October 3, 2017 / 4:24 PM / 2 months ago

UPDATE 2-Algeria to amend energy law by year-end to lure overseas cash - source

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By Lamine Chikhi

ALGIERS, Oct 3 (Reuters) - Algeria plans to amend its energy law before the end of the year as the OPEC producer tries to attract more foreign investors, a senior source at state energy firm Sonatrach told Reuters.

Algeria, a major gas supplier to Europe, wants to boost oil and gas revenues which were hit by a fall in global prices.

But oil companies have mostly stayed away, saying the legal framework is too tough, the bureaucracy stifling and terms leave little profit even in times of high oil prices.

The new law is expected to facilitate foreign oil and gas exploration, including untapped shale production and provide more tax incentives, the Sonatrach source said.

“The sooner the better, the law will be amended before the end of this year,” the Sonatrach source, who has knowledge of discussions, said.

Debate over such reforms in Algeria is often slowed by competing ideas inside a government with a history of state planning and where the ruling old guard remains wary of rapid change after several failed reform campaigns.

The new law also will encourage local investors to enter the oil and gas industry, the source said.

Reda Kouninef and Ali Haddad, two prominent Algerian businessmen, have expressed interest in investing in the energy market in recent years.

“A BEGINNING”

Following a fall in global oil prices, Algeria has been looking for ways to improve its energy output and a new hydrocarbons law, which would be a major development for the North African country.

Government officials were not immediately available for comment on its plans.

The country has already taken a more flexible approach with foreign oil investors by entering into bilateral deals with companies like France’s Total.

Algeria, which has lost more than half of its energy earnings since 2014, has struggled in the past to increase oil and gas output without major foreign investment.

Prime Minister Ahmed Ouyahia said this week it was necessary to amend the energy law, following a suggestion by Sonatrach’s CEO Abdelmoumen Ould Kaddour. He gave no more details.

A windfall tax introduced in 2006 was seen by foreign companies as a major disincentive.

“International energy companies will be especially encouraged by changes of the windfall tax and by opportunities to develop Algeria’s abundant shale gas reserves,” Geoff Porter, president of North Africa Risk Consulting, said.

If approved, the new law will be the fourth in twelve years, but it could face resistance from hardliners who see the law protecting Algeria’s natural resources.

“Algeria amending its energy law is a positive signal to the international community,” economy analyst and owner of Algerian based consultancy firm Arslan Chikhaoui told Reuters.

“This is a beginning.” (Reporting by Lamine Chikhi; Editing by Ulf Laessing and Alexander Smith)

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