- OPEC member Algeria unveiled long-awaited amendments to a reform of its hydrocarbon sector on Saturday that limit foreign participation in exploration and production and impose a windfall tax on surplus profits.
The provisions, in a statement on the government gazette website, require state energy firm Sonatrach, Africa's largest company by revenue, to take a mandatory 51 percent stake in all exploration and production ventures.
They also impose a new tax on foreign oil firms of between five to 50 percent whenever Brent crude trades above $30.
Their publication is the latest in a spate of moves sweeping the international energy sector in which oil and gas producers from Bolivia to Britain, emboldened by high energy prices, have tried to keep as much output and revenue for themselves.
Algeria approved a liberal energy law in July 2005 that downgraded Sonatrach's role in the oil and gas sector and gave more scope for foreign energy companies to invest and produce in Africa's second largest country.
But in July 2006 the government dismayed foreign investors by abruptly changing course and saying it would issue amendments to safeguard the role of Sonatrach and keep as much oil as possible in the ground for future generations.
Commentators suggested the government had been influenced by the high price of oil and had decided that it no longer saw an urgent need to maximise production and revenues, a need that was uppermost in officials' minds when the law was first conceived in 2000, a time of far lower prices.
Obviously, the idea behind amending the law is to retake control over the energy sector, and use it as a tool to strengthen Algeria's position internationally, said Lies Sahar, an oil specialist at top French language daily El Watan.
I have no doubt that international companies present in Algeria will continue to make good profits, though they may show some concern over the windfall taxes, he said.
Early private reaction from international companies was not so sanguine.
The devil will be in the details, one senior executive said. There's a ton of unanswered questions, such as how do you qualify for the low rate of five percent on the windfall tax. What stops Sonatrach from taking 99 percent of a venture?
Another executive said that the provisions appeared to refer mainly to oil and did not spell out sufficiently how the measures would affect the gas sector.
The 2005 law was never implemented because its detailed implementing measures were never published. Similarly, implementing measures for the latest amendments must be published before they can take effect.
The latest amendments state in part: Contracts for exploration and production, and contracts for production, must contain an obligatory clause giving participation to the national enterprise Sonatrach.
In the two cases, the rate of participation of Sonatrach is fixed at a minimum of 51 pct.
On the tax provisions, the amendments described the measure as a non-deductible tax on surplus profits made by foreign associates and applicable over the share of production they own when the monthly average of the oil price Brent is above 30 dollars a barrel.
The tax will be implemented from Aug 1 2006... The rate of the tax applicable to the production output belonging to the foreign associate will be from a minimum of five percent to a maximum of 50 percent.
Algeria produces about 1.5 million barrels of oil per day and 62 billion cubic metres of gas a year. It is a major supplier of gas to Europe.
Sonatrach's foreign partners earned about $4 billion from their involvement in oil and gas production in 2005 while Sonatrach itself earned about $41 billion.
The company has said it expects total energy revenues of between $52 billion and $54 billion in 2006, of which some $6 billion would go to foreign partners. The remainder would go to Sonatrach.