Under the original law, which was introduced last year, foreign firms could hold a majority stake in energy sector projects with Sonatrach taking a minority holding of up to 30 per cent.

Proponents of the reforms say that the country needs to open up its energy sector to attract investment in exploration and production activity. However, opponents have been arguing, with apparent success, that with oil prices high, there is no shortage of liquidity or international interest in the country and consequently there is no need to hand over state control to international oil companies (IOCs).

The move has come as a disappointment to IOCs. ‘Oil prices are certainly the main driver behind this but it is a surprise,’ says Craig McMahon, North Africa analyst at UK-based Wood MacKenzie. ‘Its going to knock investor
confidence.’

One project that could be affected by the change is the estimated $2,500 million project to build a 36,000-barrel-a-day integrated gas-to-liquids (GTL) plant at Tinhert. Royal Dutch/Shell Group and a consortium of South Africa’s Petro SA with Norway’s Statoil and the Anglo-Australian BHP Billiton are bidding for the licence to develop the project in joint venture with Sonatrach.

Originally, Sonatrach had
been expected to take a 25-
30 per cent stake. However, this is now expected to be at least
a 51 per cent controlling interest. ‘Tinhert isn’t the most attractive project around,’ says a UK-
based analyst. ‘Algiers has to be careful or it could end up with nothing.’