Nationalization of hydrocarbons (1971), one of major economic events in contemporary history of Algeria (Special dossier)
By: Hana Saada
ALGIERS– Algerians celebrate, today, Thursday, February 24th, 2023, the double anniversary of the nationalization of hydrocarbons (1971) and the creation of the General Union of Algerian Workers (1956). A date anchored in the collective memory of the Algerian people, because it has drawn and defined for many decades the sovereignist line of the national economy, in accordance with the message of November 1.
Indeed, Algeria has consecrated since this date (February 24, 1971) its total sovereignty over the oil resources and all the wealth of its subsoil, hence paving the way for major socio-economic development projects in the country. A historic decision that has enabled Sonatrach to impose itself on the national and international economic scene and initiate a process of economic and social development on a large scale.
Announced by the late Houari Boumediene on February 24, 1971 at the Maison du Peuple in Algiers, headquarters of the General Union of Algerian Workers (UGTA) which was celebrating its 15th anniversary, this historic decision put the process of economic and social development on track.
The content of this decision: the acquisition by Algeria, after a long process of negotiations launched in 1967, of at least 51% of the interests of the French concessionary companies which operated in the south of the country where other large companies were also active, including, among others, BP, Esso, Shell, and Mobil.
The nationalization decision was followed by an ordinance signed on April 11, 1971 promulgating the fundamental law on hydrocarbons, which, thus, defined the framework in which the activity of foreign companies in terms of research and development should henceforth be exercised.
Thanks to this strategic decision, Algeria has come to hold at least 51% of the interests of French concession companies, such as; CFPA, Petropar, SNPA, Coparex, Omnirex, Eurafrep and Frabcarep.
The final settlement of the disputes resulting from this decision took place through the signing, on June 30, 1971 between Sonatrach and CFPA, and on December 13 of the same year between Sonatrach and ELF-ERAP, of agreements on the new conditions governing their activities in Algeria.
February 24 is also “a demonstration of the capacities of mobilization of Algerian workers and executives for the management of oil installations abandoned by foreign companies,” underlined Mohamed Arkab, Minister of Energy, in a previous message addressed on this occasion.
He added that: “In order to make up for the socio-economic backwardness accumulated during long years of colonialism, the high authorities of the country had to take decisive and historic decisions at the time”.
This was the beginning of a series of nationalizations, undertaken with determination and meticulousness, to recover all the national wealth, starting with the mines, the banks and the insurance companies, followed by the hydrocarbons, the industrial and building materials companies, as well as the audiovisual companies and the written press.
The nationalizations carried out by Algeria during the first years of its independence enabled the State to take the control over all the sectors essential to the economic development of the country and to undertake several actions to modernize the acquired means of production.
Thus, the nationalization of hydrocarbons, on February 24, 1971, remains one of the major economic events in the contemporary history of Algeria and which had contributed to the birth of a vast movement of nationalizations within the producing countries of the Third-World.
The hydrocarbons sector assumes, to date, a pivotal role in the country’s development strategy and receives special attention in order to consolidate it and enable it to be the true engine of development of the national economy.
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.
Since the ratification of the law, New Algeria, under the far-sighted vision of the President of the Republic, Mr. Abdelmadjid Tebboune, succeeded in creating 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. 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. In fact, thousands of contracts have been concluded so far.
As for the statistics of 2022, the importance of 2019 legislation became apparent this year with the signing of a $4 billion multinational oil and gas contract for a site in southeastern Algeria. The agreement brings together Sonatrach, Italy’s Eni, the US-based Occidental Petroleum Corporation, and the French company Total. This agreement followed several deals inked with foreign partners.
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. Regarding the supply of energy sources to the population, more than 99% of households have been connected to electricity and 65% to natural gas.
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.
These include oil discoveries at the Touggourt perimeter with a deposit estimated at one billion barrels, the Zemlet El Arbi research perimeter, in the Berkine basin, as well as a gas discovery condensate in the perimeter of Hassi R’mel (Laghouat).
The Sonatrach group had also announced a major discovery of condensate gas in the perimeter of Hassi R’Mel, in the Lias Carbonaté reservoir -LD2- at the level of an exploitation perimeter with a volume varying between 100 and 340 billion m3 of gas condensate, which constitutes “one of the largest revaluations of reserves in the last 20 years”.
Another important oil discovery was also made by Sonatrach, at Haasi Illatou in the Sbaa region (wilaya of Adrar), with preliminary volume that could exceed 150 million barrels. This discovery also comes 28 years after the last oil discovery made in the Sbâa region in 1994.
In addition to the announcements of these important discoveries, the national company had also communicated on the positive results of the drilling of oil wells, in particular those carried out successfully in the El Ouabed perimeter, located in the wilaya of El Bayadh at about 158 km to the east. West of Hassi R’Mel and a delineation well in the Touggourt Est I perimeter (North of the Hassi Messaoud field).
Thanks to substantial reserves of natural gas and the recent increase in production, the National Hydrocarbons Company is on the right track to become “one of the most important sources of gas supply in the world”.
Currently, the overall production of natural gas exceeds 130 billion m3, more than 50 billion m3 of which is intended for export. As for liquefaction capacity, it is estimated at more than 30 billion m3/year with the existence of 4 liquefaction complexes.
On this subject, the President of the Republic, Mr. Abdelmadjid Tebboune, had instructed, during his visit to the Sonatrach oil industries, the Algerian production fair (FPA-2022), the group’s leaders to increase Production to “reach a volume of 100 billion M3 of gas intended exclusively for export”.
The President of the Republic also called Sonatrach as “one of the powerful levers of national sovereignty” and “shield” which protects Algeria. Subsequently, Sonatrach has initiated a major budget for investment by 2026, of a global value of up to 40 billion dollars.
Sonatrach also has, as part of its investment plan, to consent more than $ 7 billion in refining, petrochemical and gas liquefaction projects.
A leading producer of natural gas and liquefied natural gas, Algeria also has ambitious renewable energy and energy efficiency programs that promise to expand its energy resources and support sustainable development. The country, with the Sahara Desert covering 86 percent of its area, enjoys both the potential and the incentive to maximize its natural resources and become a renewable energy leader. It has a year-round solar energy capacity, enabling it to be ranked 21st in terms of potential solar energy capacity.
Thanks to the efforts made, Algeria has become a major producer and exporter of natural gas and oil in the world, assuming a decisive role as a reliable supplier to its partners. Within major global organizations, such as OPEC, the OPEC+ alliance, the Gas Exporting Countries Forum (GECF) and the African Petroleum Producers Organization (APPO), the place of Algeria is today exceptional, distinguishing itself by its initiatives and its consensual positions which are widely hailed and even supported.
