Sonatrach: MEED Assessment

06 April 2010

Delays attributed to the global economic crisis and bureaucratic decision-making processes

In numbers:

  • AD5.2 trillion: Sonatrach revenues, 2008
  • AD598bn: Sonatrach investments, 2008

Sonatrach oil export revenues

Sonatrach investments

Sonatrach has delivered huge revenues to the Algerian treasury, enabling it build up an oil stabilisation fund of about $40bn. This helped the government keep its budget deficit to manageable levels during the recent downturn in energy demand, and Sonatrach will continue to play a predominant part in the country’s economy in the future.

But the firm has fallen behind the targets set out in 2005 for production increases. The energy ministry has postponed its gas exports target to 2014, while the planned increase in oil exports has been abandoned.

All but two of the six planned petrochemicals projects have been shelved, and these are still mired in contract negotiations. Delays are also besetting the award of engineering contracts for the new refinery. While the Medgaz pipeline will miss its end-2009 target by just a few months, the Galsi gas pipeline to Italy, originally planned for 2010, will not be delivered before 2014 at the earliest.

To some extent, these delays can be attributed to the global economic crisis. But the bureaucratic decision-making processes within the state firm and the government’s continued politicisation of the oil and gas sector are more significant factors. The power to make decisions at the firm is held by a few senior executives who are answerable to the energy ministry, and ultimately to President Abdelaziz Bouteflika. Sonatrach remains first and foremost a tool of the state.

The ongoing investigations into alleged corruption (see analysis) will exacerbate the firm’s bureaucratic issues, and is likely to put a brake on contract awards in the coming months.

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