Jeune Afrique magazine: Algeria’s oil giant Sonatrach, lever of national sovereignty, remains 1st in Africa
By: Hana Saada
ALGIERS– Unbeatable! This is how the magazine ‘Jeune Afrique’ dubbed Algeria’s oil giant, Sonatrach Group, the lever of the national sovereignty.
In fact, Sonatrach grabbed another international title! The state-owned company has outclassed 500 companies depicted from among the best in Africa, retaining its first place acquired past year.
In 2021, Sonatrach was ranked the first African company, according to the annual ranking of the best 500 African companies carried out by the magazine Jeune Afrique, thus, remaining the leader of companies operating in Africa due to the significant turnover and profits achieved in a difficult environment marked by the decline of all leading companies in the continent.
According to the same magazine, Sonatrach group is: “unbeatable and figures, as usual, in first place in the ranking. The export of the Algerian giant increased by 75%”. This is clear testimony to the tremendous efforts exerted and the qualitative leap achieved by our national oil company in recent years, especially since Mr. Toufik Hakkar was appointed as the company’s CEO.
The turnover of the Sonatrach group is, noteworthy, 34336.3 million US dollars while the second, Sasol, is far behind with ‘only’ 17288.8 million US dollars; half of the turnover of the Sonatrach group.
Better still, Sonatrach group has not only ranked first among companies in the hydrocarbon sector, but ahead of the 499 large high-level African companies from all economic sectors.
Since his December 2019 election, President of the Republic, Mr. Abdelmadjid Tebboune has declared his intention to focus on economic issues. Since then, New Algeria has embarked on a very ambitious reform program of its legal framework to boost all-around investments with the aim of achieving economic recovery. This latter is being achieved at different levels thanks to the judicious and far-sighted policy adopted by the country’s high authorities, under the leadership of the President of the Republic, Mr. Abdelmadjid Tebboune, Commander-in-Chief of the Armed Forces, and Minister of National Defense.
Aware of the fact that the economic recovery would not be achievable on the ground without energy security, a new law on hydrocarbons was ratified, addressing critical deficiencies of the former 2005 Hydrocarbons Law and related tax regimes.
Indeed, Algeria’s Hydrocarbon Law No. 19-13 of 11 December 2019, had the primary goal of spurring investment in the hydrocarbon sector. Prior to it, Algeria had witnessed a stagnation in terms of attracting significant hydrocarbon investments due to a range of factors, including the country’s oil and gas regulatory and fiscal framework, the slowdown in exploration efforts, particularly in a context marked by a structural and potentially durable drop in crude oil prices, as well as the increased competition among producing countries to attract new investors.
Sonatrach looks to new law to galvanise investment
Since the ratification of the law, New Algeria succeeded to reverse declining foreign upstream investments through improved contract terms and tax rates. It has created a more structured petroleum framework and a more favorable tax regime for investors, consolidating its role in the oil and gas markets at the regional and international levels.
As a results of the aforementioned reforms, Algerian state producer Sonatrach has managed to expand production, renegotiate prices, and sign new export deals, resulting in record production levels and a major financial windfall. A small comparison with the past showcases how the number of the concluded contracts has multiplied. Despite the four amendments to the 2005 law (in 2006, 2013, 2014, and 2015), this latter still featured high taxes and duties on exploration and production (E&P) activities, as well as unclear contract-sharing agreements with Sonatrach, the national oil company. Subsequently, Algeria repeatedly failed to attract foreign investors. Statistics show that since 2010, the number of new contracts signed dropped to an average of only two signed contracts per year.
In response to this problematic situation, the New Law revived energy activity, attracting foreign investors. Multiple deals have been inked with major oil firms in Italy, Russia, China, Spain, France, among others, by the state-owned oil firm Sonatrach, considered as the locomotive of the national economy and an integrated group with an international dimension, operating on more than 150 oil and gas fields and having 22 000 km of pipelines, four natural gas liquefaction complexes with a capacity of over 50 million cubic meters per year, six refineries in Algeria with a capacity of over 30 million tonnes/year and major other infrastructures (gas pipelines, ships, port facilities) allowing it to maintain its export levels while ensuring the supply of the national market.
According to Salim Fergui, Director of Reporting & Project DC P&L at Sonatrach, the company concluded, during the first half of 2021, 1038 contracts with national and international companies for an amount of 430 billion dinars or 3.25 billion dollars 45% of these contracts, noteworthy, were concluded in the supply market, 36% in services, 15% for works, 3% for studies and advice and 1% for EPCs.
Of the 1,038 contracts concluded during the first half of 2021, said Mr. Fergui, 211 were signed with international companies, against 827 contracts signed with national companies, i.e. more than 80%, for an amount of 219 billion dinars. 286 contracts were concluded with public companies and 541 contracts with private ones.
As for the 2020 financial year, Sonatrach concluded 2010 contracts for an amount equivalent to 389 billion dinars (3.07 billion dollars).
In detail, the same official indicated that 42% for procurement and supply contracts (844 contracts), 36% are service provision contracts (714 contracts), 18% for works contracts, 2% for studies and consulting services, and 2% of EPC contracts.
On another note, Algerian state firm Sonatrach operates in several countries – Libya, Mali, Niger and Tunisia – where exploration work has been initiated, sanctioned by several oil and gas discoveries in Libya and Niger.
As statistics, the efforts made by the company resulted in a qualitative leap, both in terms of volumes and financially. Algeria has acquired significant capacities in terms of hydrocarbon development, now having large industrial infrastructures in the field of oil refining, petrochemical industries, transport via pipelines and export, in particular through pipelines linking our country to Europe, in addition to natural gas liquefaction capacities and LNG carriers.
Year after year, promising results are multiplying. Thus, in 2021, the national firm achieved an export turnover exceeding 35 billion dollars, compared to 20 billion dollars in 2020, due to a notable increase in the primary production of 14% for hydrocarbons and 23% for gas.
In terms of production, it reached 175.9 million tonnes of oil equivalent (TOE) in 2020, before amounting to 185.2 million TOE in 2021, and 190.7 million tonnes in 2022, while the company’s objectives for the end of the current year stand at 200 million tonnes of oil equivalent (TOE) per year thanks to the implementation of the development program through the exploration operations, the revaluation of the reserves in place and the commissioning of several projects, including the Hassi R’mel boosting, which started in two phases in 2020 and 2021, and the gas fields of Tinhert and the outskirts of Gassi Touil.
As for the volume of production at the level of the refining units, the oil company announced, in its annual report for 2021, stability of the order of 27.9 million TOE in 2021, against 27.8 million in 2020.
Regarding the production of liquefied natural gas (LNG), Sonatrach made a remarkable advance of 14% in this area last year, as the level of production reached 26.3 million m3 in 2021 compared to the quantity produced in 2020 (23.1 million m3).
On another level, Sonatrach installed, in 2021, the Ethics Committee, made up of a president accompanied by 04 members and a Secretariat. This Committee is responsible for implementing the Sonatrach code of ethics accompanied by the rules and procedures applicable in this context. The committee is also involved in practices related to Sonatrach’s commitments towards stakeholders, in particular its employees and business partners, as well as the environment.
2022 year of discoveries for Sonatrach; Algeria’s “golden goose”
Sonatrach made a series of new hydrocarbon discoveries that can increase Algeria’s reserves and strengthen its position internationally as a reliable supplier of hydrocarbons, in a global context marked by a strong demand. Between 2020 and 2022, no less than 35 new hydrocarbon discoveries were recorded, including 34 discoveries in Sonatrach’s own effort.
In the first quarter of the 2022 alone, Sonatrach made three new discoveries of oil deposits, including a major discovery at the Touggourt perimeter, with a deposit estimated at one billion barrels. In partnership with the Italian ENI, the Sonatrach group announced, last March, another major oil discovery in the Zemlet El Arbi research perimeter, in the Berkine basin.
Sonatrach announced, last June, the discovery of a significant gas condensate deposit (Lias Carbonaté “LD2” deposit) in the Hassi R’mel field in the Algerian Sahara, the exploitation of which will begin as of November, with a production capacity of 10 million cubic meters per day, as declared by the project manager, Loucif Youcef. The deposit is estimated to have between 100 and 340 billion cubic metres of gas condensate. These volumes constitute one of the largest revaluations of reserves in the last 20 years.
In July, Sonatrach announced three other discoveries, including two gas discoveries based on its effort, and another oil discovery in partnership with the Italian company Eni. In the Illizi basin, Sonatrach made a gas and condensate discovery with its In Ekker Sud West-1 exploration well in the In Amenas 2 licence. Sonatrach also drilled a successful delineation well in its Taghit licence in the Bechar basin, opening up what appears to be a new gas play. The third discovery — made by Sonatrach and partner Eni in the prolific Berkine basin — will also be fast-tracked to production.
In August, another important oil discovery was made by the State-run oil firm Sonatrach at Haasi Illatou in the region of Sbaa (wilaya of Adrar), with an estimated output of 151 million barrels, a very encouraging result. This discovery comes 28 years after the last discovery of oil in Foukroun in the perimeter of Sbaa.
Sonatrach: Hekkar fifth best CEO in the Middle East
Due to these achievements, the Chief Executive Officer of the national hydrocarbon company Sonatrach Toufik Hekkar was ranked, by the specialized magazine “Forbes Middle East”, fifth best CEO in the annual list of the most powerful managers of the Middle East for 2021, in recognition of their significant contribution to the economies of the region. And in 2022, he gained one spot, ranked 4th by the same magazine as he managed to strategically lead the wheel of growth and development in the country despite the “Coronavirus” pandemic.
Oil Giant Sonatrach snatches International titles:
Ranking “Jeune Afrique” 2021: Sonatrach ranked first African company
Sonatrach, dubbed by President Tebboune as one of the powerful levers of the national sovereignty, grabbed multiple international titles. In 2021, Sonatrach was ranked the first African company, according to the annual ranking of the best 500 African companies carried out by the magazine Jeune Afrique, thus, remaining the leader of companies operating in Africa due to the significant turnover and profits achieved in a difficult environment marked by the decline of all leading companies in the continent.
The Economist: State-run oil firm Sonatrach among 15 best oil companies worldwide
In a study carried out in 2022 by the British specialist magazine “The Economist”, the oil giant Sonatrach was ranked among the world’s 15 largest oil companies, ranking 12th in terms of oil and gas production. Sonatrach, thus, outperforms major oil companies, such as; Qatar Energy and the Mexican company Pemex.
The best is yet to come. Sonatrach Group is engaged in negotiations with several foreign partners with the aim to ink several contracts by the end of 2022.
A coincidence? Certainly not. This major player in the oil industry draws its strength from its ability to be a fully integrated group across the entire hydrocarbon value chain. Its management has a lot to do with it. The appointment of Toufik Hakkar was an asset as he, given his rich career at the firm, restored the company’stability, desired by the President of the Republic, Abdelmadjid Tebboune.
Oil exploration: Algeria tops Arab countries, says OAPEC
The monthly report of the Organization of Arab Petroleum Exporting Countries (OAPEC) also ranked, in October 2022, Algeria, an OPEC member since 1967, at the top of Arab level in terms of oil and gas exploration during the first months of 2022. In the same context, the Director of the Exploration Department of Sonatrach, Badji Al-Rabie, revealed to “Morning Guest” program on Radio Channel One, that Sonatrach group managed, during this year, to achieve 11 discoveries in the oil and gas fields across the country, nine of them thanks to its own efforts and two others in partnership with the Italian energy company “ENI”, specifying that the exploration investments carried out by the national hydrocarbons firm in the field of oil include the offshore area, including the western Mediterranean.
To conclude, energy reform, emblematic of the country’s independence and sovereignty, was one of the pledges made by the President of the Republic, Abdelmadjid Tebboune on his election in 2019. This eventually took the form of new frames that spurred investments in Algeria’s oil and gas sector by IOCs. The sector, headed by Minister of Energy and Mines, Mohamed Arkab, operating on the instructions of President Tebboune, which set out the guidelines for national energy policy, made it possible, despite the negative impact of the health crisis, to achieve positive results, particularly in terms of concluding contracts with foreign partners, exploration and renewal of reserves, commissioning of new gas projects and infrastructures and export, for the first time in the decade, of diesel and gasoline. Sonatrach has also initiated major projects and multiplied the implementation of structuring projects. These results culminated in profound and beneficial changes in the production and exploitation of hydrocarbons, and the development of petrochemicals.
These projects constitute encouraging indicators for the company which approaches the future’s challenges with serenity. Today, the company continues to deploy tireless efforts to meet the challenges of today and tomorrow, in particular those linked to the mobilization of new reserves, the development of refining and petrochemicals as well as the participation in the country’s future economic and energy development. It has allocated for this purpose a financial envelope of 11 billion usd, under its five-year plan 2022-2026, as indicated by the director of the Methods and Operations Division of the Refining and Petrochemicals Activity (RPC), Miloud Amara. In parallel, CEO Toufik Hakkar announced, last January, that the company would invest $40 billion in oil and gas exploration, production, and refinement between 2022 and 2026.
