company and is considering opening up the airline business to private competition.

Both domestic and foreign investors will be able to invest in the production, shipping and distribution of national gas, Algeria’s main petroleum source, Energy Minister Youssef Yousfi announced Sunday.

In the airline industry, proposed legislation before Parliament would end Air Algerie’s monopoly over domestic flights and would permit ``direct private investment.″

``We want to break with the practices of a controlled and administered economy,″ said Finance Minister Abdelkader Harchaoui.

Until now, private capital was limited to exploration for petroleum deposits in partnership with the government company Sonatrach, allowing a share of the profits.

Sonatrach predicts it will take $19 billion in investment over the next five years to further develop the petroleum industry. The industry provides most of the country’s foreign income needed to service $28 billion in foreign debt.

The petroleum business has helped prop up the military-led government as it battles a nearly 6-year-old Muslim insurgency that has left an estimated 75,000 dead. Despite bombings and massacres of civilians, the government has managed to maintain tight security around petroleum installations mostly located in the south.

Algeria also plans a bond offering on Jan. 2, under terms of an accord signed Sunday between Sonatrach and the Banque Exterieure d’Algerie to cover a loan of 5 billion dinars ($85 million).

Yousfi said Algeria has proven petroleum reserves of 12 billion barrels (1.7 billion tons). ``At the current rate, they will last about 40 years,″ he said.

One of the objectives is to work with the U.S. company Anadarko and the Italian company Agip to boost yield, currently between 60 and 70 percent, Yousfi said.

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