Petroleum Africa
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Wednesday, April 22, 2020
Algeria’s state oil firm Sonatrach has signed a Memorandum of Understanding (MoU) with the American supermajor ExxonMobil to initiate joint discussions on potential exploration and development opportunities in Algeria, the company said in a press release.
The signing of this MoU comes after signing similar MoUs with the Russian company Zarubezhneft and the Turkish company Turkiye Petrolleri Anonim Ortakliôi (TPAO) last week, and with Chevron last month. Sonatrach attributes the agreements to an interest in evaluating opportunities under the new Algerian hydrocarbon law.
The signing of these memorandums of understanding “confirms the renewed dynamism of the Algerian mining domain, within the framework of the new attractive provisions introduced by the law on hydrocarbon activities, the Sonatrach statement said.
Entered into force last January, the new hydrocarbons law, which maintained rule 51/49 and Sonatrach’s monopoly on the transport by pipeline activity, reduced by more than 20% the tax burden borne by Sonatrach and its partners, bringing it from 85% to 60-65%.
This significant drop in the tax burden is due to the reduction in the three main taxes in the Algerian hydrocarbon tax system, namely the production royalty, the petroleum income tax (TRP) and the additional tax on result (ICR).
The amended and supplemented Hydrocarbons Law 05-07 will allow Alnaft to work more autonomously and only involving the minister in strategic decisions relating to the general policy of the sector and not in technical matters.
The other major reform brought by the new law is the return to the old system of production sharing, established by the law of hydrocarbons 86-14 which had made it possible to realize the great discoveries of the 1990s.
In addition to production sharing, the new law provides for a return to the “participation contract”, where Sonatrach and its partner have the same rights and obligations in terms of risk-taking, expenses, remuneration, payment of tax and production sharing as well.
The third contract reintroduced by the new law is the risk services contract, which will be used when Sonatrach does not want its partner to share production with it. Thus, the foreign investor invests, bears the risks before he is remunerated according to his performance, in cash and not in return for a sharing of production. This type of contract is used in particular to develop deposits that are difficult to exploit or to improve the recovery of mature deposits.
The choice of one of the three formulas will depend on the nature of the areas proposed for exploration and exploitation, but also on the investor himself. Source: Sonatrach and APS
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