Tentative reform moves could boost Sonatrach
Algeria’s new government presents a conciliatory face, which could help revitalise the energy sector and the national champion
Newly elected President Abdelmadjid Tebboune has responded to ongoing Algerian protests in support of democratic reform and an end to corruption by launching a drive to "separate money from politics". If he succeeds, the staid and corruption-tainted energy sector could be one of the beneficiaries.
At least partially in an effort to appease marchers on the streets, the new president appears to be trying to bring on board some of a handful of establishment figures who last year offered public support to the Hirak grassroots opposition—even appointing one of them, Abdelaziz Djerad, as his prime minister.
A committee of experts is to draw up proposals to amend the constitution so as "to implement the demands of our people as expressed in the popular movement", the president's office said in early January. The amendments will be designed to "protect … against any form of autocracy", by, among other things, boosting the independence of the judiciary and promoting ethical standards in public life.
The Algerian public may be sceptical, having seen several supposedly reformist agendas come and go over past decades. Tebboune himself is hardly a new broom—he is 74 and headed three different ministries under the now discredited Abdelaziz Bouteflika, whose 20 years as president ended abruptly last April. Despite high official turnout figures, the 12 December poll that brought him to power was widely boycotted in many urban areas.
A cynical Algerian public has long seen Sonatrach 'reform' as a cover for inter-elite score-settling
Tebboune can, though, claim some anti-corruption credentials. Back in 2017, soon after being appointed prime minister by Bouteflika, he told parliament he planned to move against vested financial interests that were distorting decision making. Within weeks he had been dismissed and replaced.
Margin for manoeuvre
The new president may find himself with greater than expected room for manoeuvre following the death of army chief Lieutenant General Ahmed Gaid Salah. Post-Bouteflika, Gaid Salah stepped in as Algeria's de facto decisionmaker and was expected to remain a power behind the presidency even after the election. But the 79-year-old general suffered a heart attack and died in late December, with his role filled, on an interim basis, by General Said Chengriha, 74.
Last year saw the detention of prominent Hirak figures and many low-level demonstrators. But both Tebboune and the military may now take a more conciliatory approach with the youthful opposition, not least over fears that the rapidly-deteriorating security situation in Libya—just across the border from its main gas-producing areas—could spill over into a restive Algeria.
The initial signs are promising. Tebboune's pick for prime minister, Djerad, is a political scientist who has also held senior civil service posts. Last year he was scathing about Algeria's supine parliament, and said reform-minded figures, from academia and the judiciary for example, should step up, along with new leaders from the streets, to help manage a transition towards "free elections" and "a real democracy".
Sonatrach's cash cow status has often seen it become an arena where the main 'clans' have fought their turf wars.
Abdelaziz Rahabi, a key Hirak supporter and, crucially, a former ambassador and minister in the 1990s who always declined to serve under Bouteflika, was invited to meet with Tebboune on 9 January. He tweeted that discussions centred a way forward totally inclusive of all currents of opinion. In another crowd-pleasing move, Tebboune has released some 70 Hirak supporters, albeit scores more remain behind bars.
Energy sector corruption
While Hirak remains determinedly committed to non-violence, it debated last year whether a general strike might be an effective pressure-applying strategy beyond its weekly marches. Official unions, including the oil workers' union, have shown little interest thus far in disrupting a status quo that has been kinder to them than many others and aligning themselves with the spontaneous, leaderless opposition movement.
That is not to say, though, that if the Hirak phenomenon—currently espousing civic-minded idealism—does help usher in greater transparency and accountability, that would be unwelcome among the rank-and-file of national oil company Sonatrach and its subsidiaries. A newspaper investigation, albeit now 10 years old, found Sonatrach mid-level employees demoralised by the firm's nepotism, waste and corruption in the Bouteflika era.
Sonatrach's cash cow status has often seen it become an arena where the main 'clans'—formed in an Algerian grey area where politics intersects with the business world, the army and the security services—have fought their turf wars. Soon after taking office, for example, Bouteflika reserved to the presidency the right to choose Sontrach's whole top management team.
An understandably cynical Algerian public has long seen Sonatrach 'reform' as a cover for inter-elite score-settling. A high-profile 2010s investigation into malpractice at the firm which saw then chief executive Mohammed Meziane dismissed and later given a five-year suspended sentence in connection with, among other charges, dubious contract awards—was, to many observers, in reality a proxy battle between the DRS security service and Bouteflika's entourage.
Various Sonatrach corruption investigations have over the past decade been making their way through courts that operate under various degrees of independence. Certain foreign firms that did business with Sonatrach have also come under the microscope, particularly Italy's Eni and its partly-owned subsidiary Saipem, and Canada's SNC-Lavalin.
In the current febrile domestic political atmosphere, Arkab has little wiggle room to soften his declared opposition to the deal
As Gaid Salah last year attempted to hastily distance himself from the Bouteflika clan by purging figures close to the former president, yet another Sonatrach CEO, Abdelmoumene Ould Kaddour, was relieved of his post, again with accusations of corruption swirling around him. He was replaced at the helm of the energy behemoth by Rachid Hachichi, formerly head of exploration and production.
Energy sector legislation
In November, revised oil and gas sector legislation, relating in part to foreign involvement in the upstream sector and the gas pipeline network was hurried through parliament. The timing and content drew criticism not just from protestors on the streets, but also from former Sonatrach senior managers. Such key legislation, they argued, should not be introduced by an interim government—with minimal debate—ahead of the December election.
The energy ministry and Sonatrach responded with a lengthy statement: there had been a "drastic decline" in international oil companies (IOCs) partnering with Sonatrach for exploration, it explained. The new law was "not a choice but a necessity in order to adapt to the new world energy order, which is characterised by abundant supply, lower prices, and the ongoing introduction of renewable energy into countries' energy supply mix". The legislation was published in Algeria's official journal in January and has now come into force.
Energy minister Mohamed Arkab has retained his portfolio in Djerad's new cabinet. One political hot potato is the future of Berkine Basin assets of US independent Anadarko. The US firm became Sonatrach's main foreign partner in the 1990s and was the last US producer active in Algeria.
But Anadarko's takeover by fellow US indie Occidental last year foresees its international assets being sold to Total, including a transfer of its Algerian assets in a deal valued at $8.8bn. In the current febrile domestic political atmosphere, Arkab has little wiggle room to soften his declared opposition to the deal—given Total's historically close links to the French government and that country's, often brutal, colonial past in Algeria—even in a challenging environment for attracting international investment.
The European gas market is another example of challenges facing Sonatrach in a rapidly evolving market where other actors have grasped the need to be nimbler. According to the IEA, the firm's pipeline gas exports to Europe plunged by 40pc in 2019, not least as its core southern European destinations improve interconnection with northwest Europe's more competitive markets.
In the second half of last year, both new Sonatrach boss Hachichi and deputy minister of energy Fatma Zohra Cherfi-Talantikite seemed more interested in being critical of any desire to reform traditional oil-linked take-or-pay European gas supply contracts than in discussing Sonatrach's appetite to evolve in the new paradigm. Changing entrenched mindsets in the Algerian energy sector may take a lot more than some top-down blandishments from a new president.