Algeria's Sonatrach to sell oil and gas sites

After a deep slide in oil prices, Algeria’s Sonatrach is shifting strategy to offer foreign firms direct negotiations to buy stakes in 20 oil and gas fields in a bid to attract investors and increase output, a source at the state energy company said.

The campaign to bring in energy investment comes at a crucial time for the north African Opec producer as it tackles lower revenues and stagnating production.

Algeria, a key gas supplier to Europe, is also in talks with EU officials on holding a summit in Algiers in May that will discuss energy investment opportunities in Algeria as EU leaders look to diversify from Russian gas.

The switch to bilateral deals follows two energy bidding tenders that failed to attract much interest. A bid scheduled for last year was cancelled because of low crude prices.

“Direct negotiations are a more efficient, less expensive, a faster, and a less bureaucratic approach,” the Sonatrach source said of the talks.

The source did not give details of the other firms and ENI declined to comment.

The stakes being sold are expected to leave Sonatrach the majority holder as Algerian law dictates.

The 20 fields, which the source said Sonatrach took over from state hydrocarbons agency Alnaft in September as part of the streamlining process, include oil and gas fields across the centre and south of the country in places such as Ouargla and Adrar provinces, and Illizi near the Libyan border.

As part of the campaign, Sonatrach chief Amine Mazouzi will travel to China at the end of the month for meetings with Chinese oil companies Sinopec and CNPC, which are already operating in Algeria.

Algeria’s energy potential is not in doubt, but oil executives say tough terms on production-sharing contracts, bureaucracy and other problems make the country less attractive.

Reforms to open up the and gas sector to foreign investment in 2005 were reversed a year later, adding a windfall tax and more Sonatrach control, when oil prices were high and Algeria’s reserves were in good shape.

Security is also a factor after the 2013 attack on the In Amenas plant run by BP and Statoil with Sonatrach in which 40 oil workers died.

BP and Statoil on Monday said they were reducing staff in Algeria after rockets hit another gas plant last week.